What is Ethereum?

“The next Internet.” It’s a phrase that’s often used when discussing bitcoin, the decentralized digital currency, and the blockchain, its distributed global ledger. Yet, the phrase is perhaps misleading in its simplicity.

While commonly referred to as a singular construct, “the Internet” is rather a web of protocols and rule sets that combine to power complex communications, collaboration and business processes.

When viewed similarly, “the blockchain”, or the public, permissionless blockchain protocols, could be seen as a more primitive version of what could become a mature “Internet of Value”. Such a public utility could one day provide a similarly layered architecture to expand the Internet of Information, or the Internet as we know it today, to deliver all manner of financial and non-financial transactional services.

If the Internet decentralized access to information, thereby increasing access to communication tools, the vision for the blockchain is that it would decentralize, and reduce barriers to establishing trust and transacting in the digital world.

First introduced in 2014, ethereum can be seen as both a realization of this future, and a recognition of the limitations of the bitcoin network, the first widely used public blockchain.

In his keynote announcement for the project, creator and inventor Vitalik Buterin described ethereum in such terms, arguing that bitcoin was not designed to serve as the blockchain’s answer to the Transmission Control Protocol (TCP) or Internet Protocol (IP), the code that forms the basic communication language of the Internet.

Buterin wrote: “Bitcoin was designed to be a [Simple Mail Transfer Protocol] SMTP. It’s a protocol that is very good at one particular task. It is good for transferring money, but it was not designed as a foundational layer for any kind of protocols to be built on top.”

In remarks, Buterin spoke of the need for a technology that was more expansive, and that replicated the functionality of Turing-complete programming languages in a way that would be so powerful as to describe any blockchain application that could possibly be built. “Ethereum does not have features, it just has a programming language,” he said.

Ethereum is perhaps best viewed as an attempt to apply learnings from bitcoin’s decentralized, global cryptographic network to challenges beyond value exchange. Rather than disintermediate third parties in e-commerce, it envisioned how removing other traditional arbitrators of trust could enable a new wave of application development.

Ethereum’s “business problem”, as articulated by former ethereum CCO Stephan Tual, is that most Internet services are centralized. “You trust your bank to keep your money safe. The same is true of Facebook when you upload a picture of your kids or you push a document to Dropbox. As a developer you need to submit your application to an app store and risk having it removed.” Tual explains.

Ethereum seeks to enable the creation of similar Internet services while restoring the control of personal data and funds to users.

Ethereum Glossary

Trading Related:

  • Exchange
    Websites where you can buy and sell crypto-currencies. Some popular exchanges in North America are:
    Coinbase
    GDAX
    Gemini
    Bittrex
    Poloniex
    Quadriga
    Kraken
  • FIAT
    Government-issued currency, such as the US dollar.
    https://en.wikipedia.org/wiki/Fiat_money
  • Whale
    Someone that owns absurd amounts of crypto-currency.
  • limit order / limit buy / limit sell
    Orders placed by traders to buy or sell a crypto-currency when the price meets a certain amount. They can be thought of as ‘for-sale’ signs. These orders are what are bought and sold against when traders place market orders.
  • sell wall / buy wall
    Using a depth chart, traders can see the current limit buy and sell points. The graphical representation on the depth chart looks like walls: http://media.coindesk.com/uploads/2015/05/image-1.png
  • market order / market buy / market sell
    A simple purchase or sale on an exchange at the current price. Market buys purchase the cheapest ETH available on the order book, and market sells fill the most expensive buy order on the books.
  • margin trading
    The act of ‘magnifying’ the intensity of your trades by risking your existing coins. (NOTE: Very risky, only for experienced traders and only on certain exchanges even then)
  • going long
    A margin trade that profits if the price increases.
  • going short
    A margin trade that profits if the price decreases.
  • bullish
    An expectation that price is going to increase.
  • bearish
    An expectation that price is going to decrease.
  • ATH
    All-Time-High. We’ve gotten a lot of these the past couple months.
  • Altcoin
    Generally any crypto-currency other than Bitcoin or Ethereum. (Though some Bitcoin folks would probably still say Ethereum is an altcoin)
  • ETH
    The crypto-symbol for Ether. Kind of like stock market symbols. (i.e., the crypto equivalent of AMZN meaning Amazon stock)
  • Symbols of some other crypto-currencies that are regularly discussed/shilled around here:
    BTC – Bitcoin
    LTC – Litecoin
    ANS – Antshares
    SC – Siacoin
    XRP – Ripple
    ETC – Ethereum Classic
    FCT – Factom (described as a software license more than a coin, but can still be traded)
  • Tokens
    Refers to the ‘currency’ of projects built on the ethereum network that have raised money via issuing their own tokens. Some common tokens discussed on this sub:
    GNT – Golem
    REP – Augur
    BAT – Basic Attention Token
    ICN – Iconomi
  • ICO
    Initial Coin Offering, somewhat similar to an IPO in the non-crypto world. Startups issue their own token in exchange for ether. This is essentially crowdfunding on the ethereum platform.
  • Shilling / pumping
    Someone essentially advertising another crypto-currency. If a coin is promised to cure cancer or be the second coming of Jesus, it’s being shilled.
  • stable coin
    A crypto-currency with extremely low volatility that can be used to trade against the overall market.
  • arbitrage
    Taking advantage of a difference in price of the same commodity on two different exchanges. Often mentioned when it comes to comparing ETH prices on Korean exchanges against US exchanges.
  • FOMO
    Fear Of Missing Out. The overwhelming sensation that you need to get on the train when the price of something starts to skyrocket.
  • FUD
    Fear, Uncertainty, and Doubt. Baseless negativity spread intentionally by someone that wants the price of something to drop.
  • FUDster
    Someone that is spreading FUD.
  • Pump And Dump
    The recurring cycle of an altcoin getting a ton of attention, leading to a fast price increase, and then of course followed by a huge crash.
  • Bagholder
    Someone still holding an altcoin after a pump and dump crash. Can also just refer to someone holding a coin that is sinking in value with few future prospects.
  • Market Cap
    The total value held in a crypto-currency. It is calculated by multiplying the total supply of coins by the current price of an individual unit. This site shows a great run-down of each coin’s market cap: http://coincap.io/
  • ROI
    Return on Investment. The percentage of how much money has been made compared to an initial investment. (i.e., 100% ROI means someone doubled their money).
  • TA
    Trend Analysis or Technical Analysis. Refers to the process of examining current charts in order to predict which way the market will move next.
  • MACD
    Moving Average Convergence Divergence. A trend indicator that shows the relationship between two moving averages of prices. More info: http://www.investopedia.com/terms/m/macd.asp
  • Bollinger Band
    A margin around the price of a crypto that helps indicate when a coin is overbought or oversold. More information available at: http://www.investopedia.com/terms/b/bollingerbands.asp

Crypto-currency related, but not really specific to Ethereum:

  • blockchain The classification of technology that Ethereum falls into. Blockchains are distributed ledgers, secured by cryptography. They are essentially public databases that everyone can access and read, but the data can only be updated by the data owners. Instead of the data residing on a single centralized server, the data is copied across thousands and thousands of computers worldwide. More detailed information available at: https://en.wikipedia.org/wiki/Blockchain
  • node A computer that possesses a copy of the blockchain and is working to maintain it.
  • mining
    The process of trying to ‘solve’ the next block. It requires obscene amounts of computer processing power to do effectively, but is rewarded with ether.
  • mining rig
    A computer especially designed for processing proof-of-work blockchains, like Ethereum. They often consist of multiple high-end graphic processors (GPUs) to maximize their processing power.
  • Fork A situation where a blockchain splits into two separate chains. Forks generally happen in the crypto-world when new ‘governance rules’ are built into the blockchain’s code. Some more information available at: https://en.wikipedia.org/wiki/Blockchain#Hard_forks
  • POW
    Proof-of-work. The current consensus algorithm used by Ethereum.
  • POS
    Proof-of-stake (not piece of shit). The proposed future consensus algorithm to be used by Ethereum. Instead of mining in its current form, people that own ETH will be able to ‘lock up’ their ether for a short amount of time in order to ‘vote’ and generate network consensus. The plan is that these stakeholders will be rewarded with ETH by doing so.
  • sharding
    A scaling solution for blockchains. Typically, every node in a blockchain network houses a complete copy of the blockchain. Sharding is a method that allows nodes to have partial copies of the complete blockchain in order to increase overall network performance and consensus speeds.
  • software wallet
    Storage for crypto-currency that exists purely as software files on a computer. Software wallets can be generated for free from a variety of sources. MyEtherWallet (MEW) is one of the popular. (more on MEW below)
  • hardware wallet
    A device that can securely store crypto-currency. Hardware wallets are often regarded as the most secure way to hold crypto-currency.
  • Ledger Nano S / Trezor
    Two of the most popular hardware wallet models.
  • cold storage
    The process of moving crypto-currency ‘offline’, as a way of safekeeping your crypto-currency from hacking. There are a variety of ways to do this, but some methods most commonly used:
    —Printing out the QR code of a software wallet and storing it somewhere safe, such as a safety deposit box.
    —Moving the files of a software wallet onto a USB drive and storing it somewhere safe.
    —Using a hardware wallet.

Terms more specific to Ethereum

  • smart contract
    Code that is deployed onto the Ethereum blockchain, often directly interacting with how money flows. Not my quote, but: “A normal transaction allows you to send money from A to B. Smart contracts allow you to send money from A to B, on the condition that C happens.”
  • solidity
    One of the most popular languages that smart contracts can be written in. Has some similarities to Javascript.
  • Dapp
    Decentralized Application. This refers to an application that uses an Ethereum smart contract as it’s back-end code.
  • The Flippening
    A potential future event wherein Ethereum’s market cap surpasses Bitcoin’s market cap, making Ethereum the most ‘valuable’ crypto-currency. This site shows the progress of the Flippening in real-time: http://www.flippening.watch/
  • gas
    A measurement of how much processing is required by the ethereum network to process a transaction. Simple transactions, like sending ether to another address, typically do not require much gas. More complex transactions, like deploying a smart contract, require more gas.
  • gas price
    The amount of ether to be spent for each gas unit on a transaction. The initiator of a transaction chooses and pays the gas price of the transaction. Transactions with higher gas prices are prioritized by the network.
  • Wei
    The smallest denomination of ether. 1 Ether = 1000000000000000000 Wei (1018)
  • Gwei
    Another denomination of ether. Gas prices are most often measured in Gwei. 1 Ether = 1000000000 Gwei. (109)
  • Finney, Szabo
    More somewhat common denominations of ether. The full denomination chart: https://ethereum.stackexchange.com/questions/253/the-ether-denominations-are-called-finney-szabo-and-wei-what-who-are-these-na
  • Raiden Network
    An upcoming protocol change to Ethereum that will enable high-speed transfers across the network. It is similar in some aspects to Bitcoin’s planned Lightning Network. The name, I assume, comes from the Mortal Kombat character named Raiden that can shoot lightning. More reading available at: https://themerkle.com/what-is-the-raiden-network/
  • Frontier, Homestead, Metropolis, Serenity
    The four planned stages of the Ethereum development roadmap. We are currently in the Homestead phase. The Metropolis update is likely to be available sometime in the next year.
  • MEW
    MyEtherWallet. A free site that can generate ethereum software wallets for you.
  • EEA
    Enterprise Ethereum Alliance. A coalition of startups and corporations trying to figure out the best way to use this dang thing.
  • Vitalik Buterin
    One of the primary co-founders of Ethereum (and certainly the most well-known). A brief biography is available at: https://en.wikipedia.org/wiki/Vitalik_Buterin
  • DAO
    Decentralized Autonomous Organization. An investor-directed venture capital fund built on the Ethereum network that was hacked in June 2016. The hack stole about a third of the DAO’s funds and led to Ethereum being hard-forked the following month. The DAO is often cited as one of Ethereum’s biggest stumbles thus far.

Memes:

 

Sources

Basoosh – Reddit
CoinDesk.com

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