DeepDotNet 
Estimated reading time: 10 minutes
Table of contents
What is Ethereum?
Ethereum is a decentralized computing platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud, or third-party interference.
These apps run on a custom-built blockchain, an enormously powerful shared global infrastructure that can move value around and represent the ownership of property.
This enables developers to create markets, store registries of debts or promises, move funds in accordance with instructions given long in the past (like a will or a futures contract), and many other things that have not been invented yet, all without a middleman or counterparty risk.
Ether is the cryptographic token (or ‘ cryptocurrency ‘) that fuels the Ethereum platform. It is used as “gas” to pay for computation time and for transaction fees.
How Does Ethereum Work?
The Ethereum platform was created to enable developers to build and deploy decentralized applications. A decentralized application runs exactly as programmed without any chance of downtime, censorship, fraud, or third-party interference.
This means that developers don’t need to ‘trust’ a third party with their apps and can build trustless applications. Meaning apps such as contracts, bonds, data storage agreements, financial agreements, and smart property.
This is all built on a blockchain, a global ledger of all transactions that can be programmed into existence through a process called ‘smart contract’.
The Ethereum blockchain is based on the notion that the computational power of all connected computers in a data center can be harnessed to share information.
This allows developers to create apps with many different functions and use them worldwide without any restrictions.
This makes Ethereum a global computer that can do things that have never been done before.
Ethereum is a decentralized platform where anyone can develop and run smart contracts, but the global computer is still in its infancy and has a long way to go before it will become a reliable version of itself. But it is already starting to turn heads – especially in the world of cryptocurrencies.
Many cryptocurrencies have been designed with many different functions but Ethereum’s useful features have made it very attractive to developers wanting an easy solution to build complex applications with no downtime, censorship, or fraud.
The first live release of the Ethereum platform was very popular and during the last few months, it has continued to gain traction. This is reflected in the increasing value of Ether.
In order to run apps on the Ethereum platform, users need Ether tokens. It is a necessary element for any application on the network and has many uses. It also serves as fuel for the operation of smart contracts.
In order to run an app or execute a smart contract, a user must spend a small amount of Ether which then goes into the network as Gas that powers their transactions and contracts.
The more complex an app’s code, the more Gas it will consume and the more Ether will be required to process it successfully.
The Ethereum platform has proven to be very valuable. The platform supports many different kinds of decentralized applications, including financial apps, identity systems, governance apps, social apps, and games. It can support other blockchain assets or cryptocurrencies as well as intellectual property.
This whole concept is based on the idea of trustlessness. Trustlessness is the ability of two entities to perform a transaction without needing third-party validation or authorization. It’s fundamentally changing the way people interact with each other and it could revolutionize the internet as we know it today.
There are four main pillars that make Ethereum special:
Open Source
The Ethereum platform was built to run the code that enables exactly this kind of technology.
Ethereum is unique in that it’s not just another software project, but rather a new kind of public blockchain network. This means it can be used by anyone, anywhere to do anything. It’s fully open-source and accessible to anyone who wants to develop on the platform.
Public Blockchain Network
This blockchain network is also fully decentralized so no single entity or ‘quasi-governmental organization’ controls it.
Anyone can install the Ethereum platform and use its powerful smart contracts for anything they want even if they do not have programming skills or technical know-how. It can be used by businesses, government agencies, academics, artists, and even individuals.
Smart Contracts
A smart contract is a computer program designed to digitally facilitate, verify or enforce the negotiation or performance of a contract. Smart contracts allow the performance of credible transactions without third parties.
These transactions are trackable and irreversible. This means that the terms of the agreement are directly written into lines of code. The code and the agreements contained therein exist across a distributed, decentralized blockchain network.
Smart contracts permit trusted transactions and agreements to be carried out among disparate, anonymous parties without the need for a central authority, legal system, or external enforcement mechanism (e.g., courts).
Smart contracts are high-tech and secure, but they have a major drawback. This is the same concept that governs a vending machine. You put money in, you press a button, and out comes your snickers bar.
The code is transparent, open-source, and immutable -the machine either gives you the food or it doesn’t. This kind of technology can be used to create a smart property, digital identity systems, voting systems/ democracy, self-enforcing contracts, and many other things that have never been possible before because of the cost of running them.
The Ethereum platform also works as an execution environment for distributed applications (DApps), enabling developers to build and deploy decentralized applications (DApps).
This is a big deal. For the first time, developers can use blockchain technology to create trusted applications that can be used worldwide without any restrictions.
Ethereum creates a solution for executing smart contracts and it even provides a kind of ‘backup’ system in case anything goes wrong with the execution of the code by providing an off-chain solution.
How about a Ledger Nano S hardware wallet that will protect your Ethereum coins from being hacked or stolen. You can find out more here!
Decentralized Autonomous Organizations (DAO).
The Ether Token and Blockchain Commitment
Ethereum also serves as a platform for running distributed apps and building decentralized organizations (DAOs). The decentralized autonomous organization (DAO) is an organization that operates through rules encoded as computer programs called smart contracts.
The DAO was created when Ethereum’s backers funded the project using Ether tokens during its 2014 ICO.
These tokens enable the development and governance of complex and evolving networks and programs, as well as the creation of powerful new tools for trustless agreements and enforcement.
The DAO works as a decentralized autonomous organization, which means it operates according to rules encoded in computer programs. Like any other DAO, it seeks to provide a shared set of functionality for anyone to use within its ecosystem.
Ethereum’s DAOs serve as an experiment in self-sustaining economies that operate without its founders’ direct participation. It’s a way to consider how we may operate in the future without external control or oversight.
The Ether token system is at the heart of Ethereum’s blockchain technology. It drives the network infrastructure and serves as the incentive for developers to write quality applications that they know will be used by people all over the world.
The more people use Ethereum, the higher the value of Ether tokens becomes. This is because there is a limited amount of Ether in circulation and they also have real-world utility. People can buy things with Ether or sell their services for it.
Ethereum’s DAO has proven to be a powerful platform for developers and entrepreneurs. As of May 2016, there are already over 1,000 decentralized applications running on the Ethereum platform.
Ethereum’s code is also open source. Anyone can review it and make changes to it. Since the code is open-source, it allows for transparency and reliability across the entire network.
How to store Ethereum?
There are a number of ways in which you can store your Ethers.
Buying Ethereum on exchanges
Exchanges are where you go to buy, sell, or exchange Ethereum for other forms of cryptocurrency. Some exchanges may charge you fees for buying or selling Ethereum. You can find 30+ exchanges here: https://www.tradingview.com/chart/ETHUSD?symbol=ethhort (the symbol ethhort is the short form of the symbol ETH)
Purchasing with fiat money (Ether)
You can also purchase Ethereum directly with fiat money (for example, USD, Euros, pounds sterling). Some exchanges require identity verification to be able to trade through them. Others do not.
Purchasing Ethereum on the Ethereum platform (aka ‘getting Ether’)
If you don’t want to create an account with an exchange but still wish to directly purchase Ethereum, you can do so by using your credit card.
There are lots of ways in which you can do this; however, the easiest is by using the ShapeShift integration built into MyEtherWallet (an open-source wallet that you can use with any platform).
You then send some ETH over to ShapeShift via their API and they convert it for you on the fly, so it’s instant and no fees are charged. You then send it to your wallet.
Storing your Ether in an online wallet
It’s also possible to store Ether online in wallets provided by
- Jaxx among others.
You can also use hardware wallets like the
- Ledger Nano S – Read the full Ledger Nano S here
The disadvantage of storing your Ether online is that you need to be connected to the Internet all the time.
Other Wallets
If you don’t want to use a dedicated Ethereum wallet, we do have another option for you. Other wallets include:
Coinbase Wallet: This is a hosted wallet so it’s very easy to use and you can buy, sell and store your Ethereum coins here. You can find out more here!
Ethereum Mist Wallet: This is a desktop wallet with an in-built trading facility.
Exodus Wallet: If you’re looking for a multi-currency wallet that also supports Ethereum, this might be the one for you. You can find out more here!
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