{"id":128093,"date":"2018-06-07T19:22:08","date_gmt":"2018-06-07T23:22:08","guid":{"rendered":"https:\/\/www.countingpips.com\/?p=128093"},"modified":"2018-06-07T19:22:08","modified_gmt":"2018-06-07T23:22:08","slug":"ethereum-has-taken-the-world-by-storm-but-how-does-it-work-and-why-is-it-becoming-so-popular","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2018\/06\/ethereum-has-taken-the-world-by-storm-but-how-does-it-work-and-why-is-it-becoming-so-popular\/","title":{"rendered":"Ethereum has taken the world by storm…but how does it work and why is it becoming so popular?"},"content":{"rendered":"
June 7, 2018<\/div>
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Article by King Passive<\/strong><\/p>\n

King Passive shares the basics of Ethereum, how it works and what it is used for in a condensed version of their Full\u00a0Ethereum Guide<\/a>.<\/p><\/blockquote>\n

1. What is Ethereum?<\/b><\/h2>\n

Ethereum can be thought of as a virtual supercomputer.<\/span><\/p>\n

It’s designed as a platform to host applications that can run without the need for human interference.<\/span><\/p>\n

These applications are called ‘Decentralized Apps’, and I’ll explain how they work later in this guide.<\/span><\/p>\n

The cryptocurrency, Ether (usually referred to as Ethereum) is the currency or \u201cutility token\u201d that you pay to use this virtual network.<\/span><\/p>\n

2. How Ethereum Works.<\/b><\/h2>\n

2.1. Ethereum Blockchain.<\/b><\/h3>\n

Like Bitcoin and other cryptocurrencies, Ethereum has it’s own blockchain.<\/span><\/p>

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This is like a record of all transactions on the Ethereum network. It’s stored on nodes (computers, miners, etc.) across the world.<\/span><\/p>\n

However, while Bitcoin\u2019s blockchain just stores transaction records, Ethereum\u2019s blockchain also hosts smart contracts and decentralized applications (DApps).<\/span><\/p>\n

Smart contracts are contracts programmed to run by themselves. In simple terms, this means: If x happens, y results.<\/span><\/p>\n

(I’ll explain Smart Contracts in more detail below).<\/span><\/p>\n

The Ethereum blockchain keeps a record of the latest execution of each smart contract.<\/span><\/p>\n

2.2. How Do Transactions Work?<\/b><\/h3>\n

Transactions, whether they are simple money transfers or executions of smart contracts or DApps, require \u201cgas\u201d.<\/span><\/p>\n

Gas can be thought of as transaction fees. You pay for gas using Ether.<\/span><\/p>\n

Transaction fees go to miners (explained below).<\/span><\/p>\n

2.3. What Is Ethereum Used For?<\/b><\/h3>\n

Since you can program different smart contracts and DApps on the Ethereum blockchain, Ethereum use cases are only limited by the imagination.<\/span><\/p>\n

This potentially makes Ethereum more useful than single use cryptocurrencies, such as Bitcoin (payments). It’s also led to the coining of the term \u201c<\/span>Blockchain 2.0<\/span><\/a>\u201d (programmable transactions).<\/span><\/p>\n

Ethereum\u2019s innovation in this regard has even led to copycats trying to mimic Ethereum\u2019s popularity and success.<\/span><\/p>\n

Note<\/b>: <\/span>Want to see how Ethereum works in the ‘real world’?<\/span><\/i><\/p>\n

Check out section 7 of this guide for some examples.<\/span><\/i><\/p>\n

2.4. \u200bSmart Contracts.<\/b><\/h3>\n

As mentioned, smart contracts are contracts that are programmed to run by themselves.<\/span><\/p>\n

So why is this helpful?<\/span><\/p>\n

Smart contracts can eliminate the inefficiencies often caused by middlemen.<\/span><\/p>\n

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Sources:\u00a0BlockChainHub<\/span><\/a> &\u00a0PricewaterhouseCoopers<\/a><\/p>\n

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Smart contracts get rid of middlemen like banks and even service providers like Airbnb and Uber.<\/span><\/p>\n

For example, banks are usually the ones that give people loans.<\/span><\/p>\n

Instead of having a bank, smart contracts could be written so that loans are disbursed once certain conditions are fulfilled.<\/span><\/p>\n

For instance, once you pay your loan amount, funds could be disbursed into your account automatically without the need for a loan collector.<\/span><\/p>\n

For something like Airbnb, instead of having Airbnb connect renters and landlords, smart contracts could grant a renter access to an apartment once he or she makes a payment.<\/span><\/p>\n

The examples are endless.<\/span><\/p>\n

Smart contracts could be revolutionary and have the potential to upend many industries and business models.<\/span><\/p>\n

\u200b2.5. Mining Ethereum.<\/b><\/h3>\n

When you make a transaction, this transaction is broadcast to the Ethereum network.<\/span><\/p>\n

Miners verify transactions and group them into blocks (groups of transactions), which are added to the blockchain (groups of blocks or all Ethereum transactions).<\/span><\/p>\n

The way that miners verify Ethereum transactions is via \u201cproof of work\u201d. However, they are <\/span>planning to move<\/span><\/a> towards “proof of stake”.<\/span><\/p>\n

Miners, using their mining devices, such as computers or specialized mining devices, perform computationally difficult work.<\/span><\/p>\n

Whoever finishes this work first gets to add a new block to the blockchain.<\/span><\/p>\n

For their efforts, miners are paid in transaction fees (gas paid for in Ether) and newly created Ether (if they finish the work first).<\/span><\/p>\n

About the Author:<\/em><\/strong><\/p>\n

Article provided by King Passive<\/strong><\/a>\u00a0– A site on cryptocurrency that has written on Blockchain, Bitcoin, ICOs, and more.\u00a0See the Full Ethereum Guide Here<\/a><\/span><\/p>\n

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Article by King Passive King Passive shares the basics of Ethereum, how it works and what it is used for in a condensed version of their Full\u00a0Ethereum Guide. 1. What is Ethereum? Ethereum can be thought of as a virtual supercomputer. It’s designed as a platform to host applications that can run without the need […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-128093","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/128093","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=128093"}],"version-history":[{"count":4,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/128093\/revisions"}],"predecessor-version":[{"id":128098,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/128093\/revisions\/128098"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=128093"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=128093"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=128093"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}