The Advent of the Smart Contract
Ethereum functions as a blockchain-based software platform that is home to many decentralized applications and payment system. It provides users with the freedom to produce distributed applications that have no regulations and utilize smart contracts to enable safe transactions between users. Ethereum was first developed by Vitalik Buterin in 2013. With the funding and aid of subsequent founders such as Gavin Wood, Anthony Di lorio, Charles Hoskinson and Joseph Lubin, the blockchain went live on 30th July 2015. The native cryptocurrency of the platform is known as Ether (ETH or Ξ for short). Ethereum is currently the second largest cryptocurrency by market cap right behind Bitcoin.
What Ethereum aims to do with such a decentralized platform is to provide their users to conduct safe and reliable transactions in contrast to centralized systems. Centralized systems are potentially more susceptible to cyberattacks which could jeopardize any users of these systems.
For example, in 2017, Equifax faced a massive data breach where 15.2 million British and 19,000 Canadian citizens were compromised. This resulted in one of the largest cyber crimes related to identity theft with many credit card numbers compromised as well. Ethereum utilizes blockchain technology in creating these decentralized products which gives users all the power. Companies using Ethereum will be unable to store any of their information and only the users have the access to their personal details.
Smart contracts are the primary tool behind the decentralized applications on the platform. Many of these applications and decentralized finance (DeFi) make use of these smart contracts. These contracts are used to validate and secure all transactions made in Ether. They serve to automatically perform actions and transactions that were agreed upon by both parties. It prevents either side from retracting from an initial agreement and prevents any changes to their deal.
Ethereum powers many applications and has a myriad of functionalities:
- Smart contracts: The automatic execution of contracts when the conditions of it are met.
- Currency: With crytocurrency wallets like MetaMask, users are able to conduct transactions for goods and services should the currency be accepted as payment. Cryptocurrency exchanges like Binance allow users to buy and sell ETH on their platforms.
- Non-fungible tokens (NFTs): A large portion of these tokens are powered by Ethereum and through the use of smart contracts, allows direct transactions between artists and buyers.
- Decentralized Finance (DeFi): Users of Ethereum are able to avoid centralized control over money and other assets.