Introduction to Ethereum and blockchain technology
In this chapter, we will introduce Ethereum and blockchain technology, and explain how they differ from traditional systems. We will also discuss the main characteristics of Ethereum and the applications that it enables.
What is Ethereum?
Ethereum is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third-party interference. These apps run on a custom built blockchain, an enormously powerful shared global infrastructure that can move value around and represent the ownership of property.
This enables developers to create markets, store registries of debts or promises, move funds in accordance with instructions given long in the past (like a will or a futures contract) and many other things that have not been invented yet, all without a middleman or counterparty risk.
What is blockchain technology?
A blockchain is a distributed database that maintains a continuously growing list of records, called blocks, secured from tampering and revision. Each block contains a timestamp and a link to the previous block, forming a chain of blocks that cannot be modified retroactively without the consensus of the network.
This ensures that the data stored in the blockchain is transparent, tamper-proof, and resilient to malicious attacks. It also allows multiple parties to share and update the data in a decentralized and trustless manner, without the need for a central authority.
Differences between Ethereum and traditional systems
Ethereum and blockchain technology differ from traditional systems in several ways:
- Decentralization: Ethereum is a decentralized platform that runs on a network of nodes, rather than on a single central server. This makes it resistant to censorship, tampering, and downtime, as there is no single point of failure in the network.
- Trustlessness: Ethereum allows parties to interact and exchange value without the need for intermediaries or trusted third parties. This eliminates the need for trust in the system, and allows parties to transact directly with each other.
- Immutability: The data stored on the Ethereum blockchain is immutable, meaning that it cannot be altered or deleted once it is written. This ensures the integrity and security of the data, and allows for a verifiable and auditable history of transactions.
Applications of Ethereum
Ethereum enables a wide range of applications, including:
- Financial applications: Ethereum can be used to create and manage digital currencies, financial contracts, and other financial instruments. This can enable new forms of financial interactions and reduce the costs and risks associated with traditional financial systems.
- Supply chain management: Ethereum can be used to track the movement of goods and materials throughout the supply chain, and ensure that they are produced and transported in a sustainable and ethical manner. This can improve the transparency and efficiency of supply chain operations.
- Identity and access management: Ethereum can be used to manage and verify digital identities and access rights, allowing individuals and organizations to securely control access to their online resources and services. This can improve the security and privacy of online interactions.
- Voting and governance: Ethereum can be used to implement decentralized voting and governance systems, allowing stakeholders to directly participate in decision-making processes and ensure the transparency and accountability of these processes. This can enable new forms of democratic and collaborative decision-making.
- Predictive markets: Ethereum can be used to create markets that allow participants to bet on the outcome of future events, such as the outcome of elections, the success of a product, or the weather. These markets can provide valuable information and insights on the likelihood of different outcomes.
- Self-sovereign identity: Ethereum can be used to implement self-sovereign identity systems, where individuals control and manage their own digital identities and the information associated with them. This can enable individuals to have greater control over their personal data and privacy.
Conclusion
In this chapter, we have introduced Ethereum and blockchain technology, and discussed their main characteristics and applications. In the next chapters, we will dive deeper into the details of the Ethereum protocol and its components, and explore how they work together to enable the applications described above.