#CryptoExplained: The Wonderful World of Ethereum 

As Ethereum prepares for its latest upgrade, it’s a good time to look at the second biggest crypto currency by market cap after Bitcoin. In fact, the Ethereum Ecosystem as a whole is very likely more valuable than the Bitcoin ecosystem even though the currency is only second, because the vast majority of Financial Assets in crypto, exist on Ethereum. Tokens, NFT’s, DAO’s, decentralized exchanges and more, are all innovations that first took hold in the Ethereum ecosystem and have come to dominate the Crypto economy. In this series of articles, we will explore the Ethereum ecosystem and why it could become the base layer of trust on the internet.

So what exactly is Ethereum? Ethereum is a blockchain based decentralized system like bitcoin, and its native currency is called Eth. The Bitcoin network is very specialized and is primarily focused on being a decentralized method of exchanging value in the form of the Bitcoin token. Ethereum on the other hand is focused on being a world computer. This means that not only does it have the ability to transfer value, but it also allows the creation of smart contracts that are immutable and trustless. Smart contracts that are run by a decentralized computer form the basis of the wonderful world of ethereum.

Any normal person would wonder why we need to run smart contracts on a decentralized network? We need this for the same reason we need transactions recorded by decentralized computers (see my article on Bitcoin). Trust. 

A smart contract is simply a set of instructions that a computer can understand. A smart contract that is stored and run by the Ethereum decentralized system means that it will run anywhere in the world, any time, by any one, exactly the way it was written. This is because the smart contract is checked by thousands of computers around the world to ensure that it has not been changed. This is different from a piece of code run on a centralized system that can be changed by the person running it without anyone knowing it.

So we can trust that a smart contract that was written to allocate assets in specific ways will always do that. For example, a Will written in the form of a smart contract will always transfer funds the way the writer intended. Imagine a Warren Buffet of the crypto world who wanted to make sure his wealth was transferred to charities on his death. Warren could write a smart contract that included the addresses of the charities and the amounts each would receive. He would publish it on the network. Once the contract detects that Warren has passed away, it automatically transfers the assets to these charities. No lawyers, no arbitration, and no family members tampering with the will. 

Smart contracts form the basis of most things we consider to be innovations in crypto. Tokens for example are created using the ERC-20 smart contract. This is a specific type of ethereum contract that specifies how the features of a token are to be constructed. This standard is the reason so many coins exist. The vast majority of ‘Crypto Currencies’ are actually ERC-20 tokens that run on Ethereum. This means that transactions with these currencies are recorded on the Ethereum blockchain and not a blockchain specific to the token. This also means that you can create your own crypto currency in less than 10 minutes. Try it out at https://docs.openzeppelin.com/contracts/4.x/wizard

NFT’s, DAO’s, and decentralized exchanges also use smart contracts to operate. And thanks to these we have things like Crypto Kitties, Nouns DAO, Uniswap, and Crypto Punks. The wonderful world of ethereum has created innovations the world has never seen before that is turning finance, law, and value transfer on its head. And it is poised to continue to do so.