What Is Ethereum? Know The Smart Contract Blockchain
Ethereum, With The Abbreviation “ETH,” Is A Digital Currency And A Decentralized Network. This Network Has Three Main Purposes And Uses: 1. Decentralized Digital Money; 2. Facilitating Global Payments; 3. Building And Running Decentralized Applications.
“Decentralized” refers to a system, program, country, or anything that is not controlled by a specific person, company, or government, and others can also play a role in maintaining it, Like a democratic government where one person alone cannot have all the powers.
This digital currency is here to decentralize “everything.” Imagine a future where people directly use financial and non-financial services without trusting corrupt intermediaries. Systems that people control never stop, and no one can interfere with their work. This is the future Ethereum built for.
In this article, I will try to introduce you to Ethereum in a simple way, away from technical complications, and answer the following questions:
- What is Ethereum, and how does it work?
- What is the difference between Bitcoin and Ethereum?
- What is an Ethereum smart contract?
- What is Ether, Ethereum’s digital currency, and its price trend so far?
- What is the Ethereum storage method? What are Ethereum wallets?
- How to buy Ethereum in Iran?
What is Ethereum?
I suggest you first watch the video below and then read the rest of the article, But if you don’t have the possibility, reading the article itself is enough.
Ethereum official website This project is defined as follows:
Ethereum is a decentralized platform for executing smart contracts. There is no possibility of failure, censorship, fraud, or interference of intermediaries for the programs that run on this network.
I will explain what “smart contract” is next, But up to this point, I will say that Ethereum can be defined from two perspectives:
- It is a decentralized network.
- It is a digital currency.
Ethereum is a decentralized network.
Ethereum is a decentralized network for building computer programs and conducting financial and non-financial transactions. In more straightforward and less precise terms, consider this digital currency as a decentralized internet on which you can launch decentralized websites; Websites that don’t stop and governments and intermediaries can’t shut them down.
Ethereum cuts out the middleman.
The difference between Ethereum and old platforms like today’s web is that the middleman has been removed in this digital currency, and the control of data and assets can be in the hands of the people themselves.
Ethereum is a digital currency.
Ethereum is also considered a digital currency. In other words, for this network to be complete and independent, the digital currency “Ether” (Ether) with the abbreviation ETH is defined in this network. This asset is the currency of the web and a way to pay fees.
Do not forget that in the community of digital currencies, the digital currency of the Ethereum network is also called Ethereum; in reality, its name is “Ether.” So, if you see somewhere “buy Ethereum,” “analyze Ethereum,” etc., it means Ether.
Many people are investing in this digital currency, hoping for the future of Ether. You can easily buy Ether from cryptocurrency exchange websites and store it on mobile wallet software or PC. Continuing the article, you will learn about Ether and how to keep and buy it.
How will Ethereum transform our world?
Consider an app like Telegram or Instagram. Millions of people worldwide use these useful messaging and communication apps, But there is a fundamental problem about them that few people pay attention to: these programs are centralized. For example, Instagram to the companyFacebookbelongs and the company may remove content or block access, or even sell private data according to its policies.
In theory, with Ethereum, this decentralized platform, it is possible to create an Instagram owned and controlled by its users instead of Facebook. This is the same Web 3.0is that the future will be the Internet.
Of course, we should not forget that this project is still in the beginning, and at least at the current stage, its technical problems do not allow us to build an extensive system like Instagram.
As another example, with this network, we can hold free and transparent elections, An election in which fraud is impossible. This blockchain can decentralize any other centralized service. Essential things such as payments, insurance, voting, banking, lending, and many benefits that intermediaries now do will be decentralized with this network. On the Ethereum open network, anyone can use a Decentralized application (Dapp)or digital currency (token) to develop itself.
Ethereum was founded with this goal so that we don’t need any bank, company, or institution other than ourselves to do our life’s affairs.
Joseph Lubin, one of the co-founders of Ethereum
A short history
Introduction essay (idea) or White paper(Whitepaper) Ethereum was published in 2013, and in 2015 the network officially started working.
The leading creator of this project, a young Russian-Canadian, Vitalik Buterin(Vitalik Buterin), who supported Bitcoin and was inspired by Bitcoin, presented the idea of ”decentralization of everything.”
Vitalik Buterin, along with Gwynn Wood, two of the principal founders of Ethereum
The history of Ether is full of ups and downs, from the birth of Ethereum ClassicFrom hacking to historical updates. It is a pity that this exciting history cannot be discussed in this article due to the limitation of words.
Similarities and differences between Bitcoin and Ethereum
Since theBitcoinThe first decentralized digital currency, perhaps one of the best ways to better understand Ether is to examine its similarities and differences with Bitcoin.
What are the similarities between Bitcoin and Ethereum?
Bitcoin and Ethereum are similar in several ways:
Both are digital currencies
Both Bitcoin and Ether are decentralized digital currencies traded on online exchanges.
Both have independent blockchains.
Like Bitcoin, this digital currency tooBlockchainhas it. Transaction information and smart contracts are recorded on the blockchain. Next, I will explain more about blockchain.
Both are stored in wallets.
To store Bitcoin and Ether in Digital wallets you will explain this issue in the rest of the article.
Both are public and license-free
Ethereum is transparent, accessible, and public. Anyone can use this network to create transactions or intelligent contracts without permission from anywhere. Like Bitcoin, the Ether network is shared, and anyone can use it.
What are the differences between Bitcoin and Ethereum?
Bitcoin and Ether differ in at least the following aspects:
The purpose of creation
Bitcoin is the first decentralized, digital, and distributed monetary system. Bitcoin was created to be a decentralized currency, But only money!
On the other hand, Ethereum has gone one step further and has provided the possibility of decentralized execution of computer codes (intelligent contracts) so that we can decentralize other things in addition to money.
Ethereum transactions are faster.
In general, Ethereum transactions are confirmed faster than Bitcoin. If you transact on the leading Bitcoin network, approving your transaction with average fees may take about an hour. Still, the transaction verification process on this blockchain only takes a few seconds.
The number of ether units is unlimited.
One of the main differences between Bitcoin and Ethereum is the number of units (supply) of these two currencies. Bitcoin has a limited supply, But unlimited Ether will be offered.
According to the Bitcoin protocol, only 21 million units of this digital currency are mined; While in Ethereum, there is no limit; more than 120 million Ether units have been circulated at the time of writing this article.
It should be noted that this does not mean unrestrained inflation in Ethereum; Because the annual inflation of Ether is specific and limited and is close to 4%, which may increase or decrease slightly depending on the conditions.
How does Ethereum work?
This article does not include a detailed or technical explanation of how Ethereum works and could be a book by itself. By the way, his book is also available: “Mastering Ethereum” by Andreas Antonopoulos. This book has also been translated into Farsi, But I am unsure about the smoothness of the translations.
You don’t need to know precisely how it works to buy and keep Ether and use this network; Just as now, network expertise is not required to work with the Internet; You have a mobile or computer and some user-friendly and straightforward applications.
In Ethereum, the story is the same. To use this network or buy and maintain Ether, which I will teach later, you only need a smartphone or a computer to install software or register on some websites.
However, since it is impossible to move forward blindly, we will continue to try to explain how Ethereum works in the simplest terms possible so that even without the previous background, this complex network can be understood a little.
This part is written so that not reading it does not affect the understanding of the rest of the content; So, if you don’t feel like it, skip this section and read the rest of the article.
In a simple model, the Ethereum network can be divided into three components, the work of each of which is dependent on each other:
- Smart contract
- consensus mechanism (over transactions and blocks)
We start with the smart contract, which is the fundamental principle of Ethereum. A smart contract is a code (software) that runs on its blockchain. In case of predetermined events, this software executes commands automatically.
The principle is that after the contract is registered on Ethereum, no one can prevent its execution, and this contract has an execution guarantee. Before I explain the intelligent contract, let’s review the standard agreement first.
A standard contract is an agreement between two or more people that commits them to something in the future. For example, Behzad undertakes to pay Majid an amount every month in exchange for using Majid’s house for one year, a rental contract, or a “lease.”
What makes the difference between a standard contract and a smart contract is that in smart contracts, computer codes solve the problem of the need for trust. With smart contracts, programs and projects can continue without intermediaries and malfunctions. So even the intelligent contract programmer cannot prevent its execution.
The difference between a traditional contract and a smart contract (Design: Farshad Motkalami © Erzdigital)
If you think these explanations are insufficient for the critical concept of smart contracts, you can get more information about this topic in the article “What is a smart contract?”.
What are the features of the Ethereum blockchain?
Ether, like Bitcoin, uses blockchain technology to store transaction records and their security. Think of the blockchain as a ledger where all transactions performed on the Ethereum network are recorded. For example, if you send an Ether to another person, this transaction is stored on the blockchain forever.
Banks in computer servers, OfficeOr have a ledger that stores transactions. However, the Ethereum blockchain has four main features that distinguish it from bank ledgers:
- Public blockchain
- Transparent blockchain
- Distributed blockchain
- Blockchain resistant to censorship
The Ethereum blockchain is public
The Ethereum ledger is public; anyone can become a node by connecting directly to the network and downloading a copy of the catalog (including all transactions).
The Ethereum blockchain is transparent.
Everyone can check and intercept the transactions in the network. The inventory figure is also known; Of course, not that the identity of people is determined directly; But you can see the balance of wallet addresses.
The Ethereum blockchain is distributed.
Every computer that connects to its network and becomes a node receives a full copy of the blockchain. Therefore, the blockchain does not have that single point of failure, and if data is erased from one computer, it is still protected by other computers worldwide.
Ethereum blockchain is resistant to censorship.
Thanks to the block structure in the Ethereum blockchain, all the data stored in the chained blockchain are connected; In such a way, changing one piece of data makes other blocks invalid. This unique feature makes the blockchain highly resistant to censorship.
If you still don’t know blockchain, I suggest you read the article “What is blockchain?”Spend
Consensus Mechanism (Ethereum 2.0)
When do we say that Ethereum is a decentralized network when you send money to someone which supports your transaction to make the transfer? Who validates transactions or maintains the security of this network? The answer to these questions is validators or ether holders.
From the beginning of the work of the Ethereum network until 2022, Ether is based on the same as BitcoinminingWas. People who wanted to participate in the process of building transaction blocks had to allocate the processing power of computer hardware to the network to join in mining operations, and the network rewarded the miners in exchange for this processing power, which ultimately ensured the security and verification of transactions. To this algorithm process proof of work, they say.
According to the predetermined plan and in a program called “Ethereum 2(ETH 2.0), in September 2022 (September 1401), this network will change from proof of work to more scalable (faster and cheaper transactions) and reduce energy waste. The evidence of stake algorithm(Proof Of Stake) moved, and Ethereum mining ended forever.
Contributors take network transaction fees. In the proof-of-stake method, people must buy Ether and allocate it to the network in their wallets to participate in validating transactions and creating blocks, or in other words, they mustStakingdo. Thus, they can join in verifying transactions and receive new units of digital currency (Ether) as a reward. With this approach, there is no need to buy expensive hardware and consume electricity to participate in the network.
Design: Farshad Motkalami © Erzdigital
Why does Ether have value? The answer is simple: for the same reason that gasoline has value. Ether fuels the Ethereum network, and network validators (contributors) are rewarded with Ether. For every activity and transaction on its blockchain, we must pay the network fee with Ether; Therefore, Ether can be an investment option.
As Ethereum becomes more powerful and trust in the network increases, their Ethereum price will also increase. On the other hand, when its network performs poorly and cannot reach its goals according to the roadmap, the cost of Ether will take a downward trend.
Not to mention the price of Ether and all digital currencies, the general market trend, and foreign events are also involved, Like the legislative news of this area.
At what price was Ether traded for the first time?
In 2014, in the fundraising program of the Ethereum Foundation, about 7 million Ether units were presold at approximately $0.3 per unit; Therefore, we consider the first price of Ether to be $0.3.
At the time of this update (D1401), the price of each Ether is around $1,200, which means early Ether investors are making around 400,000% profit if they still hold their assets.
What is the peak price of Ether?
On November 1, 2021 (November 19, 1400), Ether recorded a new all-time high, reaching a peak of around $4,700. Due to the dramatic growth of the dollar price in Iran, the Ethereum price in TomansIt has also increased astronomically, and from the bottom of about 2 thousand Tomans in 2014, it reached more than 140 million Tomans at the peak (Azer 1400).
When updating this article (D1401), with the severe correction of ether price from the peak, the Rial price of this digital currency is about 48 million Tomans.
Ethereum price chart from the beginning of trading in exchanges (2015) until the update of this article (D1401) (source: Trading View)
To store Ether and Ethereum-based tokens, you need software or hardware called a wallet. Digital currency wallet Think of it like a bank account used to store, receive and send money.
Design: Amirhossein Khalilnejad © Erzdigital
Ethereum software wallets are free, and you can easily install them on mobile phones (Android and iOS) or PCs (Windows, Linux, and Mac). In contrast, more secure hardware wallets are physically available and must be purchased from reputable stores.
There are dozens of wallets with different names for Ether; Therefore, if you are an investor of this digital currency or an investor of tokens based on this blockchain, it is not difficult to find a wallet. In the table below, you can see the names of some examples of the best Ethereum wallets. These wallets have the highest number of installs and the best popularity rate:
|Trust Wallet (multi-chain, Ethereum, Tron, etc.)||Software/Mobile||Download|
|Metamsk wallet (Ethereum, Olench, etc.)||Software/browser add-on||Download|
|Exodus wallet (multi-chain)||Software/mobile and desktop||Download|
|Ledger wallet (multi-chain)||hardware||physical|
|Trezor wallet (multi-chain)||hardware||physical|
|Phantom Wallet (Solana)||Software/browser add-on||Download|
every Ethereum wallet has one or more unique addresses. The wallet address is the same as the bank card number you can use to receive money. An Ethereum address can receive Ether and all Ethereum-based tokens (ERC-20). For example, Shiba Ino currency (SHIBA) is a network-based token of this digital currency so you can store this token in your wallet.
Don’t forget that in the world of blockchain and digital currencies; everyone is responsible for protecting their capital; Therefore, it is necessary to make a backup copy of your wallet so that you can recover your funds if the wallet is deleted or the password is forgotten, or the device on which the wallet is installed is damaged.
As a backup, wallets often show you 12 or 24 English words you should write somewhere safe. Thus, you can easily access your assets in any other wallet with those words.
Buy Ethereum (ETH)
Design: Farshad Motkalami © Erzdigital
ToBuy EthereumThe best thing to do is to visit digital currency exchange websites. Users living in Iran usually use one of the following two methods to buy Ether from online exchanges:
- Direct purchase of Ether from Iranian websites with Rial and bank card (recommended)
- Buy Bitcoin or pheasant from Iranian websites and then convert it to Ether in foreign exchanges such as Kocoin
To buy Ethereum from Iranian exchanges, go to the page Buy EthereumSwitch to digital currency. On this page, you will find the list of Iranian businesses that have listed Ethereum.
First, choose the desired exchange, register, deposit the desired amount, and finally, buy Ethereum! So simple!
Also, you can fromList from the best Iranian digital currency exchanges and find the best Iranian trades.
However, sometimes when the liquidity of domestic exchanges is low or the purchase cost is high, investors can use the second method, meaning Buy BitcoinOr Tether from internal websites and then convert it to Ether on foreign exchanges like Kocoin.
A few frequently asked questions about Ethereum
Is Ethereum better than Bitcoin?
Bitcoin and Ethereum pursue two different goals, and it cannot be said which one is better than the other, But this digital currency is technically a newer network.
Do we need to buy a whole Ethereum?
Buying a whole unit is unnecessary, and a fraction of an ether (0.01 ether) can also be purchased.
Can Ethereum be mined?
No, with the update of Ethereum (ETH 2.0), the mining of this digital currency ended; Therefore, Ether can no longer be extracted.
What is the difference between Ethereum and Ethereum 2.0?
Until September 2022, Ethereum operated with a proof-of-work or mining algorithm; But with the upgrade in a project called Ethereum 2.0, the platform moved to the proof-of-stake chain. Ethereum 2.0 is the previous version that has been upgraded and improved.
Do we have free Ethereum?
The short and clear answer to this question is “no,”; So beware of scams and websites that waste your time.
This article can be your starting point. It is impossible to understand all the complexities of Ethereum in one or two pieces. This article only briefly explained each aspect, and the road to expertise in Ethereum is still long.