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23 May 2018
Beginners wishing to deal with cryptocurrencies need more comprehensible explanation in plain English to understand how a specific type of a digital currency works and what it is as a matter of fact. In this post we provide a guide for dummies on what Ethereum blockchain is all about and how its cryptocurrency, Ether, may be used.
Decentralization idea of Ethereum
In its essence, Ethereum is an open software platform powered by the blockchain technology, allowing various developers to create their own decentralized applications. Ethereum blockchain enables its participants to earn Ether, a cryptocurrency, instead of mining it, which is the case with Bitcoin. Being, among other things, a tradeable cryptocurrency, Ether is used by developers as a payment method, when it comes to pay fees and services in the network.
The key ideal of Ethereum creators is to establish a decentralized network of nodes (machines) to hamstring the current centralized structure ruling the digital data management, making third parties storing information and keeping track of high volumes of data useless.
Ethereum wants to take users from conventional models of data storage to the innovative path, where cloud storages and servers are replaced by ‘nodes’ operated by volunteer individuals or entities worldwide, forming a ‘World Computer’.
In a modern world, choice of applications is controlled by third parties and app marketplaces such as Google Play or Apple iTunes, where users may be banned from downloading some software because of censorship policies. Ethereum, on the contrary, wants to enable users and authors of the applications to take control of this process, allowing them to add, edit or delete their entries without intervention on the part of central entities.
Ethereum Virtual Machine
Introduction of Ethereum blockchain was a breakthrough event in the industry, where applications had been previously developed with a limited set of functions and operations. Cryptocurrencies created on the basis of pre-Ethereum blockchains could be used only to perform a role of a P2P digital currency.
With the creation of Ethereum, its author Vitalik Buterin brought a new technology, Ethereum Virtual Machine (EVM), run on the Ethereum network, which allows running almost any program irrespective of the programming language it has been created on, provided a user has sufficient power, time and memory.
With the EVM, the process of developing new applications has become more convenient and less time and resource-consuming, as developers no longer need to program an entire blockchain from scratch to create their application, because Ethereum provides them with a platform, on top of which any applications may be created.
How to use it
In order to use Ether, one needs a ‘wallet’ or account, where Ether coins will be stored. There are many types of wallets available today for the users, including mobile wallets, web-based wallets, hardware wallets and even paper wallets.
If you opt for using a desktop version of a wallet, you need a PC or laptop. After you download the client onto your machine, you may face the challenge of waiting for several days to complete the process of your account creation, as such clients usually upload the entire blockchain (about 100 Gb) into the desktop hard drive, and the volume of the uploaded information grows proportionate to the growth of the Ethereum blockchain, as the wallet should always remain synchronized and updated according to the latest changes and modifications in the network.
These are much more convenient types of wallets, as they don’t require the entire information volume to be downloaded from the blockchain. However, some experts believe that, while these wallets are more user-friendly, they feature lower level of security, insomuch as an owner of a mobile wallet will have to rely on the miners and nodes, when it comes to the shared information.
Such types of wallets are most often sought for by the users, who want extra layer of security as compared to smartphone-based apps. With a small, usually a USB flash memory size, device users may disconnect it from the Internet, ensuring the safety of their funds. Besides, the transactions with hardware wallets don’t require online connection to be signed. On the other hand, these devices may be somewhat inconvenient, if a user wants to access his/her Ether holdings often and on the go.
Actually, this type of Ether storage is not a wallet in the true sense of the word, as it involves printing or writing down your private key on a paper and storing this piece of paper in a safe place. It should be noted, that if an owner of Ether coins loses his/her private key, the funds are lost forever.
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