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What is Ethereum?

According to ethereum.org (the official website of the Ethereum Project), Ethereum is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third party interference. This sure as hell confused me in the beginning. So let's take a look at how other people or media describes Ethereum.

Based on the definition on blockgeeks.com, Ethereum is an open software platform based on blockchain technology that enables developers to build and deploy decentralized applications. Like Bitcoin, Ethereum is a distributed public blockchain network. Although there are some significant technical differences between the two, the most important distinction to note is that Bitcoin and Ethereum differ substantially in purpose and capability. Bitcoin offers one particular application of blockchain technology, a peer to peer electronic cash system that enables online Bitcoin payments. While the bitcoin blockchain is used to track ownership of digital currency (bitcoins), the Ethereum blockchain focuses on running the programming code of any decentralized application.

By now, we can together establish that Bitcoin is mainly a peer-to-peer cash transfer system (like a currency), where the Bitcoin blockchain tracks the movement of the currency from one address to another. While the Ethereum blockchain is created to enable many types of applications to run using its blockchain, including currency transfers (like Ether and other Ethereum tokens), among many other types of applications. Dr. Gavin Wood, Ethereum co-founder explains that Bitcoin is first and foremost a currency; this is one particular application of a blockchain. However, it is far from the only application. To take a past example of a similar situation, e-mail is one particular use of the internet, and for sure helped popularise it, but there are many others.

Ethereum was first proposed by Vitalik Buterin, who previously ran the Bitcoin Magazine – a well-read and reputable media among the cryptocurrency enthusiasts. The funding for the project was done via a crowdsale that sold shares in form of Ether. This process is also known as an ICO (Initial Coin Offering). Similar like IPOs (Initial Public Offering) but ICO uses some sort of a digital / cryptocurrency that functions like shares in a company.

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