What is Block Chain
In simple terms the block on the blockchain is a book, containing transaction records such as an accounting book, the difference is that if the accounting book uses a debit credit system, on this blockchain it is even simpler, it just records source funds - input - (from whom the amount is) and the purpose of the transfer. -output- (to whom how many). This book is then sealed using a cryptographic function and then compiled together with the previous books forming a blockchain and distributed or copied to other places scattered everywhere as evidence as well as backups that can be read by anyone. In the process of writing this book (block), the node (the place that stores these books) before writing it will check whether the data written as the source of the transaction (input) actually exists, the amount is correct, has never been used in other transactions, and the input whether people have the right or not, this mechanism is known as double spending prevention (update: this mechanism applies to the bitcoin blockchain system) The most basic thing about blockchain is a decentralized system, eliminating the existence of third parties as central figures, so as to promote transparency. One of the technologies that take advantage of blockchain is a smart contract.
What is Ethereum?
Ethereum is actually very similar to Bitcoin. Ethereum is a public peer-to-peer network or blockchain with its own digital currency called Ether. Ethereum was created by Vitalik Buterin in 2014 and Ethereum's goal is to become a platform on which smart contracts can be created and run.
Simply put, Ethereum's goal is to become the world's computer.
Bitcoin is intended for keeping a list of balances and transactions on its blockchain, while the Ethereum blockchain is designed to store various types of data. This data can be accessed and used by computer programs running on the Ethereum blockchain. These programs are called decentralized applications, or dapps.
Bitcoin is the first generation cryptocurrency and perhaps the most popular today, after bitcoin appeared other cryptocurrencies such as lite coin, ripple, ethereum and many more. Ethereum is one of the cryptocurrencies that supports the concept of smart contracts, in contrast to bitcoin even though both have the form of a smart contract (script), ethereum provides the flexibility to create smart contracts with the same complexity as programs written in a programming language in general (complete turing machine)
Developers all over the world can build and run decentralized applications on the Ethereum blockchain. Its aim is to improve the financial industry, personal information storage, governance with many other uses by using the transparent nature of blockchain.
Where does Ethereum come from?
Ethereum was first mentioned in 2013 in a whitepaper by Vitalik Buterin, the developer who was working on Bitcoin at the time.
Buterin believes that Bitcoin should be made more "adaptable". He believes that Bitcoin should be used further than just a store of wealth and that smart contract features can be used to automatically determine when payments are made, for example. This project is not meant for Bitcoin, which is why Buterin created Ethereum in 2014 for this purpose.
Ethereum is pioneering what is known as an initial coin offering (ICO), selling to early investors about 60 million Ether tokens while the project was still under development. It is a great journey to develop and continue to promote the Ethereum ecosystem while paying a fee for legality and development.
Since then, Ethereum has grown rapidly. Several other projects have been launched, and development of the Ethereum platform has begun, with varying degrees of success.
What are smart contracts?
A smart contract system can be set up to build decentralized applications that are already on the Ethereum network. The most widely used smart contracts today are based on Ethereum for issuing tokens. The existing tokens continue to grow, not only for the benefit of information technology projects, they are even used for the development of various businesses. Crypto traders and investors currently not only focus on digital currencies, but also invest from their tokens. Blockchain technology will seem foreign to some ordinary people who are still accustomed to traditional systems. New users find it difficult to understand what blockchain means and the concepts it carries. Tokens are inseparable from blockchain-based smart contracts, so their use has become the center of attention for some people.
As mentioned in the previous article, Ethereum's goal is to become a platform on which smart contracts can run. Let us explain with a simple example what you might be able to do with Ethereum in the future.
Ethereum's goal is to make your everyday life more efficient and cost-effective by automating the processes you go through every day and removing middlemen from the systems we use; including legal systems, financial systems, computer systems or more.
For example, suppose Lisa has several documents stored on the Ethereum Blockchain: her identity document, her will, and her home certificate. It is assumed that on the day Lisa died, her death certificate was also uploaded to the blockchain.
The process that had to be done to move Lisa's property required a lot of admin work because there were several parties involved; like those from the realm of law, tax, and property.
However, because all of these documents are stored on the Ethereum blockchain, something interesting and different is happening. Once John's death certificate is officially issued and uploaded to the blockchain, John's final will and will can be processed.
Assuming Lisa bequeaths her house to her immediate family, ownership of the house can be transferred to her immediate family automatically by the Ethereum network. Therefore, Lisa's immediate family would inherit Lisa's house exactly as Lisa wanted, without having to contact legal professionals.
This may sound overwhelming and creepy but Lisa has saved a lot of time and resources by not having to wait for Lisa's closest family, legal professionals and property registrar to get in touch with each other to prepare and execute this transaction.
Many interesting projects are under construction at the moment, but there is a lot to pay attention to for the large-scale adoption of Ethereum, so we can all see how Ethereum will develop in the future.
Since when have smart contracts been used to the public? Smart contracts were first created by Nick Szabo, a computer scientist in 1994. That's why one of the units of account on Ethereum is called Szabo. Szabo's value is equivalent to 0.000001 ETH. In a simple way, the smart contract executes itself so that tokens are issued in a short time. A smart contract consists of transactions that are triggered by an event, such as a transaction or if a certain block height has been reached.
Currently there are two types of smart contracts, namely Deterministic and Non-Deterministic. Both are determined by the availability of the conditions necessary to trigger the action in the smart contract. The explanation is as follows:
- Deterministic smart contracts get all the information from the blockchain it operates on. This information can be in the form of a specific transaction, block-high, execution of another contract, or as long as the information can be found on the blockchain. The most common examples of its use are crypto tokens, lotteries, and stock ownership
- Non-Deterministic smart contracts crave information that is external to the blockchain. This means that there is human interference and the luck factor that is impossible for computers to do Information may come from sports results, weather reports, and election results.
Non-deterministic contracts do require users to believe in predictions, a missing link between the blockchain and the real world. Smart contracts will be provided with information about external world events that are incorporated into the decentralized system. This system is usually applied in the prediction market or the betting market. Why should you use a smart contract? The purpose of this contract is to eliminate third party interference. The issuance of a smart contract as a conditional release of funds which is only owned by the fund holder. This token will then be released after all conditions are met.
With smart contracts, when conditions are met, transactions are programmed automatically. This system will eliminate the need, trust, and costs associated with hiring a third party.
smart contracts are not all about programming code. Because in essence, smart contracts are about us, humans, and a sense of trust in other people. What does the code on the blockchain have to do with trust? To answer that, let's dive into the question why Szabo initiated this Smart Contract concept? Why does he think that we need a Smart Contract?
Broadly speaking, it can be concluded as follows:
- Smart contract is the application of code in a blockchain that aims to bind agreements or agreements between several parties.
- The smart contract system is claimed to increase trust thanks to the use of a permanent code that cannot be changed.
- Although it seems promising, its permanent nature makes smart contracts tend to be stiff than real contracts, and the limitations of the programming language for engineers are some of its weaknesses.
Many activities in our daily life promote a sense of trust, especially activities that involve transactions using money. For example, to order an item online, we must believe that the seller will not disappear after we send money.
As sellers, we also have to believe if people who pre-order goods from us will actually buy when the goods are finished. One hit and run event can lose the seller's trust in the buyer, and vice versa.
Smart contract is an alternative system designed to solve this problem of trust.
We design various systems so that we can be sure that the people we are going to transact with are people who can be trusted.
- Various marketplaces display a percentage of successful transactions that are easily visible to potential buyers.
- The buyer pays an advance when ordering goods or services.
- In the case of buying and selling property, the developer creates documents with various conditions that must be signed on stamp duty to avoid fraud and loss.
How do I get Ethereum?
There are several ways to get Ether:
Just like normal money, you can get it by providing goods or services, and asking people to pay you in Ether. Paying with Ether is a cheap and easy alternative, and also one of the easiest ways to get you some Ether.
Another way is the way most people generally use: buy Ether from a credible Ether broker, or from and exchange service providers. This method is similar to how you would buy foreign currency at your bank or stocks online. This is the way many people choose because there is a guarantee that you will get Ether on the platform.
You can also get Ether by mining it, but this method is very difficult to do. Most mining is done by large companies with very expensive and highly specialized equipment, so it is very difficult for a single person or an ordinary computer to win the competition. So unless you have a lot of expertise and a lot of money, it is better if you buy or get your Ether through the two methods mentioned earlier.
Is Ethereum being used by criminals?
There are many public misconceptions about the many uses of Ether by criminals, but that thinking is wrong. This thinking is due to the fact that many people think that Ether is anonymous, when in fact Ether is quite the opposite - all Ether transactions are transparent and everyone in the world can see the Ether transaction in progress. People may not be able to link certain individual identities to Ether transactions directly (this is why Ether is sometimes called pseudo anonymous too), but if they find it, then they can see all the transactions you have made on the Ether network. This is why Ether is the wrong way if you are using it for the wrong thing.
Although Ether is probably the safest and not the worst way to use money, that doesn't mean there aren't criminals using it. Just like normal money, there are 'bad guys' who use Ether. But there are two important things to note - first, as more and more data becomes available in the industry, it becomes clear that the number of malicious cases is very, very small. If the Ether ecosystem is like one large mountain, then the size of the evil parts is only a few lumps of rock.
Second, in every financial system, this is an indispensable and only mitigable risk, and Ether has the best system in the world for that.
Ether moves parallel to the internet in the context of the many 'bad things' people have pinned on Ether. Is the internet all good? Certainly not.
Terrorists, money launderers, drug smugglers use Facebook, Twitter and Whatsapp to communicate and coordinate every day. Some people may worry that at least 5-30% of online traffic is related to pornography. We haven't even discussed the dark web, where all the bad things are.
But despite all these issues, is society making any concrete efforts to ban the internet? Not. Not because revoking and banning the internet is difficult, but because it offers more positives than negatives. For the same reason, we should be more careful about our mindset towards Ether, because a lot of evidence has shown that Ether has many positive effects. The Internet and Ether are simply tools that both 'bad guys' and 'good guys' can use. Fortunately, this world was filled with even more people who were in the 'good guys' category.
What is Ethereum mining?
As mentioned earlier, we can view Ethereum as a large global cash system that stores a history of transactions (or 'money movements') from one person to another. When Ethereum transactions are being processed on the Ethereum network - meaning Ethereum is being moved from person to person - one needs to make sure that all transactions are properly recorded and the cash system is synchronized around the world.
In the case of Ethereum, this process is not carried out by individuals or companies, but by thousands of computers around the world connected to the internet. These computers are known as miners or 'miners'. In simple terms, they are 'computers that process transactions'. In order to perform this processing in a safe manner, computers need to perform complex calculations that consume enormous computing effort, so it also requires a lot of energy and sophisticated special tools. Someone - the owner of these computers - needs to pay for the equipment and electricity, so they must be compensated for all the effort and money they spend supporting this network. They are compensated through the newly mined Ethereum.
Another way to understand this is to imagine what would happen if the big banks built the world's largest global transaction processing system: they would spend billions of dollars and then charge users a small transaction fee to cover the costs of building the system.
With Ethereum mining, the costs for this global system are split across thousands of computers, and they cover their costs with the newly mined Ethereum. Long story short, this is the democratization of the financial infrastructure.
What is the Ethereum private key?
Moving Ether is really easy, but behind the scenes, moving and storing Ether is actually done with something called a 'private key'. The easiest way to fully understand this key, is to imagine a traditional post box system:
Imagine if Maria wanted to send a letter to Peter. First of all, she needed to know Peter's address or postal number. Vice versa, if Maria wants to send Ether to Peter, she must know Peter Peter's address, which is the number that specifically indicates that the post box belongs to Peter. This number is called a wallet address, or public key. This number is very long and complicated because of the many Bitcoin post boxes in the world, but luckily you don't need to memorize it, you can see it on the internet.
So now Maria is sending Ether to Peter's mailbox. Let's suppose Peter's postbox number is 2034. Maria can look inside this post box and see Ether in it, even everyone passing by can see the post box 2034 which contains one Ether. This is the interesting part about Ether - where anyone can view all transactions without knowing the identity of the owner. One can see there is one Bitcoin in 2034, but no one, except Maria and Peter, knows that the post box belongs to Peter.
Now let's see how Peter picks up the Ether - he can see it there, so he doesn't have to do anything. But if he wants to move it, he needs to open the box to send it to someone else. To open this post box he needs a key - and this is his unique private key, which is also called the private key. Only Peter can use this private key to open his post box. When he opens it, he can move the Bitcoin and place it in someone else's mailbox. Suppose he buys an online game at Microsoft, he can put Ether into Microsoft's mailbox and if Microsoft sees Peter's Ether they have received, they will send the online game to Peter.
If Maria sends Ether to the wrong post box, she can't get it back. It's the same as cash - if you already paid someone, you can't take it back easily. Nobody can move the Ether, except Peter, who has the keys to the post box. If Peter loses the key? Nobody will be able to access that post box, forever! Peter has to make sure that no one steals the key, because if he did, that person could open Peter's box and steal his Ether. So it's important to keep the key as secure as possible, or to entrust the key to someone who is trusted.
How do I keep Ethereum safe?
Storing your Ethereum securely is extremely important. Unlike other types of money which are controlled by banks, Ethereum gives you many options to store and control your money.
Remember the private key you need to move your Ethereum? The key is the Ethereum storage key. The person who owns the key is Ethereum who controls it. This key can be a key in digital or physical format as written on a piece of paper.
How do I store this key? You can keep it in your trouser pocket, but that is certainly not safe. You can put it in your home safe - which is much safer. But someone could just break into your house and steal it. If you want to use your Ethereum every day, you'll need a digital version on your phone so you can access it easier. The only problem is that if you lose your phone then you lose your keys, so there will be no way to get your Ethereum back.
That's why companies like Luno were founded - not just to make it easier for you to buy, sell and use Ethereum, but to keep it safe. We do this by storing your private key in a vault bank with access like fingerprints and retina scans. Not just one iron vault, but various iron vaults on many continents. And we built this with a system that if someone wants to access it, you need the keys of the various metal vaults and combine them to retrieve Ethereum - just like in the old movies, when nuclear submarines needed three to five 'launch codes' of some generals. before launching a nuclear weapon. This is also known as 'multisig' (multiple signatures required).
This method is a secure way to store Ethereum, but you need to trust the person who stores this key. There are many reputable companies like Luno you can rely on, but many also don't store your Bitcoin very well, or pretend to store and then misuse your Ethereum. Unlike conventional money, you have many options when it comes to storing Ethereum - you can store it yourself, in digital or physical format, or you can trust someone else to look after it for you (or a combination of these options).
The way Ethereum is stored is one of the biggest irony of Ethereum - the world's largest global digital currency designed for use online, mostly stored 'offline' in bank vaults and off the internet. Who knows!
What are the risks of Ethereum?
Ethereum is an exciting technology and it is a new form of money, but this does not mean that Ethereum is free from risks. Keep in mind that there are some of the same rules on Ethereum as traditional money. For example, don't keep your cash under your pillow because it's easy to steal, or don't entrust your money to strangers.
Ethereum also has another unique risk: for one person, Ethereum is a new technology, and while it looks very secure and solid, there is always the possibility of failure. That's also why you should never put 'all your eggs in one basket' and never buy Ethereum with all your possessions. Ethereum is more volatile (the value of Ether can go up and down in a short space or time) than other currencies, and even though the value of Ether is more stable now, Ether is sure to experience many volatile moments in the future.
Remember that Ethereum transactions are like cash in that transactions are irreversible - so if you send Ethereum to the wrong person, or your Ethereum wallet gets hacked and someone steals your Ethereum, it is very difficult and even impossible to retrieve it. Ethereum is also not protected by any entity, so if you lose your Ethereum, the service provider or the 'Ethereum network' cannot compensate for your loss. That's why you should use trusted products and service providers to help you, just like when you chose a bank to keep your money safe.
Ethereum's value is determined by the number of people or businesses that accept Ethereum. If Ethereum grows, it will be very good for Ethereum, but if fewer people use Ethereum it will have a negative impact on the price and usage of Ethereum itself.
In conclusion, Ethereum has enormous potential and is very exciting to change the world, but make sure you understand the risks involved.
