What are Ethereum and smart contracts?

"Bitcoin is blockchain 1.0, Ethereum is blockchain 2.0", "Ethereum is the dominant position of the public chain", similar expressions may you often hear.

What is Ethereum? How is it different from Bitcoin? Why is it called “Blockchain 2.0”? Today, let’s unveil the “mystery” of Ethereum.

01
Genius Prodigy: V God

Before talking about what Ethereum is, we must introduce Ethereum The legendary founder - Vitalik Buterin, a genius prodigy, known as "V God".

In 2011, the father of a computer scientist began to give his 17-year-old son Vitalik Amway Bitcoin, which was only 2 years old (Satoshi Nakamoto released the Bitcoin white paper in 2008, but in the world The first Bitcoin was mined by Satoshi Nakamoto in January 2009).

After studying Bitcoin, Buterin was completely fascinated. He began to help a media write blockchain-related articles on the forum, and co-founded Bitcoin Magazine with others.

In 2013, 19-year-old V God went to the United States to attend a Bitcoin-related conference. Then he discovered that Bitcoin had some flaws, and he wanted to make some corrections.

After attending the meeting, Buterin was filled with excitement. Like Bill Gates and Mark Zuckerberg, he soon dropped out of college. Then he spent half a year traveling around the world to visit individuals and teams who wanted to improve Bitcoin.

Of course, V God was a little disappointed in the end, because he found that everyone was tinkering with Bitcoin and did not fundamentally solve the shortcomings of Bitcoin, that is, its functions are too single.

So, he put forward the idea of ​​Ethereum and decided to start a new business and do something big. In 2014, at the age of 20, he started crowdfunding to develop Ethereum. In July 2014, he launched a crowdfunding campaign to raise funds for project development. On July 30, 2015, the Ethereum blockchain was officially launched. The idea of ​​Ethereum became a real, working network.

02
The meaning of Ethereum

Although 'Bitcoin' and 'Ethereum' are terms that are often paired together , but the reality is that they are very different. The only thing that Ethereum and Bitcoin have in common is that they are both encrypted assets that run on the blockchain.

But Ethereum is more than just a cryptocurrency, it has features that make it a giant decentralized computer.

So Bitcoin is a distributed ledger, and its main function is accounting.

Ethereum can be understood as a distributed computing platform that can not only keep accounts but also run programs on it.

Distributed computing platform, indicating that Ethereum, like Bitcoin, is decentralized. Nodes distributed around the world jointly keep accounts and maintain a ledger. The ledger is open, transparent and inaccessible. tamper.

But unlike Bitcoin, Ethereum provides a set of Turing-complete scripting languages, which means that we can develop applications on Ethereum.

These applications require node hosting and operation on the Ethereum network. When we transfer money on Ethereum, we also need nodes to keep accounts. For this, we need to pay these node fees. In the Bitcoin network, the handling fee we pay for transfers is Bitcoin BTC, and the system’s reward to miners is also Bitcoin; in the Ethereum network, the handling fee paid and the system’s reward to nodes are Ethereum ETH.

Ethereum can also be understood as a completely decentralized computer, distributed around the world, verifying, storing and replicating transaction data on multiple computers around the world (hence the term " Distributed Ledger").

03
The key to Ethereum: smart contracts

If Ethereum is just a distributed computer, it can be Running programs on it is not enough to make it "Blockchain 2.0". The real killer feature of Ethereum is its smart contract functionality.

What is a smart contract? To simply understand, a smart contract is a contract that can be executed automatically.

For example, imagine that you and I make a bet about the weather tomorrow. I bet it will be sunny tomorrow and you bet it will be rainy. We agreed that the loser must give the winner $100. How can we do this and ensure that losers keep their promises? I can think of three different ways.

1. Trust each other

The easiest way is to trust each other. If we've been friends for a long time now, it's easy to trust each other. I know where you live and you know all kinds of embarrassing things about me. But if we were complete strangers, things would be much more difficult. You have no reason to believe me, and I have no reason to believe you.

2. Sign a legal agreement

Another reasonable approach is to formulate our bet as a legal agreement. We will both sign an agreement that defines in detail all the terms of our bet—including what happens if the loser violates the agreement.

The agreement would obligate us legally to pay the winner, but it would have no practical effect as the cost of legally enforcing the agreement would be greater than the value of the bet.

3. Get help from a common friend

We can find a common friend, we both trust him/her, and then we both give to him/her USD 100 per person as storage fee. The next day, he/she checks the weather and hands the total of $200 to the person who won the bet. Simple and easy, but what if that trusted friend runs away with the $200?

Now we have three different ways to bet, but each option has its drawbacks. Because we are strangers, we cannot trust each other. Forcing a legal agreement would be very expensive and practically unfeasible. Receiving help from mutual friends brings up the issue of trust.

In this case, Ethereum’s smart contracts can save the world. Smart contracts are like trusted mutual friends, but written in code.

With smart contracts, you and I can write the rules of the game on Ethereum, and then transfer "money" (coins) to the account of the smart contract. The next day, the smart contract automatically grabs the weather information from the official website and transfers or returns the Ethereum worth a total of US$200 to the winner.

Once a smart contract is written, it cannot be edited or changed in any way. Therefore, you can be sure that whatever the contract states, it will be enforced.

We can see that Bitcoin has realized that transaction records cannot be tampered with, and Ethereum with smart contracts has achieved the goal of eliminating "trust intermediaries" in richer scenarios, that is, no third party is needed. The transaction is completed under the guarantee of three parties.

To summarize, Ethereum is a distributed computing platform developed under the leadership of the genius boy V God. It can not only keep accounts, but also run programs on it. The killer feature is the smart contract function.

04
Ecological Development of Ethereum

Judging from the current development, the ecological development of Ethereum is already far ahead As for other public chains, a large number of top projects have emerged at the application level such as DeFi, NFT, GameFi, and DAO.

It is worth mentioning that Layer 2 of Ethereum. In order to solve the problem of high fees and low speed of Ethereum, after several years of exploration on the expansion technical route in the early stage, the direction has been basically determined, and the Layer 2 ecology has also The first appearance is majestic.

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