When you hear about cryptocurrency and blockchains, two names are synonymous – Bitcoin and Ethereum. These two blockchains service very different roles in the cryptosphere. Bitcoin, as designed by Satoshi, in its purest form, is a store of value and can be used as a form of currency to trade. Ethereum on the other hand is created by Vitalik Buterin, and is a decentralized platform on which other applications can be built using their standard of the ERC20 tokens.
A Decentralized Internet
Ethereum is not looking to simply change the way we trade with one another, but rather to change the ownership of data and information as well as changing the internet itself. In our current environment, the internet consists of clients and servers. Centralized servers host the data that clients browse. In a future where the internet in run on the Ethereum network, this type of centralized storing of data is done away with and is replaced with decentralized nodes on a network spanning the entire globe, which is often spoken of as a world computer.
Instead of hosting files and uploading documents to a centralized database, this “world computer” aims to create a unique mix of author ownership and easy means to access your information from wherever you may be at the time. This unique mix is made possible by Ethereum distributing your uploaded content to each node on the network, creating identical copies of the content on each node, but at the same time, only allowing the owner to make changes and access the content by using encrypted hashes that store all the data contained in the content. Every time the content is modified, the nodes will replicate these changes and update the content’s hash with the new data. By using this type of technology, centralized entities do not have the ability to make unwanted changes and removes single points of failure that centralized databases are susceptible to.
Ethereum vs Ether
When overhearing conversations about Ethereum, you might have heard these two terms being used interchangeably and may have thought that Ether is merely short hand for Ethereum. You would, however, be incorrect. Ethereum, as stated earlier, is a decentralized platform for applications to be built on top of, whereas Ether is the token used on the platform to make transactions and remunerate miners for mining blocks on the blockchain. Ether is comparable to Bitcoin as it holds a value and can be paid to another Ether address in exchange for a service provided. This exchange of performance for reward is done through what is known as a smart contract.
A smart contract creates a secure medium to exchange performance for a predetermined reward, one that is transparent and does not involve any bother for either party. These contracts are objects on the blockchain that work on the If-then premise. IF the performance is complete THEN the reward is paid, or alternatively, IF the payment is made THEN the action will be performed. Either way, the contract will be fulfilled depending on the terms of the contract. Self-enforcing and or self-executing contractual clauses may be added to these contracts to ensure that both parties are equally satisfied at the contract’s termination. All transactions made on the network are seen on every node on the network, meaning that if someone is in breach, the contract will be terminated according to the clauses stipulated, ensuring complete transparency of both parties.
Buying and Holding Ethereum
All of this is well and good, but how does one get access to Ether and how does one access the Ether when you’ve bought itI it is not as though you can dig in your pocket, retrieve your wallet and take out the notes you would like to pay with… No, in fact, the entire process is rather simple and much more convenient than carrying around a cumbersome wallet or worse than that, forgetting your cumbersome wallet at home!
To answer the first question, Ether is obtainable through exchanges, made available through the internet. The only issue is finding which ones accept your currency. In South Africa, we can start buying Ether in two ways. The first of these is to use the Ice3x exchange which allows payments to be made in ZAR and is the most direct means to purchase Ethereum. The second way to obtain Ether involves a couple steps. Step one is to buy Bitcoin through the Luno exchange, South Africa’s largest Bitcoin exchange, and then to transfer this Bitcoin to an exchange of your choosing from here. You simply click on the Ethereum market and create a buy order.
The second question is even simpler to answer than the first. Once you have obtained your Ether, you can either keep it in the exchange that you bought your Ether on, or in the various types of Ether wallets that are around. The first of these wallets is a desktop wallet client which is run on your computer and stores the information of the entire Ethereum network. The second is a mobile wallet that can be downloaded onto your phone, making it more versatile to keep on your person for those on-the-go transactions you may want to make using decentralized applications which are more commonly known as Dapps. Another wallet that can be utilized is a hardware wallet, which is the most secure of these wallets. It comes however, at the expense of ease-of-access. These wallets enable you to detach your address from the Ethereum network until you wish to perform a transaction and connect your wallet to the internet and enable access to the rest of the Ethereum network.
There you have it – you now have the building blocks to start your journey into Ethereum and use this incredible platform to enter into a new age of information. If you have any queries about which exchanges to choose or the safety implications that come with using the above-mentioned techniques, keep an eye out for articles explaining all of this and so much more on the Speckle website. Be sure to follow us for more tricks and tips to getting involved in this strange new world.