Ethereum is a digital currency and decentralized application platform that can change the way the internet and the economy work. Ethereum, like Bitcoin, uses blockchain technology. However, the Ethereum blockchain can verify transactions faster and more securely, and the technology can be used more widely than with Bitcoin. Moreover, the digital currency ETH, like BTC, is interesting to invest in: in 2017 the Ethereum price rose by more than 3000%.
Not yet familiar with cryptocurrency? Then read: Introduction in cryptocurrency .
What is Ethereum (ETH)?
Ethereum is a blockchain platform that makes it possible to use applications without the intervention of a central authority in the form of server (s) of a company. Because these applications – also known as DApps (Decentralized Apps) – and their content is synchronized locally at all Ethereum users and changes to the application (content) have to be confirmed by several shareholders in the blockchain, there can no longer be any downtime , censorship, data loss or data manipulation.
This application platform also directly handles ETH, the digital currency which is also known under the name Ethereum or Ether. ETH is used within applications on the blockchain to carry out transactions among themselves, as well as to verify these transactions. The Ethereum price is therefore not only dependent on the supply and demand on various cryptocurrency exchanges , but also on how much use is made of (decentralized applications on) the public Ethereum blockchain.
This technique attracts many companies because they can introduce new innovations by using the Ethereum blockchain. Think of a soft drink machine that can independently order new stock when it runs out, but also business applications that can be guaranteed to always be available.
Smart Contracts and DAOs
The aim of Smart Contracts, or smart contracts, is to have systems and applications automatically carry out actions based on predefined logic (IF / THEN / ELSE / WHILE etc.). Because this logic is programmed in the contract and the contract is processed in the blockchain, there is a guarantee that “agreements” as incorporated in the contract are always fulfilled.
A Smart Contract can for example be used by an airline company to automatically award a fee when a flight of a passenger has too much delay, but also to ensure that a certain budget is actually spent on what the budget is made available for. Other possible applications include crowdfunding campaigns or games with the certainty that abuse, fraud and manipulation do not happen.
With Smart Contracts it is even possible to build a completely virtual company whose business continuity remains fully guaranteed, because the organization runs on the Ethereum blockchain. These virtual organizations are also called DAOs: Decentralized Autonomous Organizations.
Another application for which Smart Contracts are widely used is Initial Coin Offerings (ICOs) and / or crowdfunding: new companies can create their own cryptographic token on the ETH blockchain, which is separate from the Ethereum chart. These digital tokens are then issued by the company and can for example represent a share in the company: investors then pay with ETH and in exchange receive a so-called ERC-20 token back.