What is Ethereum? The Non — Techy Guide
By: Nigeria Bitcoin Community
Tags: Bitcoin, Altcoins, Smart Contracts, Crypto, Guides And Tutorials

What is Ethereum?

Ethereum Explained

Ethereum can be better understood if you understand the internet and how it works. For starters, we all use the internet. You are reading this now on the internet.

What is the internet and how does it work?

The internet in simple terms in the interconnection of computers around the world through what is called servers or routers. The connected computers can receive and send all kinds of information such as videos, voice, graphics and text. What this implies is that the owners of these servers or routers (Facebook, Google, Amazon, Hostgator, etc) can interfere with or control the information on the computers connected to them. If they can, the government also can.

For example, Facebook can shut down your Facebook account if you fault their policy, google and yahoo can also do the same. A whole website can also be shut down by a hosting company. Secondly, hackers sometimes attack this system and get hold of people accounts.

Ethereum was basically created to give users full control of their content online. Just as Bitcoin was created to decentralize money by removing 3rd parties in money exchange, Ethereum was created as a decentralized platform for developers to build apps on.

For example, the only profit that comes from users ‘liking’ and ‘sharing’ their favourite artist’s posts on Facebook is generated from an advertisement placed on their page and it goes directly to Facebook. But in an Ethereum version of such a social network, both the artist and the fans would receive awards for positive communication and support.

This is achieved by ‘smart contracts.’

How Ethereum Works

Smart contracts are designed to automatically perform transactions and other specific actions within the network with parties that you don’t need to trust. The terms for both parties to fulfil are pre-programmed into the contract.

The completion of these terms then triggers a transaction or any other specific action.

Now, I will take a detour to explain how a smart contract works.

Let’s say Rita sees a size 39 shoe displayed on an e-commerce site(e.g Jumia) and orders it.

The shoe is worth $200 and Rita will want to ensure that the shoe fits properly(i.e it is not a big sized 39 shoe) before expending such an amount for it.

To ensure no one pulls a fast one on the other, Rita puts up the $200 in a smart contract with the condition that the money will be released:

To Jumia within 24hrs if the shoe really fits her(of course, the smart contract will be designed to detect whether the shoe fits or not). Back to Rita within 24hrs if the shoe does not fit and is sent back to Jumia.

Many people believe that smart contracts will eventually replace all other contractual agreements.

This is because the implementation of smart contracts provides security that is superior to traditional contract law, reduce transaction costs associated with contracting, and establish trust between two parties.

Moreover, the system also provides its users with the Ethereum Virtual Machine (EVM).

This essentially serves as a runtime environment for smart contracts based on Ethereum.