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Definition

Ethereum

Ethereum is an open source, distributed software platform and cryptocurrency built off of blockchain technology. Blockchain is a distributed ledger technology, or DTL, that keeps a permanent, tamper-proof list of records. Ethereum is Bitcoin’s main competitor.

Ethereum allows developers to build decentralized applications. Miners produce Ether tokens which can be used as a currency as well as to pay for usage fees on the Ethereum network. The platform also supports smart contracts, which are a type of digital contract.

Ether tokens are produced by the nodes or computers of volunteers who mine for the coin. Mining produces the cryptography upon which the currency is based. Because mining is a demanding use of a computer’s resources, miners are rewarded with Ether.

The Ethereum platform offers the computationally complete (Turing complete), Ethereum Virtual Machine (EVM). EVM executes scripts worldwide across its network of distributed public nodes. These nodes provide the processing power for decentralized applications created by developers to run on the network. Developers may purchase Ether to pay for network use, or mine for the tokens themselves, becoming a part of the network. The pricing of transactions on the network is set by an internal mechanism called Gas.

Smart contracts are carried across the network in the same blockchain that records the ledger of transactions for the Ether cryptocurrency. These digital contracts can have conditions that run on scripts until fulfilled. Ethereum has built-in mechanisms to detect when an agreement is not met. Smart contracts can be used to exchange things such as properties, money and stocks on the back of a token of Ether.

Ethereum came from a proposal made by cryptocurrency researcher Vitalik Buterin in 2013. Initially, Vitalik had proposed the addition of a scripting language for programing to Bitcoin. The development of Ethereum was funded by an online crowdsale.  The project came online July 30, 2015.

This was last updated in August 2017

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