You can read my last article on How transactions are made in blockchain.. here👇
New technology always tries to solve the limitations of previous technology.
So to understand the need of Ethereum, we need to study the limitations of blockchain and how Ethereum solves it.
💜 Just to recap, Lets first see the features of blockchain...
- Blockchain was created as an alternative of paper currency as an online currency i.e. bitcoin(BTC).
- The best feature that it provides is the DECENTRALIZED system i.e. not run or owned by single authority of any kind.
- It provides the most secure system that is almost impenetrable.
- It hashes all the data using sha256, that means if anyone changes any data then hash will change and once hash changes the NONCE(Read it in my last post) will change making the block wrong and other nodes will simply reject it.
In summary, Blockchain is a very secure decentralized system that acts as a public ledger using online currency i.e. Bitcoin.
💜 There is no as such proper limitation of blockchain. It is best on what it is meant to do, but it also does not provides a growth opportunity in its system. What I mean here is it was created as a public ledger in 2009 and today in 2022, its still working as a public ledger and nothing more.
💜 So, Using the blockchain's idea of decentralized system, its security. Can we make a system that can do more rather than just being a public ledger.
💜 The Rise of Ethereum
- Ethereum also works as a public ledger just like Blockchain.
- Instead of bitcoin(BTC) as online currency, It uses ether(ETH).
- It is also a decentralized system which is very secured just like bitcoin.
- It also hashes the data but instead of sha256, It uses keccak256 algorithm for hashing.
With these features, The biggest feature that it provides which differentiates it from blockchain is to write SMART CONTRACTS.
💜 SMART CONTRACTS
In real world, we have contracts meaning a sheet of paper authorized by government which sets some rules and requirements between two parties to achieve any kind of result.
Similarly Smart Contract is an electronic piece of code that sets some rules between any two parties. It can be another user, the system, time anyone.
💜 Facts(no 🧢) about smart contracts
- These smart contracts are deployed on EVM i.e. Ethereum Virtual Machine.
- Once deployed, Its very very hard to change the smart contract. Its easier to write a new one.
💜 Why we need the SMART CONTRACT ?
- The real world contract works only in real world. The real world is a centralized system i.e. There is single unit of power or authority that controls it.
- Now, These single unit of power or authority may flip a switch and the real world contract will be nullified.
Smart Contract solves this, Once the smart contract is in the network i.e. deployed then no-one can alter it. We can block the access but none can alter it.
Its a decentralized and transparent contract that will always work. It keeps the trust.
Smart contract is just like a pinky promise i.e. UNBREAKABLE PROMISE that will always follow the rule of its contract and no-one can change it.
We will look into Ethereum and Smart Contract in more details in upcoming articles. So 👇👇👇