What is Ethereum?

The vision of Ethereum is to create an unstoppable, censorship resistant, self-sustaining, decentralised, world computer. To achieve this, Ethereum builds on the concepts we saw with Bitcoin. If you consider Bitcoin as trustless validation and distributed storage of (transaction) data,
Ethereum is trustless validation and distributed storage and processing of data and logic. Ethereum has a public blockchain running on 15,000 computers and the token on the blockchain is called Ether, currently the second most popular cryptocurrency.

Like Bitcoin, Ethereum is also a bunch of protocols written out as code which is run as Ethereum software which creates Ethereum transactions containing data about Ether coins (ETH) recorded on Ethereum’s blockchain. In contrast with Bitcoin, Ethereum transactions can contain more than just payment data, and the nodes in Ethereum are capable of validating and processing much more than simple payments.

On Ethereum, you can submit transactions that create smart contracts - small bits of general purpose logic that are stored on Ethereum’s blockchain on all of the Ethereum nodes. These smart contracts can be invoked by sending Ether to them. This is a bit like deploying a juke machine, then putting coins in to play music. When a smart contract is invoked, all the Ethereum nodes run the code and update their ledgers with the results. These transactions and smart contracts are run by all participants using a sort of operating system called a ‘Ethereum Virtual Machine’.

Ethereum’s blockchain can be interrogated using websites like etherscan.io. As with Bitcoin, there are also forks of the main Ethereum, such as Ethereum Classic, which is also a public blockchain. Each fork has a separate coin (Ethereum’s coin is denoted ETH whereas Ethereum Classic’s coin is denoted ETC). The forks have a shared history with Ethereum up to a certain point in time, after which the blockchains differ. Ethereum’s code can also be run as a private network, starting a new
blockchain with limited participants.

To participate in the Ethereum network, you can download some software called an Ethereum client, or you can write some yourself if you have the patience. Just like BitTorrent or Bitcoin, the Ethereum client will connect over the internet to other people’s computers running similar client software and start downloading the Ethereum blockchain from them to catch up with the latest state of the blockchain. It will also independently validate that each block conforms to the Ethereum protocol rules.

What does the Ethereum client software do? You can use it to: connect to the Ethereum network;
validate transactions and blocks; create new transactions and smart contracts; run smart contracts; mine for new blocks. Your computer becomes a ‘node’ on the network, running an Ethereum Virtual Machine, and behaves equivalently to all the other nodes. Remember in a peer-to-peer network there is no ‘master’ server and each computer is equivalent in status to any other.