What is Ethereum?
Ethereum is a technology that's home to digital money, global payments, and applications. It provides:
- Banking for anyone - no frontiers to do payments, borrow money, lend money, etc.
- Censorship resistant - no government or company has control over Ethereum
- Private internet - no need to provide your personal details to use Ethereum Apps
- Peer-to-peer - move money, or make agreements, directly with someone else. No need to go through intermediaries
- Decentralized - anyone can learn, earn, use and contribute to Ethereum. The network is run by independent contributors from all around the world
Key Concepts
- Ethereum network is powered with it’s currency ETH
- Your funds are stored in addresses (public keys) in Ethereum, similarly to a bank account.
- You get access to your funds through the use of private keys, think of it as a super secure password, one private key per address.
- You can have wallets that store many addresses (“bank accounts”) and private keys (“passwords”) so it allows you to approve payments through the wallet.
What is a Smart Contract?
A "smart contract" is simply a program that runs on the Ethereum blockchain.
Imagine you have a complex transaction involving significant money. (i.e. a bet on a basketball team). You would need to go to a lawyer to set up an escrow account, pay them, and wait while they do the work and ensure the contract terms are satisfied (i.e. the match is done). Only once your lawyer has done the work to ensure everything is executed correctly will you get the document/goods/money, etc.
One of the biggest problems with this traditional approach is the need for trusted individuals to follow through with the contract's outcomes.
Smart contracts digitize agreements by turning the terms of an agreement into computer code that automatically executes when the contract terms are met.
Examples of Smart Contracts
You can use smart contracts for all sorts of situations ranging from: financial derivatives, insurance premiums, breach contracts, property law, credit enforcement, financial services, legal processes, crowdfunding agreements.
Real Estate
Suppose you rent an apartment from me. You can do this through the blockchain by paying in cryptocurrency. We can
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DeFi Applications:
Smart contracts in DeFi are facilitating the exchange of goods, services, data, funds and so on. Users of centralized financial institutions, such as banks and credit unions, rely on intermediaries to execute a transaction. Whereas, DApps are using smart contracts to ensure that each action is genuine, transparent, and free of human error.
Democracy
There are many voting systems proposal that leverage the blockchain capability to track everone’s votes. With their secret key/identity, anyone can vote only once as per the smart contract. . There is no need to recount votes, validate late comins or wait for the final outcome, once the voting time is over: there’s a new winner!
Insiders vouch that it is extremely hard for our voting system to be rigged, but nonetheless, smart contracts would allay all concerns by providing an infinitely more secure system. Ledger-protected votes would need to be decoded and require excessive computing power to access. No one has that much computing power, so it would need God to hack the system!
Secondly, smart contracts could hike low voter turnout. Much of the inertia comes from a fumbling system that includes lining up, showing your identity, and completing forms. With smart contracts, volunteers can transfer voting online and millennials will turn out en masse to vote for their POTUS.
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