What is Ethereum? Its use case in Web3?

Ethereum is one of the second largest cryptocurrencies, and people think it will be more valuable than Bitcoin. But

What is Ethereum?

As we discussed in our previous article about Bitcoin. Before blockchain money was managed and transferred with the help of a central party like a bank or government. But bitcoin helped us to create a peer-to-peer network with no central party controlling money. 

So what if we use a decentralized network for multiple things that are centralized now? What if the voting system gets decentralized? What if Facebook was decentralized and data was secured on the blockchain?

Several things can be decentralized. But bitcoin had some limitations where it only understand the ledge i.e. who sent money to whom and so. With more exploration and deriving turning complete process. People explored more use cases which led to Ethereum’s invention.

Let’s understand this with some simple thoughts. Suppose you want to build your application and set of rules for particular transactions. Eg- when you buy a house online. Where one side you get ownership and on the other side party gets the value of the house.

All these conditional transactions were catered by Ethereum.

Ethereum was first proposed in the year 2013 and was live in 2014 by Vitalik Buterin. Ethereum aims to solve a problem where you can build your DApps (D-Apps are application that is based on the decentralized network).

If you want to create your own Dapp which is not controlled by any central authority (not even by you), all you have to do is learn Solidity (Coding language used for Ethereum) and create your decentralized application.

Once you deploy your application on the Ethereum chain, all the independent nodes working on the Ethereum chain will handle and execute the codes written without any influence.

Ethereum is an infrastructure that helps you to run your Dapp worldwide. Ethereum is not a currency it is a platform. The goal of Ethereum is to decentralize the internet, which is in control of some big companies like Google, Meta, Amazon and more.

Currently, most of the world wide web is controlled by these third parties. For Eg- if you want to book a cab you need to go to the Uber application and Uber will help you to get the cab.

The motive of Ethereum is to remove the middle party i.e. Uber and have a direct connection with cab drivers and us. This allows people to connect directly without any middle party to connect with each other.

How does Ethereum do this?

Ethereum coding language Solidity helps you to write Smart contracts (Normal contracts but written in codes and the computer executes them without any central authority).

The smart contracts are based on simple logic which is IF and THEN. For eg If I pass the test, then my mom will buy me a mobile.

This is how smart contract works, they help you write the contract and with help of their decentralized network Ethereum execute the contract.

What are the disadvantages of these Smart Contracts? 

  1. They are unavoidable
  2. We need to execute the order without any other circumstances
  3. We can’t edit a smart contract once it is written and deployed on the Ethereum network
  4. The contracts are self-executing, so no one can control once the terms and conditions are finalized.

Why is there two Ethereum? (Story of Ethereum and Ethereum Classic)

The story behind Ethereum and Ethereum Classic will help us to understand various things like:

  1. Fork
  2. DAO
  3. Code is Law 

Previously the code written on the Ethereum network was the ultimate code of law. Where the Smart contract is the highest authority and no one can go against the Smart Contract.

But all these came to an end after an incident happened with a decentralized community The DAO. DAO (Decentralized Autonomous Organization) was a community-based project which use to invest money in different projects and return the investment to the community with profits.

All the decisions on investments were crowd-sourced and decentralized. They raised $150m from the community to invest, but some hackers found a flaw in the Smart contract, hacked the bridge and took all the money.

Here the main argument was, the code was not secured by the DAO. which resulted in two decisions:

  1. Either stick to the current policy of Ethereum which is Code is Law
  2. Create new laws and Ethereum developers bailed out the DAO community. 

Because of this today we have two Ethereum, the people who went with the first decision. They are now part of Ethereum classic (the original one) and those community members who moved with new laws are now the Ethereum.

This is called Fork When a blockchain takes two sideways from one single way because of a change in laws and code.

Use Case of Ethereum?

  1. DApps (Decentralized Applications working on the blockchain) 
  2. Non-fungible Tokens (Digital ownership minted on the blockchain)
  3. DeFi (Decentralized Finance is a financial tool without banks and government) 
  4. Stablecoin (Cryptocurrency that is pegged with Fiat currency) 

Ethereum has evolved from 2014 till now, where they have created more use cases and ecosystems for DApps which can clear out the role of mistakes and human errors. 

TLDR

  • Ethereum was created to build a blockchain that is more advance and has more use cases than Bitcoin. 
  • Ethereum helped us with multiple things which are based on Smart contracts. 
  • Currently, the ecosystem is more developed with multiple NFT projects, DeFi and DApps
  • Ethereum is one of the biggest ecosystems and second largest crypto in the world
  • The currency used to incentivize the miners and stakers on Ethereum is rewarded with a native token called Ether.
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