Smart Contracts and Ethereum

Source: https://medium.com/coinscapture/smart-contracts-and-ethereum-34806474f8bf

After Bitcoin, the second-largest cryptocurrency to enter the cryptoworld is Ethereum with a market cap of 15.6 billion USD and approx. 500K-600K transactions per day. Ethereum was introduced by Vitalik Buterin in November 2013 as an open-source, public, and blockchain-based distributed computing platform that enables developers to build and deploy decentralized applications that run as programmed and with no possibility of downtime, censorship, fraud and third party requirements. Along with this, Ethereum also enables the creation of the smart contracts.

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Is Ethereum similar to Bitcoin?

Ethereum may appear somewhat similar to Bitcoin, but there are significant technical differences between the two projects having completely different goals. Like Bitcoin, Ethereum is also not under the control of the central government or any single entity. The entire network is controlled by each individual participating by keeping a copy of the database with themselves. Let’s understand the differences between them:

• Bitcoin mining requires industrial-scale mining farms, tremendous amounts of computing power and electricity whereas the proof-of-work algorithm used during Ethereum’s mining encourages decentralized mining with no special hardware requirements.
• In the Bitcoin Blockchain, miners mine for Bitcoin that is tradeable. However, In Ethereum blockchain, mining is carried out to generate new tokens of the network’s currency called Ether that is used to pay for transaction fees and services.
• Bitcoin blockchain focuses on tracking the ownership of the digital currency. On the other hand, Ethereum blockchain focuses on running the programming code of every decentralized application created.
• BTC is used in large numbers for transfers and acts as a monetary system controlled by its people. Ethereum is something more than that it is a system and acts as a global computer in which people can easily write code and run the code. Ethereum is more flexible and easily upgradable as compared to BTC.

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Uses of Ethereum

• Ethereum allows the creation of smart contracts a predefined computer code that facilitates the exchange of any valuable things like money, content, property, or shares; without a need of third-party, censorship, downtime, or fraud. As smart contracts are self-operating computer programs that execute only when the predefined conditions are met.
• Ethereum allows developers to build and deploy decentralized applications that have the potential to change the relationship between the companies and clients completely. Through these applications, tracing the origin of the product being brought is possible and the implementation of smart contracts cuts down the intermediary, ensuring safe and faster trading. Some large DApps currently using Ethereum blockchain to run applications are IDEX, Cryptokitties, uPort, Gnosis, Saturn and Ethlance.
• The web-based services can be changed completely using Ethereum blockchain. For eg. A life insurance in the US possesses more than $7 bln life insurance money, the distribution of such a big amount is tedious. Using, Ethereum Blockchain the distribution can be done fairy by implementing smart contracts which will allow clients to submit their insurance claim online and after meeting all the required an instant automatic payout will be released.
• Decentralized Autonomous Organizations (DAO) can be created using Ethereum. DAO’s are designed to avoid human intervention or any requirement of central authority control. They run based on the programming code and the smart contracts written.
• With the help of ERC20 based tokens, the Ethereum platform can be used to launch cryptocurrencies and they can issue their own token to raise funds for ICO.

What makes Ethereum a better choice?

• Third parties: The contracts are self-sufficient to get executed by itself and therefore it doesn’t require any intermediary.
• Immutability — There is no chance of data tampering as any changes to data has to be verified by each node/individual in the network
• Fight censorship — Each App created depends on the principle of consensus completely which makes censorship impossible.
• Secure — Each application is backed using cryptography to prevent hacking and fraudulent activities also decentralized nature prevents any single point of failure.
• Zero downtime — Apps never shut down unexpectedly unless it contains an error

Ethereum can be the next game-changer of the cryptoworld making a currency payment system secure, stable, scalable, able to carry out the transfer of funds across the globe with minimal fees and quickly.