Hey there.  Today I want to talk to you about Ethereum.  If you really want to succeed in the crypto space, you absolutely need to understand Ethereum.  And if this is the first time you’re hearing about it, don’t trip: I’ve got your back.

This article is going to build off of the concepts I talked about in Breaking Down Bitcoin, so if you’re not quite familiar with what I mean by “blockchain” I recommend checking that one out first, then come on back.  I’ll wait right here.

 

You may be thinking: “Why do I need to know about Ethereum?”

Well next to Bitcoin, Ethereum is one of the most valuable and important cryptocurrencies, and is already transforming the world of finance, entertainment, and beyond.  I’ll be giving you plenty of examples below, but first it’ll be important to wrap your brain around what Ethereum is and how it works.

Ethereum may seem intimidating at first, so I’ll be using metaphors throughout this article to help you get a better grasp on it.  Specifically, I’ll be using some Avengers: Infinity War references to help you understand this thing.

See, in Infinity War there’s a fancy glove called the “Infinity Gauntlet” that channels tremendous power.  It’s made to fit the Infinity Stones, which are six incredibly powerful stones that give its user the unique special ability of that particular stone.  There are the Space Stone, the Mind Stone, the Soul Stone, the Reality Stone, the Power Stone and the Time Stone.  When they are added to the Infinity Gauntlet, they create an entity of almost unimaginable power.

And that’s kind of how I like to think of Ethereum, as this amazing thing that brings together all these unique powerful uses and unites them harmoniously.

I’ve got my nerd-mode on full display here, my friend.  To understand crypto you really gotta understand Ethereum, so this article is intended to educate you on Ethereum in my own nerdy, and I hope entertaining way.

 

What the heck is Ethereum?

Ethereum is a blockchain-based platform used to create various financial services, business applications, and more. 

First developed in July 2015 by Vitalik Buterin and Gavin Wood, Ethereum calls itself “the world’s programmable blockchain.”  If Bitcoin is the first generation of blockchain, Ethereum would be blockchain’s second generation.

See, I think of Ethereum like the Infinity Gauntlet, as I described above.  So here, Ethereum is the Ethereum Gauntlet, and the many different uses for Ethereum are represented by the Infinity Stones.  Combined, they form a mighty force capable of shaping the world.

See, the creators of Ethereum saw the need for a programmable money, one more advanced than the presently limited capabilities of the Ancient Crypto known as Bitcoin. Ethereum’s code is open-source, meaning it is publicly accessible to anyone looking to develop and build on it.  If you have an idea and the programming know-how to make it happen, you can do it on Ethereum.

By letting its users to build on top of the Ethereum platform, like placing specially designed Infinity Stones onto the Ethereum Gauntlet, Ethereum set out to change the crypto universe.  Big time.

Let’s have a look.

 

Somewhere, Deep in the Farthest Reaches of the Crypto Space…

… there exists a mighty gauntlet known as Ethereum.  Let’s call it The Ethereum Gauntlet.

The Ethereum Gauntlet is a blockchain platform capable of many amazing things, and gives its user vast powers limited only by their imagination.  While the age-old celestial being known as Bitcoin is limited to the power to transmit value from one end of the universe to the other, Ethereum’s abilities are many, and are still being discovered even to this day.

 

If Ethereum is the Infinity Gauntlet, then what are the Infinity Stones?

Glad you’re following my train of thought, my friend.

To date, these are some of the powerful “Stones” that make up this Ethereum Gauntlet, some specific uses that make Ethereum unique:

• The Payments Stone
• The Smart Contracts Stone
• The Decentralized Applications (DApps) Stone
• The Non-Fungible Tokens (NFTs) Stone
• The Decentralized Finance (DeFi) Stone
• The Decentralized Autonomous Organizations (DAOs) Stone

These facets of Ethereum each have their own powers, unique skill sets that each brings to the Ethereum ecosystem.  And each one is totally rad in its own way.  Let’s fire up the starship and explore them further, shall we?

 

The Payments Stone

Ethereum’s most basic use can be simply for payment transactions.  We’ll call this use case the “the Payments Stone.”

Bankers and clearing houses are able to control what money people send to one another because they control whether that money is sent or not.  But Ethereum has a solution for all that.

Like the Bitcoin network has its own native currency called bitcoin (or BTC), Ethereum has its own native currency called Ether (or ETH).  Who needs those ridiculous banks and clearing houses when value can be sent between two people without the use of a third party?

ETH is also much faster to send than BTC at this time, and Ethereum’s network can currently process roughly 25 transactions per second (or TPS) compared to Bitcoin’s seven TPS.  In terms of processing and sending payments, Ethereum actually has a slight edge here.  The faster the better, baby.

If you’re looking for more on what a blockchain is, and how payments and transactions come into the picture, check out my article on breaking down bitcoin.

 

The Smart Contracts Stone

One of the most important and revolutionary features of Ethereum is that it allows its users to create “smart contracts.”  Smart contracts are contracts programmed into the blockchain that are automatically carried out when its conditions are met.  They work on an “if, then” logic.

We’ll call this smart contract component of Ethereum “the Smart Contracts Stone.”  And what a powerful component it is, my friend.

What are some examples of smart contracts?

You might think of smart contracts in its simplest form like an automatic recurring payment, like when you authorize your car payments to be automatically paid on a set date for a set amount until your car is paid off.

Smart contracts can also be taken up a notch.  If you’ve ever dealt with an insurance claim before, you know how long and complex the process of settling that claim can be.  With a smart contract, you could create a contract between you and your insurance broker to say “If my laptop is stolen, then I’ll be compensated x amount.”

I’ve had one stolen before, and it took weeks for my insurance to finally compensate me for my loss.  With a smart contract, the stealing of the laptop would trigger the insurance policy execution, which would then execute the smart contract and the payment to you would start immediately.  Boom.  No waiting weeks, the event happened and the agreed payment was made in a fraction of the time.  Imagine that.

Here’s another more futuristic example.  If you’re like most of the workers of the world, you’re getting paid roughly twice a month.  Why are we only paid twice a freaking month?  With a smart contract and an open-minded employer, you could have a system where you’re getting paid at the end of each shift.  Or every hour.  Or every minute.  Hell, why not get paid for every second of work you do, as you’re doing it?  A smart contract could literally have you streaming money.

I mean, we stream our movies, we stream our music… why not stream our money?

This is the power of smart contracts, and we’re only scratching the surface here.  Smart contracts have potential uses in areas like voting, property ownership, mortgages, medical research, copyrights, and many more.

The usefulness of this facet of Ethereum extends all the way out to the stars.

 

The DApps Stone

People love their smart phones and the many apps (short for applications) found on them.  Essentially all of these apps (from Twitter to Netflix to Gmail) are all centralized, meaning one single company or group controls that app and everything that happens with it.  This is where Ethereum’s next use arises, another powerful Stone for the Gauntlet: let’s call these Decentralized Applications (or DApps) “the DApps Stone.”

See, Ethereum allows users to create their own apps on top of its blockchain, apps that are not governed by a single body but are programmed by the users and executed automatically using the smart contracts discussed above.  Sweet.

Ethereum also allows users to create their own crypto tokens.  Now, you may notice I say “token” and not “coin” here.  To be clear, “coins” are cryptos that have their own blockchain (like BTC and ETH), while “tokens” are cryptos that are built on top of another blockchain like Ethereum.  It’s a small distinction, but one worth mentioning as we move forward.  If you’re curious, you can find a current list of all crypto tokens (and their respective blockchains) here.

But back to users creating their own tokens.  With the right know-how, you could create your own Ethereum-based crypto coin if you wanted to.  Got a poker game you run every week and are tired of having to hit the bank to put your dollars down on the table?  You could create “PokerCoin” and your poker buddies could all play with crypto, and can keep the tab running from week to week if you felt like keeping the game alive, just for an example.

What are some examples of real-life DApps?

DApps are growing in number each day, with contributors from all across the solar system pitching in their ideas.   Some of the most popular Ethereum-based DApps in the Milky Way galaxy at the moment are:

• Uniswap and SushiSwap, two massively popular decentralized exchanges used to swap one crypto for another (among other services).
• Axie Infinity, a digital pet universe modeled after Pokemon, where users can raise, collect and even battle creatures called Axies.
• OpenSea and Rarible, decentralized marketplaces for buying and selling non-fungible tokens (NFTs).

Wait… did someone say “NFTs?”  I sense the presence of yet another Stone in our midst…

 

The Non-Fungible Token (NFT) Stone

A growing use for Ethereum, another Stone in the Gauntlet, comes in the form of non-fungible tokens, or NFTs.  Let’s call it “the NFT Stone.”  NFTs have been a popular topic of discussion lately, popping up on Saturday Night Live and one even selling for over $69 million.  But what are they?

First, some definitions are in order.  Something is “fungible” if it can be replaced by another identical item without sacrificing any value.  A common example is a dollar bill; it’s fungible because the particular dollar in your pocket can be traded for another dollar bill just like it.

Yeah, but what are they?

Non-fungible tokens, as their name suggests, are tradable items built on Ethereum that are specially unique.  That is, they are one-of-a-kind with specific features or identifiers that make them unable to be easily swapped out with something else.

NFTs basically turn real-world and online objects into tradeable assets.  Many NFTs today take the form of digital artwork, photos, collectibles, tweets, games, concert tickets, and more.  The transparent nature of Ethereum’s blockchain means that whoever owns a particular NFT can be easily verified, so there’s no way to forge or fake a copy.

So if you own a certain NFT, you can be sure that you’re the only one who owns that specific NFT.  Say goodbye to ticket scalpers and fake Craigslist resellers forever!

NFTs are also fantastic for artists and creators, as well as fans and collectors.  Why?  Well, artists can receive royalties on their NFT for life (even if they’re sold to someone else) and fans now can actually own their favorite artists’ pieces or musicians’ songs.  Before NFTs, many artists wouldn’t have access to royalties once they’ve given away the rights to their work, and the average fan wouldn’t be able to openly bid on their favorite artists’ pieces so openly and easily.

In the music industry, for example, the production studios have historically owned the rights to their artists’ songs.  No more of that stuff, buddy.  Power to the people!

And all without even so much as a bank account, by the way.  That’s the beauty of Ethereum, y’all.

So where in the world do you go to buy and sell NFTs?  Well, Ethereum DApps like OpenSea and Rarible are two of the most popular places to go for NFTs, so head over and dive on in.

By the way, speaking of bank accounts, let’s dip on over to our next  Ethereum use case, shall we?  And this one is a major game-changer, amigo.

 

Decentralized Finance (DeFi)

We have all come to entrust our money with massive centralized banks and financial institutions that not only charge hefty fees for their services, but that aren’t even available in many parts of the world.  This leaves an estimated 2 billion people around the world completely unbanked, or without access to any of the financial services (like a bank account) that you and I take for granted.

But guess what many do have?  A smartphone and access to the internet.

This leads us to arguably Ethereum’s most powerful facet of all: Decentralized Finance (DeFi).  Let’s call it “the DeFi Stone,” and it’s one that could truly help unite the entire world by providing financial services to anyone with a smartphone and an internet connection.

What could DeFi help bring to the world?  Just so, so many things:

• Stablecoins – crypto coins that are intended to always be worth $1 regardless of the market
• Lending and borrowing – with DeFi you can lend and borrow money without ever giving up one bit of your personal information
• Decentralized Exchanges (DEXs) – exchanges that let you trade one crypto for another using smart contracts, instead of traditional buy/sell orders run by a central exchange
• Derivatives and prediction markets – if you like placing bets or speculating on future outcomes, DeFi can do that… no bookie or broker needed
• Other high-concept applications like wrapped bitcoin, yield farming, and liquidity mining – these complex ideas will be explored further in later articles, but if you’d like to learn more now check out this extensive Coindesk article on the topic.

DeFi can help allow countless people to participate in the world’s financial system without a bank account and without giving up any sensitive personal information.  It’s a complex topic that I’ll be devoting an entire article to later, but for now know that the “DeFi Stone” could very well prove to be a truly universe-changing force for good, shifting the balance of powers from that of the financial overlords back to the people.

And speaking of the people, let’s unearth the final Stone in our mighty Ethereum Gauntlet.

Decentralized Autonomous Organizations (DAOs)

Our last powerful use for Ethereum has to do with creating organizations and communities.  See, back on Earth, most organizations are created by a single person or small group of people, and the power to make the decisions for that organization lies in the hands of those select few individuals.

For example, if you were to sign up for an organization like the Girl Scouts, you don’t have any say over what projects they choose to take on, where their funding goes, which cookies they sell, or anything like that.  You sign up, and do as they ask of you.  And that’s fine, of course.  But the leadership makes the decisions, and you’re most likely not a part of that leadership team.

And this is where another fantastic Ethereum use case comes in, the final Ethereum Stone we will be discussing here.  I call it “the DAO Stone.”

What exactly is a DAO?

DAO stands for “Decentralized Autonomous Organization,” and though the name is kinda weird it’s actually a pretty simple idea.  A DAO is basically a group of people with no central leader who collaborate over the internet to achieve a common goal based on a shared set of rules.

Still sound kinda weird?  Well, let’s get back to our Girl Scouts example for a moment.

Let’s say you’re super passionate about supporting the growth of strong, confident and resourceful girls all around the world, like the Girl Scouts.  You could start up a DAO and raise funds from literally all over the world for your organization since ETH knows no borders.  Anyone who contributes to your DAO would now have voting rights to say how those funds are used to empower young women around the world.

Also, the rules for managing your DAO would be set in stone, in a smart contract, and could only be altered if the community voted unanimously to change them.  Everyone involved in the DAO is a member of the leadership, because no one person runs the show.  Finally, everyone involved is entitled to a portion of the profits and will be paid out exactly according to the rules set by the DAO.

Pretty cool, right?  I know I would be pumped to get a royalty check from all those sweet, sweet Thin Mints I’ve been nomming down on.

For a real life example, Bitcoin itself is widely considered to be the first ever DAO since it functions autonomously, is governed by its own clear set of rules, and works based on the consensus of its participants.  Ethereum takes this to the next level by allowing its users to create their own rules that would govern the way their own unique community works, by the people and for the people.  Kaboom.

If you’re interested in learning more about how to create your own Ethereum-based DAO, Aragon is a top project that helps its users do just that.

Conclusion

Well my friend, we’ve explored some of the many amazing facets of the game-changer known as Ethereum.  I hope some of this information serves you well on your crypto journey, because to better know Ethereum is to better know crypto.

Many of these uses are already changing the world, and I am a firm believer that we are only seeing the very beginning of a full-on crypto revolution.  Ethereum promises to be a key player in that revolution.

And if you’ve made it this far, you’re already on your way to being an early participant in a more decentralized tomorrow.  Here’s to the future, my friend.

 

Stay golden.

 

If you’re digging the idea of Ethereum, but aren’t sure where to go to pick some up, check out my article on crypto exchanges.

What are your thoughts on the future of Ethereum?  What are some uses for Ethereum you’d like to see implemented?  Do you like Bitcoin, Ethereum, or both?  Leave a comment below.