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What is Ethereum?

Updated: Sep 6, 2019

Ethereum is a software platform developed to facilitate transactions that are decentralized yet secure, transparent yet private, and – most importantly – self-executing. Yeah, that’s a lot for an opening sentence. So let’s take it apart and examine it piece by piece.

First off, Ethereum is simply a software platform used to create smart contracts. Those smart contracts are basically trades. The exchange could be in property, money, stock, whatever. They are called smart contracts because the transaction is basically set up with lines of computer code that will only enforce the transaction if certain conditions are met.

In plain English the computer code for the transaction could state something like: if full payment has been made to X account, initiate delivery of goods. Or it could be: if the price reaches a certain amount and an expiration date hasn’t been met, initiate purchase of a set of assets.

Decentralization and security go hand in hand. Since they are programmed, the rules for the transactions are strictly enforced. And because the transactions are carried out over a vast network of decentralized servers, all transactions are verified many times worldwide. This makes them extremely secure. So, although anyone may see the transaction take place, the owners of the contracts can remain anonymous.

Ethereum is often used synonymously with Ether – the currency generated via Ethereum. Ether is assessed on contracts submitted to the blockchain over the network. It can be thought of as rent paid to owners of the servers making up the network. The creator of a smart contract application has to pay a small fee to use the computational power of the network. Simply put, server owners receive tokens based on the work their computers did to administer the Ethereum blockchain.

Many industries are starting to utilize Ethereum and smart contracts. The conditional nature of their transactions makes them a perfect solution for all sorts of business models. And Ethereum’s decentralization continues to draw those who want a more democratic and open-source platform. That is what makes it so attractive.

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