What is Ethereum? A Beginner's Explanation in Plain English

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Start trading Bitcoin and cryptocurrency here: http://bit.ly/3qDOEmv Ethereum was proposed in 2013 and brought to life in 2014 by Vitalik Buterin. Unlike the Bitcoin network which was designed for Bitcoin transactions only, Ethereum is a DIY platform for decentralized apps (or Dapps) that uses smart contracts. ‘Ether’ is Ethereum network’s currency and it is used for running Dapps. 0:34 - Quick Bitcoin recap 1:27 - Blockchain technology in a nutshell 3:30 - What is Ethereum? 5:43 - How Ethereum works 8:14 - The DAO and the Ethereum fork 9:47 - Ethereum as a currency 10:39 - Ethereum's ICO 11:09 - Conclusion Special thanks to Jimmy Song who's post about Smart Contracts helped us a lot in creating this video: https://medium.com/@jimmysong/the-truth-about-smart-contracts-ae825271811f For the complete text guide visit: http://bit.ly/2RAjY4j Join our 7-day Bitcoin crash course absolutely free: http://bit.ly/2pB4X5B Learn ANYTHING about Bitcoin and cryptocurrencies on our YouTube channel: http://bit.ly/2BVbxeF Get the latest news and prices on your phone: iOS - https://apple.co/2yf02LJ Android - http://bit.ly/2NrMVw2 See anything we haven't covered? Leave us a comment in the comment section below

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Video Transcript:

What on earth is a theorem I mean I keep hearing about it all the time I've seen it's the second largest cryptocurrency around but I just can't seem to wrap my head around it is it as revolutionary as Bitcoin can it actually change the world as we know it if you want to have a better understanding of ethereal but are tired of explanations that sound like complete technical gibberish stick around here on Bitcoin whiteboard Tuesday or should I say aetherium whiteboard Tuesday will answer these questions and more before we get into aetherium we need to do a quick recap about Bitcoin since it's the basis from which aetherium was born by now you probably know that bitcoin is a form of decentralized money and if you still have some questions about what that means or how it works then you might consider revisiting our original video what is Bitcoin before Bitcoin was Invented the only way to use money digitally was through an intermediary like a bank or PayPal even then the money used was still government-issued and controlled currency however bitcoin changed all that by creating a decentralized form of currency that individuals could trade directly without the need for an intermediary each Bitcoin transaction is validated and confirmed by the entire Bitcoin network there's no single point of failure so The system is virtually impossible to shut down manipulate or control pretty neat huh well now that we know that money can be decentralized what other functions of society that are centralized today would be better served on a decentralized system what about voting voting requires a central authority to count and validate votes real estate transfer records currently use centralized property registration authorities social networks like Facebook are based on centralized servers that control all of the data we upload to them what if we could use the technology behind Bitcoin more commonly known as blockchain to decentralize other things as well the interesting thing about blockchain technology is that it's actually the byproduct of the Bitcoin invention blockchain technology was created by fusing already existing technologies like cryptography proof-of-work and Decentralized network together in order to create a system that can reach decisions without a central authority there was no such thing as blockchain technology before Bitcoin was invented but once Bitcoin became a reality people started noticing how and why it works and named this thing blockchain technology black changes to Bitcoin what the internet is to email a system on top of which you can build applications and programs a Currency like Bitcoin is just one of the options so this got people very excited and they began to explore what else can we do centralized however in order for a system to be truly decentralized it means a large network of computers to run it back then the only network that existed was Bitcoin and it was pretty limited Bitcoin is written in what is known as a touring incomplete language which makes it understand only a small set of orders like who sent how much Money to whom if you want to create a more complex system you'll need a different programming language which means a different network of computers imagine for a second you wanted to build your own decentralized program just like Bitcoin at home you'd need to understand how bitcoins decentralization works write code that mimics the same behavior get a huge network of computers to run this code and so on and that is a lot of work Enter aetherium aetherium was first proposed in late 2013 and then brought to life in 2014 by vitaly Putin who at the time was the co-founder of Bitcoin magazine aetherium is the do-it-yourself platform for decentralized programs also known as dams decentralized applications if you want to create a decentralized program that no single person controls not even you even though you wrote it all you have to do is learn the etherium programming language called solidity and Begin coding the etherium platform has thousands of independent computers running it meaning it's fully decentralized once a program is deployed to the etherium network these computers also known as nodes will make sure it executes as written if theorem is the infrastructure for running adapts worldwide it's not a currency it's a platform the currency used to incentivize the network is called ether but more on that later Sirians goal is to truly decentralize the internet wait the Internet is centralized I thought the internet already was decentralized and that anyone can start their own site while in theory that might be true in practice Amazon Google Facebook Netflix and other Giants control most of the worldwide web as we know it there's almost no activity on the web that happens without some sort of intermediary or third party but once the Concept of digital decentralization was demonstrated by Bitcoin a whole new array of opportunities became available we can finally start to imagine and design an internet that connects users directly without the need for a centralized third party people can rent hard drive space directly to other people and make Dropbox obsolete drivers can offer services directly to passengers and remove Oberer as the middleman people can buy Cryptocurrencies directly from one another without the need for an exchange that can get hacked or steal your money if theorem allows people to connect directly with each other without a central authority to take care of things it's a network of computers that together combined into one powerful decentralized supercomputer okay so now you know what if theory immed us but we haven't touched upon how it does it if theorems coding language solidity is Used to write smart contracts that are the logic that runs dams let me explain in real life all the contract is is a set of ifs and vents meaning a set of conditions and actions for example if I pay my landlord $1500 on the first of the month then he lets me use my apartment that's exactly how smart contracts work on aetherium if theorem developers write the conditions for their program or dap and then the etherium network executes It they're called smart contracts because they deal with all of the aspects of the contract enforcement management performance and payment for example if I have a smart contract that is used for paying rent the landlord doesn't need to actively collect the money the contract itself knows if the money has been sent if I indeed sent the money then I'll be able to open my apartment door if I miss my payment I'll be locked out Ever smart contracts also have their downsides going back to my previous example instead of having to kick out a renter that isn't paying a smart contract would lock the non-paying renter out of their apartment a truly intelligent contract on the other hand would take into account other factors as well such as extenuating circumstances the spirit with which the contract was written and it would also be able to make exceptions if warranted in other Words it would act like a really good judge instead a smart contract in the context of aetherium is not intelligent at all it's actually uncompromising lis letter strict it follows the rules down to a tee and can't take any secondary considerations or the spirit of the law into account like what commonly happens with real-world contracts once a smart contract is deployed on the etherium Network it cannot be edited or corrected even by its original author it's Immutable the only way to change this contract would be to convince the entire aetherium network that a change should be made and that is virtually impossible this creates a very serious problem since unlike Bitcoin if theorem was built with the ability to create really complex contracts and complex contracts are very difficult to secure with any contract the more complicated it is the harder it is to enforce as more room is left for interpretations or more clauses Must be written to deal with contingencies with smart contracts security means handling with perfect accuracy every possible way in which a contract could be executed in order to make sure that the contract does only what the author intended if theorem launched with the idea that code is law that is a contract on aetherium is the ultimate authority and nobody could overrule the contract well that all came to a crashing halt when the DAO event Happened Dow or Dao stands for decentralized autonomous organization which allowed users to deposit money and get returns based on the investments that the Dow made the decisions themselves would be crowd-sourced and decentralized the Dow raised a hundred and fifty million dollars in aetherium currency either when ether was trading at around $20 while this all sounded very the code wasn't secured very well and Resulted in someone figuring out a way to drain the Dow out of money now you could say that the person who drained the Dow was a hacker but some would argue that this was just someone who was taking advantage of the loopholes he found in the Dow smart contract and this isn't very different than a creative lawyer figuring out a loophole in the current law to effect a positive result for his client what happened next is that the etherium community decided that Code no longer is law and changed the etherium rules in order to revert all the money that went into the Dow in other words the contract writers and investors did something stupid and the etherium developers decided to bail them out the small minority that didn't agree with this move stuck to the original etherium blockchain before it's protocol was altered and that's how aetherium classic was born which is actually the original Etherium we've covered a lot up until now and the last thing I want to talk about is aetherium as a currency we've already established that aetherium is basically a large bunch of computers working together like one supercomputer to execute code that powers daps however this costs money money to get the machines to power them up store them and cool them if needed that's why ether was invented when people talk about the price of aetherium they actually are Referring to ether the currency that incentivizes people to run the etherium protocol on their computer this is very similar to the way Bitcoin miners get paid for maintaining the Bitcoin blockchain in order to deploy a smart contract to the etherion platform its author must pay to do so that payment is made in the form of ether this is done so that people will write optimized and efficient code and won't waste the etherium network Computing power on unnecessary tasks ether was first distributed in aetherium original initial coin offering back in 2014 back then it cost around 40 cents to buy one ether today one ether is valued in the hundreds of dollars since the use of the etherium network has grown immensely due to the ico hype that started in 2017 still confused don't worry we'll get more into ether and mining in a later video aetherium network and Ether are a whole new rabbit hole that we'll cover but I think this will do for now as an intro to aetherium this concludes this week's episode of aetherium whiteboard Tuesday hopefully by now you have a better understanding what etherium is a network of computers working together to replace the centralized model of programs and companies which run the Internet today you may still have some questions if so just leave them in the comments section Below and if you're watching this video on YouTube and enjoy what you've seen don't forget to hit the like button then make sure to subscribe for notifications about new episodes thanks for joining me here at the whiteboard 499 bitcoins calm I'm Nate Martin and I'll see you in a bit

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