A Beginner’s Guide to Ethereum.

The blockchain system was made popular by the successful launch of Bitcoin back in 2009, as a way of decentralizing the institution of currency. Ever since then, cryptocurrency projects, very similar to Bitcoin, were created. But after the cryptocurrency boom happened, people started to realize that this decentralization could be used for many other things, not just money transactions.


After Bitcoin’s success, the use of blockchain technology for purposes beyond currency started to take off. Developers came to the conclusion that, although Bitcoin was a fascinating use of blockchain technology, it was also limited primarily to just one purpose (money). Some developers considered Bitcoin’s narrow approach very limiting for future development, and therefore these developers started to look for ways to use blockchain technology to create single platforms that had the potential to serve many different purposes, This is how Ethereum was born.

Ethereum is currently in second place on Coin Market Cap, just below Bitcoin, so you’ve probably heard of it. Yet, you might not quite understand what it is. Let’s start from the very beginning.


The first thing you need to know is that Ethereum isn’t a just a cryptocurrency, but it’s actually an open source computing platform based on blockchain technology. This means that Ethereum is just the platform itself, but within the computer, there are all sorts of applications which serve various functions, including a cryptocurrency called “Ether” (ETH). It is a very common mistake to think that Ethereum is only a cryptocurrency like Bitcoin when it’s actually so much more.


This all started with its creator Vitalik Buterin, a young programmer who had been working as a writer for Bitcoin Magazine. He started to develop the idea of what he called “a decentralized mining network and software development platform rolled into one”, kind of like a smartphone but without any physical aspect to it.

First, he insisted that Bitcoin needed to incorporate a scripting language to create applications within the platform, but they didn’t listen. So he decided to do it himself, and he described the project on a whitepaper in late 2013.

The development started in early 2014 through a Swiss company named Ethereum Switzerland GmbH, and then it was funded through an ICO (Initial Coin Offering) during the summer of 2014, raising about $14 million.

The initial version of Ethereum, called Frontier, launched in the summer of 2015, and since then Ethereum has “upgraded” itself through what they call milestones, which are basically planned protocol upgrades. The next milestone, Homestead, was released in 2016, and there are two more planned for the future, Metropolis and Serenity, though the dates haven’t been announced yet.


We’ve mentioned how Ethereum takes the blockchain system and allows it to have functions outside of currency. They do this by enabling the incorporation of code in the blockchain. The process has given birth to what are known as smart contracts. Using smart contracts, users are able to do more than just exchange cryptocoins. These smart contracts are public because they are on the blockchain, so this gives a sense of security to negotiations.

The smart contracts are run in an environment called the Ethereum Virtual Machine (EVM). This machine executes the scripts through an international and decentralized network of nodes. This would be the “computer” part of Ethereum, and it’s what makes it a decentralized system. Then, the smart contracts are stored publicly on every node of the blockchain.

As stated in the beginning, Ethereum has it’s own internal currency. Their internal currency, called ether, is a token that can be exchanged through cryptocurrency trades, but it is also used to pay every fee or transaction made on the Ethereum network. In this sense, it serves a real world function within the Ethereum platform itself.

To prevent attacks and bring a sense of security to the network, Ethereum implemented a system called “gas”. Gas is basically a fee that needs to be paid to make a transaction. Think of a transaction as being a car and the gas being…well, gas. Without any gas, the car won’t move, and the transaction won’t be made either.

Each transaction has a different gas price, and this makes the miners prioritize the ones with the highest instead of the lowest. This also helps prevent infinite loops, making the attacker literally pay for what he’s doing.


As we mentioned, Ethereum is a platform that can run all sorts of applications, and one of the main uses organizations have used Ethereum for is the hosting of ICOs (Initial Coin Offerings). That was the case of an organization called The DAO, which hosted a crowdfund on Ethereum in May 2016, raising a record of $150 million, more than any crowdfunding campaign in history during that time.

This seems like a beautiful story, with a happy and historical ending. Until one month later, on June 2016, The DAO was victim to an attack. An anonymous entity claimed $50 million in ether, due to an exploitation of vulnerabilities in the code.

The solution that Ethereum presented was a hard fork, meaning they would “delete” The DAO in its entirety and reimburse all the investors. This represented a crossroads for Ethereum and eventually dissolved it into two different organizations. There were members of the Ethereum community that didn’t agree with this decision, stating that the nature of a smart contract and the blockchain should be immutable. So, Ethereum Classic was born.

The part of the community that wasn’t too happy with the hard fork simply decided to leave Ethereum and launched a new network called Ethereum Classic. This platform is essentially Ethereum but without the hard fork, so it offers the same features as the original Ethereum. Their cryptocoin is called ethereum classic (ETC).


The core idea of Ethereum is to provide a network for people or companies to host different applications or, as we said earlier, basically be a non-physical smartphone.

Ethereum has managed to provide such an extensive and broad range of services to its users. For example, securing identity systems for uPort, improved the management for the digital rights of Imogen Heap’s music, and even gambling with Etheroll or DAO.Casino.

Ethereum truly represents the future not only of finance but of every other industry. Bitcoin came in strong, challenging our monetary system. But Ethereum takes an additional step, by challenging pretty much everything.

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