Based on blockchain technology, the most straightforward description of Ethereum is that it is an open software platform that awards developers the ability to build and deliver decentralized applications.
As Kim St Martin of Blocksource Capital points out, “Ethereum puts control back in the hands of the people.”
Grasping the fundamentals of Ethereum requires an understanding of the inner workings of the internet.
As you connect to the worldwide web to interact with friends, banking institutions, shops and more, the current inescapable fact is that all your personal data, passwords, and financial information are kept in clouds and servers belonging to goliaths such as Amazon, Facebook and Google. In other words, the internet presently relies heavily on a centralized design in which information is on other people’s computers and not entirely in your control.
The up side of this system of reliance on a third party to entrust sensitive information is they have the infrastructure, framework and highly-qualified specialist to facilitate storage and secure data — all of this in addition to eliminating or drastically reducing the costs associated with hosting and uptime.
There is a downside, however. The systems in place are vulnerable to hackers and unwelcomed interference from a range of entities, including malevolent governments, who work hard to gain access to your information without you ever suspecting. They can steal, alter or leak sensitive data to catastrophic effect. Case in points include once dominant Internet giant Yahoo, whom while in negotiations to sell itself to Verizon, announced it had been the victim of the biggest data breach in history, likely by “a state-sponsored actor”. The 2014 attack compromised the real names, email addresses, dates of birth, and telephone numbers of 500 million users. In October 2016, the names, email addresses, phone numbers, and license plate numbers of at least 57 million Uber drivers and customers were accessed by hackers, leading to a major cover-up and scandal. There are examples abound.
“That centralized design is the Achilles’ heel of the internet,” notes Mr Kim St Martin. “This revolutionizing technology was always meant to be decentralized, and now new tools, including blockchain technology, are springing up to achieve this goal. Ethereum is at the forefront of these new tools.”
In the way that bitcoin is changing the banking landscape through a peer to peer electronic cash system with blockchain used to track ownership of the digital currency, Ethereum focuses on decentralizing the existing client-server model. This means servers and clouds are replaced by thousands of nodes (any physical device within a network of other devices that’s able to send, receive, and/or forward information), which are run by individual volunteers across the planet. With programming codes run from these decentralized applications, the ultimate result is that anyone can offer services typically provided by the previously mentioned giant third parties.
Ethereum provides the infrastructure for any developer to build applications that let you store data, transfer mortgages, keep track of complex financial instruments, and much more while giving back control of the data in these types of services to its owner and the creative rights to its author.
The attraction is that your information will no longer rest in the hands of a single entity, and hacking is virtually eliminated.