Whilst the first established use of blockchain technology, bitcoin, introduced – and is exclusively – a peer-to-peer electronic cash system, blockchain can have many more uses. Etherium has emerged as a programmable and general purpose blockchain.
Etherium, launched in 2015, is an open source software platform which offers some notable additional functionality, such as allowing for the development of decentralised applications (Dapps).
The similarities with bitcoin are that both are distributed, public blockchain platforms, and both have a trade-able cryptocurrency whose ownership can be tracked (ether in the case of Etherium).
But whilst bitcoin has been described as being analogous to email as one use of the Internet, Etherium takes the technology further, introducing the idea of smart contracts.
Smart Contracts Explained
A smart contract is a self-operating computer program, set to execute when certain conditions are met, automatically. These conditions could include a price point being hit, an expiry date, or any action that should trigger the contract to execute.
Once created smart contracts cannot be stopped, censored, or interfered with. They allow for the trustless exchange of anything of value that can be digitised – money, ownership, content, shares and so on.
Smart contracts, then, allow for transactions between anonymous individuals or organisations, where both parties can be confident they will complete as agreed. Whilst the individuals involved can retain their anonymity, the transaction can be confirmed by looking at the public ledger.
Whereas bitcoin transactions execute only once, and have deliberately limited capabilities, Etherium smart contracts have memory, and so can recall data the next time they are called.
The programming language behind bitcoin, Script, is only intended to allow for a multi-signature transaction between two individuals. Any additional logic required must be programmed off-chain (in other words, outside of the blockchain itself).
By contrast, the Etherium programming language, Solidity, allows for powerful applications to run, automated, on the Etherium blockchain. It is for this reason that Etherium is being used to program many of the new digital current currencies that have emerged since Etherium launched.
Decentralised Autonomous Organisations Explained
Ethereum smart contracts allow for the development of self-perpetuating economic entities, which ‘live’ on the blockchain, have their own funds, and self-govern according to the rules programmed into them. Not to be confused with ‘The DAO’.
The idea is that these DAOs are not managed by a company, they are the company. Composed of a collection of smart contracts, these DAOs would be self-sustaining and unstoppable.
Imagine an organisation comprising a fleet of self-employed, self-driving cars, with their own budget and their own performance targets, even using artificial intelligence to optimise routes and mechanical reliability.
Facts About Ethereum
November 2013 – the date Vitalik Buterin authored the Ethereum white paper.
25 January 2014 – the date that Vitalik Buterin introduced Ethereum to the public, making an announcement at The North American Bitcoin Conference in Miami, Florida.
60 days – the length of a funding round launched at the announcement of Ethereum, in which ether was made available in exchange for bitcoin (BTC).
1,000 – the amount of ether offered to the majority of investors in exchange for 1 bitcoin.
2,000 – the amount of ether offered for 1 bitcoin to early-stage investors, in recognition of the greater risk and uncertainty they were taking by participating early.
April 2014 – the date that Dr Gavin Wood, Ethereum co-founder, published the yellow paper that would be the technical bible and specification document for the Ethereum Virtual Machine (EVM).
August 2014 – the month that crowdfunding for the development of Ethereum successfully completed.
30 July 2015 – the date the Ethereum blockchain went live.
3 – the broad number of purposes for which ether, the Ethereum token, is used: a) the digital currency used to exchange with fiat and other cryptocurrencies, b) the incentive offered to node computers to mine blocks, and c) as a token needed to run applications on the platform.
September 2011 – the date Vitalik cofounded Bitcoin Magazine (along with Mihai Alisie, the first issue being shipped from Alisie’s home in Romania).
What is the Ethereum Enterprise Alliance?
The EEA is an alliance of technology companies and large organisations who share the common goal of advancing the capabilities of the Ethereum blockchain technology at the enterprise-level, in the areas of architecture, standards, collaboration and best practices.
28 February 2017 – the date on which the Ethereum Enterprise Alliance launched.
30 – the number of member companies and organisations at the launch of the EEA.
The Ethereum Ecosystem is Strong and Getting Stronger – William Mougayar, startupmanagement.org (07/03/2017)
A Next-Generation Smart Contract and Decentralized Application Platform – Ethereum whitepaper (download PDF).
Ethereum: A Secure Decentralised Generalised Transaction Ledger – Ethereum technical yellowpaper (download PDF).