It may take a while for the concept of what blockchain means to sink in when you consider what it does, what its applications are, what its strengths are and how it differs from modern technology.
If you did the homework from my last newsletter and blog post, you should have read the Satoshi Nakamoto Whitepaper about Bitcoin, where you would have begun to learn about the topics of double spending, “nonces” (funny word), and what proof of work consensus is all about. The Bitcoin Whitepaper is only about 9 pages – I think I read it in its entirety on a subway ride in Seoul. Not to say I understood everything the first time, nor should have you.
If you look at the title of Satoshi’s White Paper, you’ll see it says “A Peer-to-Peer Electronic Payment System.” Bitcoin operates on top of a blockchain and through some very sophisticated software and cryptography, enables revolutionary transactions to happen between humans electronically without the possibility of double spending. Amazing, right?
Well, imagine you could do peer-to-peer payments with that blockchain and with that proof of work consensus, but also do a lot more? Say, run computer programs?
Yes, Ethereum actually is a fully distributed, decentralized, node driven network of computers that operates on a blockchain and in addition to that, it can process files of code called “smart contracts.” Smart contracts can do a lot of different things, but think of them largely as contractual agreements between two or more parties on the blockchain that will execute and pay out money or do other cool computational work if conditions within the computer code are met.
Yeah, I know that’s sounding a bit out of this world. I get it – this stuff is hard. However just think about it this way – pretty much all of the computer systems you use are operated on or through centralized databases. These databases are owned by someone – who knows who? Your data is on there and sometimes it’s not aware to you where your data is and how much of that data you can access. Our world is full of intermediaries – lawyers, accountants, police, government, employers. So, imagine in the future – take as many intermediaries out of the equation as possible and being able to interact in many facets of like that we take for granted and believe are out of our control – all though these smart contracts.
You can even do ICO’s. But I’ll save that for later.
I’m going to let this sink in for a bit before we move into too much more detail about that. Ethereum is as amazing technologically as it is phillosophically in my opinion. Don’t ever ask me to talk about it with you unless you’ve got some time to spare while I talk your ear off.