How Ethereum Works

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How Ethereum Works
How Ethereum Works

Video: How Ethereum Works

Video: How Ethereum Works
Video: What is Ethereum? A Beginner's Explanation in Plain English 2024, March
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Ethereum is not only a cryptocurrency, but also a huge computer, consisting of a huge number of coordinated nodes. The platform is based on smart contracts, which are computer algorithms.

How Ethereum works
How Ethereum works

Ethereum is an open platform based on blockchain technology. It allows you to build and deploy decentralized applications. It is partially similar to Bitcoin, but differs from it in capabilities. If the Bitcoin blockchain is used to track ownership of its own digital money, then Ethereum provides the functioning of the program code of any centralized application.

Features of the functioning of Ethereum

Like any other blockchain, it needs software to work without interruptions on a large number of computers. Each must be running the Ethereum Virtual Machine. It is an operating system that uses a special programming language to solve special problems. Such programs are called “smart contracts”. For a technique to perform functions, you need to pay with Ether.

The participant himself and smart contracts, being users of one node, perform the same task. In this case, the latter behave in the same way as the "live" participants. They can send and receive digital money. Additionally, they execute certain programs. Based on the Ethereum platform, you can:

create cryptocurrency;

  • run lotteries;
  • collect funds for a specific project;
  • connect a mobile payment service.

How do smart contracts work?

They are called "smart contracts" because they allow the transfer of value from one user to another. The machine only checks operations when certain conditions are met. Unlike other contracts, they can function as multi-signature accounts, manage agreements between users, store various information such as domain registrations or membership records.

Ethereum triggers a contract code when a participant sends a message depositing a certain amount of digital currency. The virtual machine then executes the contracts in bytecode. They are a series of ones and zeros and are read, interpreted by the network.

The objects of contracts are:

  • interacting parties;
  • subject of the contract;
  • conditions for fulfillment.

The latter can be described mathematically or using a programming language.

To understand how Ethereum works using smart contracts, let's look at an example. Let's take the result of a bet on the outcome of a football match. The creators of the contract put the digital currency on two different teams in the same meeting. After the contract is created, no participant can change its terms. When the match is over, the program looks at the result and, according to the data entered in the Contract, pays to one of the parties the amount of the bet in Ether.

Thus, the Ethereum platform operates on the basis of a unique virtual machine that allows you to add any functionality. They are limited only by the developer's imagination. Thanks to it, people can exchange values without involving third parties.

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