Diving in Dapps and What is Ethereum

What is Ethereum?

Ethereum is a peer-to-peer based platform on which decentralized applications can be built. Since its release in July 2015, Ethereum has risen to the top as the second largest cryptocurrency with a market cap of approximately $50 billion.

In a market flowing with thousands of cryptocurrencies, it has quickly become the topic of many debates, not just for its similarities to Bitcoin, but its differences as well. So what makes it so unique?

Ethereum was proposed in 2013 by Vitalik Buterin, a Canadian-born cryptocurrency developer. Later in 2014, it was funded via a crowd sale event in which there were 11.9 million pre-mined ETH. It was fully released in 2015 and has quickly risen since then. Ethereum tokens, known as “Ether” have become a conventional means of exchange on various blockchain-based applications and continue to grow in value.

On the surface, Ethereum works just like any other cryptocurrency. The common conception is that ETH is just like BTC— a store of value, especially for payments. It can be exchanged for fiat currency and just like Bitcoin, the transactions are confirmed on a blockchain. It’s also completely decentralized with no need for third-party validation.

Just like Bitcoin’s blockchain, Ethereum once had miners who also ran complex computational algorithms to get mining rewards. While these similarities exist, the currency is quite different from Bitcoin in a lot of significant ways.

How Does Ethereum Work?

Unlike Bitcoin, the Ethereum platform was designed in a way that allows decentralized applications (DApps) to be built on it. In fact, 1,629 applications have currently been built on its blockchain.

According to the Ethereum website, its platform is a decentralized foundation for applications that run precisely as they’re programmed. They also claim that the platform erases third parties as well as any chance of fraud or censorship. This means that ultimately, code written on its blockchain is immutable due to cryptographic technology.

Ethereum allows users to create and execute smart contracts on its platform, which form the basis of DApps. Solidity, the platform’s inbuilt programming language is used to develop these smart contracts and DApps. Ether, the ETH token, acts as their primary facilitator. For this reason, Ethereum is commonly called programmable money.

Ethereum Blockchain Explained

The Ethereum blockchain consists of interlinked blocks that can hold and execute code snippets. These code snippets can be bundled together to build applications. This single quality differentiates it from Bitcoin, its immediate counterpart. Traditional applications are built to give certain outcomes when specific conditions are met, and Ethereum smart contracts do the same thing.

Ethereum Virtual Machine (EVM)

The EVM is a decentralized Turing-complete machine, built to run code scripts on the Ethereum platform. It’s the particular site where all smart contracts are executed and are run by every node in the network. The virtual machine is isolated from the host computer system and makes the creation and deployment of applications possible.

Decentralized Applications (DApps)

DApps are a new type of application that is not owned by a central party. They run on a peer-based network and cannot be shut down. For an application to be classed as a DApp, it must meet the following requirements:

  • It must be decentralized.
  • The app must have a consensus protocol in place.
  • It must be open source, allowing anyone to view and contribute to its code.
  • It must have digital assets to fuel its operations.

The basic structure of a DApp consists of 4 main parts:

  • The blockchain
  • A storage layer
  • Smart contract
  • Social layer

Ethereum Blockchain Based

For a decentralized application to work on Ethereum, it must be based on the blockchain. This is because peer-to-peer consensus is necessary for the validation of certain application constructs. Every node has to confirm parameters like usernames and other relevant information.

Storage Layer

Currently, there are several cloud storage service providers, like AWS, that users can outsource their file storage too. Unfortunately, most of them have centralized servers and control the way that information is stored. This goes against the principles of decentralization. However, like traditional software applications, DApps need storage facilities, and for this purpose, there are decentralized storage systems like the InterPlanetary File System (IPFS).

The IPFS is a file transport protocol that can be stacked directly on the blockchain. Its working mechanism is similar to that of BitTorrent, a peer-to-peer file sharing service. IPFS is an excellent option for blockchain-based storage because instead of storing whole content, it generates a hash for each file. A hash consists of a unique combination of letters and numbers which act as a unique identifier for the file.

Files on Ethereum’s blockchain can easily be searched for on IPFS or through the use of the Ethereum blockchain explorer. To retrieve a file, a user can search for the hash of that file. To share the file with another party, a user would merely have to share that hash with the party, similar to how links to a Google document can be shared. The amount of storage space needed by DApps varies, and it would be impractical to leave the data in blocks due to the amount of space it would take.

 

This post was originally posted at Coincentral.com

Read original post https://www.mintdice.com/blog/bitcoin-vs-ethereum-vs-litecoin

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