Ethereum is a decentralized network built on the same technology as Bitcoin, the blockchain. The project was first introduced on 30 July 2015 by a young programmer Vitalik Buterin who first proposed his project in late 2013.
The digital currency used on the Ethereum Network is called Ether. The payment system is based on blockchain and because it is a decentralized network where a consensus is present and the rules are followed by all the participants. All the transactions are verified and recorded on the blocks by the miners. While mining cryptocurrency you solve complex mathematical puzzles, this process is called proof-of-work, after the problem is solved the data is stored in the Ethereum distributed ledged and send to all the nodes in the network to update their blockchain copy.
This project is taking the blockchain and the idea of Bitcoin to the next level. This network, Ethereum network, besides the payment system capabilities, it got its own coding language, Solidity. These features are important because people can build decentralized apps on top of the Ethereum network, cutting the third parties from the apps.
To trade Ether or use the apps on the network you need a wallet where you will store your funds and make transactions. The wallet is made from a public key (used to receive funds) and a private key (this key is used to access your wallet). There are more types of wallets, desktop or mobile apps, online (on the exchange platforms), hardware (ex: Ledger) or a paper wallet.
Create a wallet on Ethereum
The process of creating a wallet on Ethereum network is very easy and it can be setup with the
service called MyEtherWallet. The website will give you some tips and reminders about security
and how to make your wallets and store your keys safely, if you are creating the wallet from a
computer your will have to use the offline mode. After you created your password the wallet will
be ready and a Keystore file will be generated, store it safely because you will use this file to access
the wallet. The next step is to access your wallet and save the private key. The best way it will be
write the key on a piece of paper and store it in a place where you are the only one with access.
The internet is not the safest place and you have to take care of your KEYS in the cryptocurrency
The mobile wallets are using a light client and don’t require to download a full copy of the blockchain. This type of client is relying on the nodes to get the valid information about the network. A simple way to access your funds anytime with any internet connection.
You can setup and download the copy of the blockchain to host you own node and generate your wallet or you can use a light client like the apps on mobile phones. The light versions of desktop wallets are easy to use, provide a better security because it can only be use on the computer where is downloaded. Even if the desktop version is more secured the connection to internet is making it vulnerable to hacks. Is a convenient way to do your day to day transactions when you trade on the crypto market.
The smart contracts are applications that are write and run on top of the Ethereum network. This type of contracts can run automatically when all the requirements are met. When you run the code of a smart contract you need to pay the transaction fee in Ether for the resources that are used by the network to execute the code.
There are a lot of examples on how you can use this kind of technology on day to day life. A smart contract for a fundraiser can be made, if the gold is reached all the money will be transferred automatically, if the requirements haven’t been met in the amount of time that was set in the contract, all the money will be send back to the people that pledged for the fundraiser.
But besides contracts that can be transferred from the actual system to a new decentralized one, developers are getting creative and more interesting apps and games that run on Ethereum network are earning some currency in their contracts. Some interesting smart contracts to look on: CryptoKitties, MakerDAO, BountyNetwork, Augur, Etheroll.
Ethereum Network is reaching new milestones every day and their plan to build a decentralized internet is closer. This technology is still in development and there are a lot of challenges when it comes to scalability and security but the developers of Ethereum are working hard and a new version of the network will be launched in December. More of the Ethereum 2.0 project can be found on the official website.