• A Beginner’s Guide to Ethereum
  • Originally written by Linda Xie
  • The Nuggets translation Project
  • Permanent link to this article: github.com/xitu/gold-m…
  • Translator: Rickon
  • Proofreader: Qiuk17, ZyGan1999

What is Ethereum?

According to the ethereum website, “Ethereum is a decentralized platform for running smart contracts.” This is an accurate summary, but in my experience, when I first explain Ethereum to my friends, family and strangers, it’s easier to compare Ethereum to Bitcoin because many people have at least heard of bitcoin before. This primer should help people new to Ethereum understand the high-level differences between the two.

To compare

In short, bitcoin can be described as a digital currency. Bitcoin has been around for eight years and is used by people to send money to another person. It is often used as a store of value and has become an important way for the public to understand the concept of a decentralized digital currency.

Ethereum differs from Bitcoin in that it allows for smart contracts, which can be called highly programmable digital currencies. Imagine that money could be automatically sent from one person to another if a series of conditions were met. For example, a person wants to buy a house from another person. Traditionally, transactions involve multiple third parties, including lawyers and escrow agents, which can make the process unnecessarily slow and expensive. With Ethereum, a piece of code automatically transfers ownership of the home to the buyer once the sale is completed, and the seller receives the money to sell the home once the sale is completed, without the need for a third party to operate on their behalf.

The potential is incredible! Think of the many apps (Uber, Airbnb, eBay) that connect you to others as third-party organizations based on some sort of logical set. Many of the centralized systems we use today can be built on Ethereum in a decentralized manner. With Ethereum, you can make these transactions untrustworthy, opening up a whole world of decentralized applications. Decentralization is important because it eliminates single points of failure or control. This makes internal collusion and external attacks impractical. Decentralized platforms cut out the middlemen, ultimately lowering costs for users. There are a few apps I’m particularly excited about.

identification

A person can create a digital identity on many sites (e.g., Facebook, Twitter, LinkedIn). It’s cumbersome to manage, and at the end of the day, you don’t have complete control over your information because it’s still owned by a central entity. With Ethereum, you can have a decentralized identity management system like uPort that gives you complete control over your data. No centralized server can access, edit, or shut down your private data, or allow your data to be hacked.

Now in the United States, we have credit bureaus (e.g., Experian, TransUnion, Equifax) that banks and others rely on to get your credit rating. Credit agencies can disadvantage certain groups such as foreigners and young people. Lending Club, a peer-to-peer Lending platform, solves the problem of traditional financial services by relying entirely on FICO scores to provide additional data points, such as home ownership, income and hours worked. Ethereum applications like uPort can go a step further and allow you to take control of your data, identity and reputation.

Computing power/storage space

Consider that an average person may have extra computing power and storage space on a computer. If it’s not being used, then why not make it available to others? It’s similar to the concept of renting out a spare bedroom on Airbnb. Another benefit of using decentralized applications is that there are no centralized servers that are vulnerable to censorship.

There are several projects under development that allow people to take excess computing power and storage space from others. Filecoin allows people to rent out their computer storage space to others for a fee. Similarly, Golem allows people to rent out their computing power. Ideas like this are not new. Since 2000, Folding@home has allowed volunteers to contribute excess computing power to Stanford science. Now, the concept can be monetized and applied to other industries, potentially lowering costs.

Social media

Akasha is a decentralized social media platform. There is no centralized server, so no one party has complete control over the content. That means the platform is resistant to censorship. Another benefit of building decentralized social media applications on Ethereum is that people can create a system that rewards high-quality content financially. It’s like Reddit, but instead of liking a post, you can give it a small amount of money.

Rights management

Decentralized applications can be used to bring transparency to multiple industries. SingularDTV, for example, provides an entertainment rights management platform that allows transparent allocation of funds to creators, investors, crew, actors and others involved in projects. There is no centralizer that can prevent a group from accessing their funds, because these terms are enforced by code. Everyone gets paid on the aforementioned terms, and no third party is required.

Management of the company

One time-consuming and often costly problem in starting a new company is allocating and managing stock. As companies grow and raise more capital, they eventually need to issue and transfer stock. An example of a promising project is Aragon, which has an easy-to-use interface to manage the company’s cap sheet and financing.

financing

Finally, a major use case for Ethereum is decentralized financing by investors from a global network. Crowdfunding lowers the barrier to entry for developers working on high-risk projects. Since Ethereum launched in July 2015, we’ve seen decentralized apps raise unprecedented amounts of money through crowdfunding. Ethereum itself was created through a crowdfunding campaign that raised $18 million worth of Bitcoin, with a project called The DAO raising $160 million. Here are some other notable crowdfunding efforts:

Amount raised in crowdfunding (non-implied valuation)

For more information on how these tokens work, see how to use tokens to fund on blockchain, the legal framework for blockchain token securities, and the differences between App Coins and protocol tokens.

data

This article covers just a few of the countless ethereum use cases. The field is constantly evolving and innovating. Here are some links to help you learn more about Ethereum and keep up with the latest news.

Understanding Ethereum

  • Ethereum is at the forefront of digital currencies
  • App Coins and the dawn of a decentralized business model
  • Ethereum White Paper
  • Bits on Block introduction
  • Faqs on proof of interest

Keep up with Ethereum

  • Ethereum Subreddit
  • Week in Ethereum News
  • The Control
  • Smith + Crown
  • The Dapp Daily
  • Silicon Valley Ethereum Meetup (Check out your local gathering)

Thanks to Will Warren, Fred Ehrsam, and many Coinbase employees, Especially Jordan Clifford, Reuben Bramanathan, Ankur Nandwani, Dan Romero and Jeremy Henrickson.

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