What is Ethereum?

Ethereum is the technology that powers the cryptocurrency Ether (Eth) and is built using blockchain technology. Currently, Ether is second in market value behind Bitcoin.

Ethereum was introduced back in 2013 when the founder Vitalik Buterin published a whitepaper, and two years later in 2015 Ethereum was launched.

What makes Ethereum different than Bitcoin?

Where Bitcoin primarily is a currency and store of value, Ethereum offers something else with its smart contracts. The definition of what a smart contract is:

Smart contracts are a type of Ethereum account. This means they have a balance and they can send transactions over the network. However they’re not controlled by a user, instead they are deployed to the network and run as programmed. User accounts can then interact with a smart contract by submitting transactions that execute a function defined on the smart contract. Smart contracts can define rules, like a regular contract, and automatically enforce them via the code. Smart contracts cannot be deleted by default, and interactions with them are irreversible.

https://ethereum.org/en/developers/docs/smart-contracts/

The smart contract has been the reason why people have selected to build their NFT (Non-fungible token) projects on Ethereum.

What is Ether?

Ether is the native cryptocurrency of Ethereum and is used as a means for purchasing things and also to pay the transaction fee (known as gas) that occurs every time a transaction is completed on the blockchain.

How to avoid being scammed when purchasing NFT projects

So I had to learn the lesson the hard way myself, I minted 2 NFT´s just to realize a day later that the creator just took off running with the eth. It was a lesson that cost me some money but one that I will learn a lot from.

After reflecting upon what happened it was clear to me that if I had done more research I would have avoided this.

First and most importantly: do your own research, I got caught up following my emotions and investing in a promise of getting a passive income and a huge increase in price.

I created this checklist for myself to avoid getting the rug pulled on me again and wanted to share it with you.

  • How many followers do they have on Twitter? Are the followers mostly real or are they bought? Excellent blog piece for this here
  • The domain they are using, is it purchased anonymously? If it is, this could be a red flag?
  • Is there a team listed on the website that is behind the project? Often there is a team, but without picture. But if there are no team listed at all this is a red flag.
  • What is the discord channel like? Are the founders active?
  • Are what the project is promising believable? If it´s too good, it´s probably not true.
  • Are they using the word “official” in their name? If they are that´s a red flag.
  • Do they have a technical explanation / plan for the project? In this case, they claimed they were going to allow for staking, but they did not offer any information about how it would actually work?
  • Have they done a town hall / AMA before the mint? If they have not, this is a red flag.
  • Have they done any other NFT projects?

I´m sure there are plenty more good questions to think about before buying into an NFT project, let me know in the comments.

What is cryptocurrency?

In the last post we looked at what blockchain is and how it´s defined. Often when people think about blockchain they think about cryptocurrency. What is cryptocurrency? Bitcoin is probably the first cryptocurrency and the one that most people have heard about.

Below is a graph from Google Trends showing the amount of searches, as you can see it peaked around the launch and is now starting to pick up again.

So let´s dive into trying to learn what cryptocurrency is.

A cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend

https://www.investopedia.com/terms/c/cryptocurrency.asp

Investopedia describes it as a secure digital currency that is nearly impossible to fake or counterfeit, very similar to the definition of blockchain. Cryptocurrency is built on blockchain technology.

Cryptocurrency is decentralized

What does it mean that a cryptocurrency is decentralized? A centralized currency is very often also a national currency for example the U.S. Dollar ($). It´s governed by the government of the US and they are able to decide what actions to take (like for example to print more money). When it comes to decentralized currency it is not governed by one body but is distributed.

To summarize what cryptocurrency is:

  • A digital currency
  • Often decentralized (there are some expectations)
  • Hard to fake or counterfeit

What is blockchain?

The goal with this blog post it to explain what blockchain is without using a very technical description and lots of abbreviations and difficult terms.

There are quite a lot of different definitions of what blockchain is:
Wikepedia explains it with this definition:

blockchain is a growing list of records, called blocks, that are linked together using cryptography.[1][2][3][4] Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data (generally represented as a Merkle tree). The timestamp proves that the transaction data existed when the block was published in order to get into its hash. As blocks each contain information about the block previous to it, they form a chain, with each additional block reinforcing the ones before it. Therefore, blockchains are resistant to modification of their data because once recorded, the data in any given block cannot be altered retroactively without altering all subsequent blocks.

https://en.wikipedia.org/wiki/Blockchain

From this definition we learn that it is a list of records known as blocks that are linked together, each block contain information about the block previous to it and therefore they form a chain and this is where we get the name Blockchain. They also go on and describe how this chain between all the blocks means that the blocks can not be altered afterwards, making it very secure since it can not be modified without it being recorded.

Bankrate.com describes it as following:

A blockchain is a digital, public ledger that records online transactions. Blockchain is the core technology for cryptocurrencies like bitcoin. A blockchain ensures the integrity of a cryptocurrency by encrypting, validating, and permanently recording transactions. A blockchain is similar to a bank’s ledger, but open and accessible to everyone who utilizes the cryptocurrency is supports.

https://www.bankrate.com/glossary/b/blockchain/

Here another common term for describing Blockchain is introduced and that is ledger. A ledger is a term most commonly used within accounting and means a collection of accounts. Here it´s also explained that Blockchain is the technology used to create cryptocurrency.

IBM describes it as following:

Blockchain defined: Blockchain is a shared, immutable ledger that facilitates the process of recording transactions and tracking assets in a business network. An asset can be tangible (a house, car, cash, land) or intangible (intellectual property, patents, copyrights, branding). Virtually anything of value can be tracked and traded on a blockchain network, reducing risk and cutting costs for all involved.

https://www.ibm.com/topics/what-is-blockchain

Okay, so let´s try to make sense of these different definitions and understandings of blockchain. First of all the proper way to spell blockchain is with lowercased letters (unless it´s used in a title).

Blockchain is a shared ledger used to permanently store transactions for different assets (for example currency, an object or pretty much anything you like). Since the data is stored on a shared ledger that is split into lots of different nodes makes it impossible (or at least extremely hard) to make any illicit changes.

I hope this clarifies and explains it a bit more, I´m now going to look into how the blockchain technology is utilized.

Why did I start this blog about Blockchain?

So first of all, nice to meet you! My name is Anders and in this post I will try to explain to you why I created understandingblockchain.io

I attended a meet-up in Oslo over 10 years ago to discuss the future of mobile, a bit on the side of the agenda there was a guy talking about Blockchain. A statement he made stuck with me “Blockchain is going to be the next big thing, we just don´t know how yet”. He also made the argument that Blockchain would have the same impact on us as the introduction of the internet.

What did I think of this?

I was fascinated but was not able to comprehend what Blockchain was, and how it is going to have such a big impact. Keep in mind that this was over 10 years ago. I didn´t do anything actively towards understanding it back then but I´ve always been interested and intrigued by Blockchain technology.

Since I attended the meet-up in Oslo a lot has happened, and now even more experts are making the same statement “this is the next big thing”. But I have two big issues with it:
1. Most people don´t understand what Blockchain is
2. How is it the next big thing?

These two are the reasons for why I´m creating this blog, I want to go on a journey wide and deep to understand how Blockchain will change our lives and I want to bring you along on the journey.

Blockchain vs Bitcoin (and other cryptocurrencies)

The fact that most people think about crypto when they hear Blockchain fascinates me, surely there must be much more than “just” crypto. This is one of the areas I want to deep dive into.

What now?

I want to jump in and start learning and understanding, matter of fact I´ve already started writing up my next blog post which is going to be titled “What is Blockchain?”.

What do you guys want me to research? Do you have any ideas, comments or inputs I´d love to hear it. Reach out to me or leave a comment on this post.