Before we can answer “What is Ethereum launched in 2015 as a decentralized, blockchain-bas...?” we have to establish what Bitcoin is.
In 2008, Satoshi Nakomoto, a pseudonymous cryptographer published the Bitcoin whitepaper. This paper, subsequently accompanied by the Bitcoin open-source software in January 2009, has given way to a whole new world of possibilities, unlocking transformative technologies for humans across the globe.
Bitcoin, the first cryptocurrency, is a global peer-to-peer payment network, where the sender and recipient transact directly with each other, without the need for middle men.
In 2015, another transformative technology was built from the same principles encapsulated in Bitcoin: Ethereum.
A Turing-Complete Blockchain
To help us understand the full scope of value Ethereum has to offer, we should differentiate Ether the coin and Ethereum the application. Take Bitcoin for example. It can be referred to as the application, whereas bitcoin(s) or BTC represent the digital online currency that people would send and receive to one another. Like Bitcoin, Ethereum has its own cryptocurrency: Ether or ETH. When most people refer to Bitcoin or Ethereum, they generally speak of bitcoin(s) and ether. However, it only takes a quick peek under the hood to reveal that it is the applications, not the currencies, that make them so special.
Both Bitcoin and Ethereum are blockchains. However, Ethereum is much more than just a payment network. Ethereum is a programmable Blockchains are made up of a series of individual blocks. Ea.... This means that decentralized internet protocols and applications can be built on top of it, the same way a computer can.
But…how does Ethereum provide that, which Bitcoin can’t do already?
Essentially, by building on Satoshi’s premise of Bitcoin the distributed, proof-of-work consensus, Ethereum uses (at the time of writing) a proof of work blockchain to encrypt new data onto its blockchain.
Blockchain technology allows the use for on-chain digital assets to represent custom currencies, the ownership of an underlying physical device, known as smart property, non-fungible assets such as domain names, pieces of art and/or any intellectual property, as well as more complex applications involving having digital assets being directly controlled by a piece of code implementing arbitrary rules, commonly known as smart contracts and even blockchain-based “decentralized autonomous organizations” (DAOs).
Scalability and Abstraction
Although on a certain level, the Bitcoin protocol can technically execute most of these actions, its protocol is not a Turing-complete machine, and its distributed consensus fails to contain the necessary conditions to fully run the required unique utilities at a meaningful scale that blockchain technology can create. The technical readers should visit the Ethereum Foundation‘s website to fully intuit the cryptography and computing that makes Ethereum capable where Bitcoin is not. However, any other person should know that the built-in economics of Ethereum allows for the creation of on-blockchain utilities at a much larger scale.
To put it simply, Ethereum is composed of an abstraction, built on top of its blockchain called the EVM (Ethereum Virtual Machine). The EVM is a virtual machine made of state transition functions that can read and write messages through code, and translate those messages into transactions onto its blockchain, which is used to store and properly secure the data of everything and everyone using the blockchain, without the use of any intermediary or middle-men.
The EVM is a complex system and we shall visit it in more detail in future articles.
In essence, Bitcoin revolutionized payment networks by allowing users to exercise self-custody of their own assets and by eliminating the dependence of intermediaries for transacting digitally.
On the other hand, Ethereum has the ability to revolutionize any given shared network by allowing anyone to build, basically anything that can be built with code, in a completely decentralized fashion.