Smart Contracts and Etherum Blockchain

What is Ethereum?

Ethereum is an open source, globally decentralized computing infrastructure that executes programs called smart contracts. Ethereum  uses a blockchain to synchronize and store the system’s state changes, along with a cryptocurrency called ether to meter and constrain execution resource costs.

The Ethereum platform enables developers to build powerful decentralized applications with built-in economic functions. While providing high availability, audit ability, transparency and neutrality, Ethereum also reduces or eliminates censorship, and reduces certain counterpart risks.

What is Ether(ETH)?

ETH is the native currency of Ethereum. ETH is “digital money” that can be sent over the internet instantly and cheaply, and also be used in many Ethereum-based applications.

What is a Smart Contract?

The term smart contract has been used over the years to describe a wide variety of different things. In the 1990s, cryptographer Nick Szabo coined the term and defined it as “a set of promises, specified in digital form, including protocols within which the parties perform on the other promises”. Since then, the concept of smart contracts has evolved, especially after the introduction of decentralized block chain platforms with the invention of Bitcoin in 2009. In the context of Ethereum, the term is actually a bit of a misnomer

Given that Ethereum smart contracts are neither smart nor legal contracts, but the term is stuck. In general, we use the term “smart contract” to refer to immutable computer programs that run deterministically in the context of an Ethereum Virtual Machine as part of the Ethereum network protocol, i.e. on the decentralized Ethereum world computer. 

What is a DApp?

As opposed to centralized applications that run on a single computer, decentralized applications run on a P2P network of computers. They have existed since the advent of P2P networks.

A Decentralized Application, or DApp, is an application which is mostly or entirely decentralized. No individual or government is controlling the application, it is publicly available to view and mined upon.

These applications are similar to a traditional Web application. The front end web  uses the exactly the same technology to render the web page. It contains a “wallet” that connects and communicates with the block chain. The wallet manages cryptographic keys and the block chain address. Cryptographic Public-key infrastructure is used for user identification and authentication. Instead of an API connecting to a database, a wallet software triggers activities of a smart contract, which interacts with a block chain

Consider all the possible aspects of an application that may be decentralized:

  • Front-end software
  • Back-end software (logic)
  • Data storage
  • Name resolution
  • Message communications