The best way to describe Ethereum is that it is programmable Bitcoin, meaning that developers and software engineers are able to use it to build applications and software instead of just using it as digital money.
<aside> đ Vitalik Buterin created Ethereum in 2013 to let anyone write smart contracts and decentralized applications. Ethereum Whitepaper
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Ethereum is the upgraded version of Bitcoin, as it can do everything Bitcoin can do and more.
In 2017, Ethereum became mainstream and everyone began to talk about âSmart Contractsâ.
So what is a smart contract? đ
In laymanâs terms, a smart contract is code on the blockchain. Just like how blockchain is decentralized, transparent, and immutable, so are smart contracts on the blockchain. Meaning, that code in a smart contract will always run the way it is suppose too. Donât over think this, Smart Contracts are computer code on the blockchain.
That is why the excitement for Crypto grew with Ethereum. Because it allowed developers to begin building decentralized applications that run on the Ethereum Blockchain. Smart contracts enabled programmable money.
Before, if you wanted to build an application like Venmo or Paypal, you would need to work with a company like Amazon, Google, or Microsoft to run your servers. All developers would have their own servers. Now with Ethereum, all developers can build on the same server, a new super computer!
How does it work?
Software built on Ethereum, is known as a DApp, or decentralized application. That is because once a developer deploys code on a smart contract built on Ethereum, it can run itself forever. There is no need for a central authority like Amazon or Microsoft to run it.
When a user interacts with a DApp they use the native digital currency Ether (ETH), which is the equivalent of Bitcoin. However, using an Ethereum DApp isnât free, because it takes computer power to execute a transaction. These are known as Gas fees.