What is Ethereum and how does it work ?

 

In this article, we talk in very simple language without the slightest reference to technical issues about the nature and purpose of the Ethereum. Note that this article is written in simple language for beginners and for a more complete understanding of the Ethereum, the article “What is the Ethereum?”

What is the purpose of the Ethereum creation?

To better understand the purpose of Ethereum, it’s best to think a little about how the Internet works. At present, when you provide personal information (such as name and address) to a website or online service company, that information is stored on their computer system (server).

Think of information that is registered on the servers of hundreds of companies. Your name, phone number, bank balance of accounts, credits and records, text messages, emails, medical records and even your personal pictures. This list does not end there.

There are countless networks of computer servers around you that swallow information. Most of these servers are powered by technology giants such as Microsoft, Google, Facebook, Amazon and others.

Everything looks good in terms of working with these companies, but in terms of privacy and security, the situation is extremely catastrophic. You have to blindly trust that your information is only used to log in or forget your password and nothing else.

There is also always the risk of hacking on these centralized servers. So far, big companies like Dropbox, Starbucks, Facebook, Uber and even Google have been hacked or destroyed. Ethereum stepped in to solve privacy, security and decentralized world problems.

Genesis of the Ethereum

In 2013, Vitalik Butrin and a few young programmers created a new solution called Ethereum to eliminate the need for us to trust large companies forever. Ethereum is a revolutionary network because it first implemented the idea of ​​running decentralized applications without the need for third-party companies like Google.

In this network, data is not controlled or stored by one or more centralized entities and can automatically continue to operate indefinitely. Although the cost of this network is still high, another goal of this network is to be cheaper than centralized systems.

In this way, there will be real privacy in the Ethereum network and the principle of distrust (without the need for trust) will be established. Ethereum’s goal is to bring together small computers from around the world to form a large computer called a “global computer” that covers all processes. One decentralized computer for everyone instead of multiple centralized computers.

Looking at app stores, you see a long list of apps that have to rely on large companies to survive. From banking to medical software, everyone uses centralized servers. If big companies like Google and Apple do not like your app, they can simply dismiss it.

Ethereum does the opposite: The platform intends to cut off intermediaries for accessing and using applications. Simply put, anyone can own a program without harming the program.

 

Ethereum’s idea is that anyone can use this large, decentralized network to run decentralized applications. No permission is required as intermediaries’ tastes no longer apply.

A free platform without the need for trust

Think of Ethereum as a platform that allows anyone anywhere in the world, regardless of race or nationality, to run applications. Since these programs no longer use centralized servers, they are referred to as decentralized programs (Dapp).

Ethereum is not controlled by its creator, Vitalik Butrin or his team. Although they can contribute to and influence the development of the network, no change is possible unless the community agrees.

Note: Of course, there is always the argument that, unlike bitcoin, developers can play a bigger role in the future of Ethereum, and this is not very much in line with the ideal of decentralization.

Ethereum users are located all over the world and volunteer their computers to help the network. Transactions on this network are like peer-to-peer (2P2) bitcoins.

Ethereum users work with each other completely automatically, without knowing or needing to trust each other. You can work in the Ethereum network without entering your personal information.

How does Ethereum work?

Imagine two people texting each other on their smartphones. The two may be using messaging software such as WhatsApp, Facebook or Skype, which are run by tech giants. When a message is sent, simply put, the message first passes through the corporate server and then reaches the recipient.

 

Since large messaging companies have control over their software, they will be able to control and access all sent messages. They also have access to your personal information or the pictures and videos you send in your messages. Anything can be done with this amount of information.

The company’s servers may be hacked or simply sell user information, something we saw in the big Facebook scandal. Now suppose these two use messaging on Ethereum Decentralized Network instead of centralized servers.

The Ethereum system is not controlled by one or more specific companies, but by a network of all computers on the network.

When someone presses the send button, the message simply circulates between the Ethereum networks and eventually reaches the receiver. The interesting thing is that your message is encrypted and no one but the recipient will be able to read it.

Behind the scenes, everything is different from centralized networks, but programs can be designed so that users do not notice the difference between centralized or decentralized at all, and without any technical knowledge, they can enjoy complete privacy. Of course, they are still much more powerful in terms of speed and efficiency of centralized applications. Let’s not forget that Ethereum still has a long way to go.

Ethereum Smart Contracts

Decentralized applications work automatically. Without dependence on any intermediary. The reason for this is the use of smart contracts. Smart contracts are programs that are set to automate a series of instructions.

What is ether?

Many Ethereum programs and smart contracts require financial exchanges. Because Ethereum is fully digital, the need for an asset and payment method in this network is felt.

In the Ethereum system, all payments are made using the network’s internal digital currency. The name of this currency is ether. Ether is used whenever there is a need to transfer value in a smart contract.

Unlike traditional currencies such as the dollar, ether is 100% digital, so it can be stored directly in smart contract codes. It is only with ether that a smart contract can transfer value.

In addition to smart contracts, miners can use their powerful computers to assist the network in transactions and security, and receive ether rewards. Ether is also used to pay network fees. For these reasons, it is also called Ethereum network fuel ether, because without it, no current would have formed in the network.

What is Gas?

We said that a fee must be paid for each transaction in the Ethereum network. Gas (fuel) is the same Ethereum network fee that is received as ether from the user. Gas can be considered like gasoline in the real world. Gasoline is the fuel of the car, and if you want your gasoline car to move, you have to buy gasoline (gas) for your car by paying money (ether). In the Ethereum network, the cost you pay for gassing goes to the Ethereum miners.

In the case of gas, we are dealing with two concepts:

• Gas limit
• Gas fee

To perform the transaction, the user must specify a limit. Gas limit is the amount of fuel that the user is willing to pay to perform an operation on the network, and when we talk about gas alone, it means the same gas limit.

 

You can think of the limit as the amount of gasoline you pour into your car to reach a destination. For example, if you need 100 liters of gasoline to reach London from Paris, if you pour 50 liters of gasoline, you will not reach your destination. If the threshold is set below a certain limit, the operation will not be performed on the network. To perform a normal transaction in the Ethereum, the limit must be at least 21,000, but performing additional operations requires a different limit. If the user limit specified by the user is not sufficient, the operation will not be performed, but if additional limitation is entered, the remainder will be returned to the user.

Gas price is also the amount of cost that you have to pay for each gas limit. Gas is paid for with ether, but because this figure is so low, it is represented by the “Wei” unit. Each 1 Wei is equal to 0.00000000000000000001 Ether. The Ethereum network leaves everyone free to set as much as they like the cost of Gas or Gas Price, but if your Gas Price is too low, the miners will not approve your transaction and will prefer to approve transactions with higher fees. . Therefore, the amount of gas price to perform the operation can vary depending on the network congestion or solitude. At the moment, the average gas price suitable for transaction confirmation is 20 Gwei (or 0.000000002 ETH), but sometimes this figure increases dramatically as the network becomes congested.