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What Is Ethereum?
Ethereum is a leading cryptocurrency which uses blockchain technology to trade value online much like Bitcoin. The Ethereum blockchain also uses smart contracts to facilitate, verify, and enforce negotiations. Proponents of this virtual currency believe Ethereum one day will allow peer to peer sports betting without vigorish.
Whether that ever comes to pass, this decentralized platform is one of the best cryptocurrencies for gamblers. In this article, we are going to introduce you to Ethereum – one of the most fascinating projects in the cryptosphere. It is often called the “primary altcoin” and aims to build global, decentralized applications for trading and negotiation.
What is an Altcoin?
Readers might ask what an altcoin is. An altcoin is any digital currency similar to Bitcoin, but which serves as an “alternative to Bitcoin.” It either can be created from scratch – using virtual machines to mine ether — or it can be created by diverging (or “forking”) from the Bitcoin protocol.
Altcoins offer a different approach to crypto transactions than Bitcoin. Many pit themselves as improvements. Some provide better user privacy, such as Monero and Zcash. Others provides a faster and lighter version of Bitcoin, like Litecoin. The Ethereum blockchain is different from all these altcoins because being a cryptocurrency is a minor part of what it is offering.
This is how Ethereum’s website defines itself:
“Ethereum is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third-party interference. These apps run on a custom-built blockchain, an enormously powerful shared global infrastructure that can move value around and represent the ownership of property.”
History of Ethereum
In late 2008 when the Bitcoin whitepaper came out, it instantly gathered quite fan-following. One of these people was Russian-Canadian programming prodigy.
Vitalik Buterin. Mr. Buterin was fascinated with the implications of blockchain technology. Bitcoin used blockchain technology to power its transactions. However, Buterin felt it could a lot more than that. He brought forward certain proposals that eventually would become smart contracts. The development process took years, though. To do so would require changing a lot of Bitcoin’s source code, which the community was reluctant to do.
Eventually, Buterin set out on his own and created his own project called “Ethereum.” In 2014, Ethereum’s crowdsale or ICO (initial coin offering) took place. The ICO raised about $18 million in 42 days. With such funding, the platform went live on 30th July 2015.
Bitcoin vs Ethereum
So, what are the core differences between the two biggest projects (by market cap) in the crypto space? Bitcoin is a pure payment protocol. You can conduct transactions with Bitcoin. Also, you can trade Bitcoin – many investors buy and hold them as an investment.
With Ethereum, you can do the same, but so much more. Being a cryptocurrency is a very small part of what Ethereum has to offer. Ethereum aims to create a worldwide, decentralized supercomputer, which will consist of nodes from all over the globe.
If the vision holds, it will create a platform wherein developers can rent resources from the system and build their own decentralized application (dApps). The dApps make certain that any given big corporation cannot misuse all the data stored inside the dApp. At the core of these dApps is the smart contract.
You must understand how smart contracts work to gain a complete understanding of Ethereum.
What are Smart Contracts?
Think of what a contract is. Then think of how it works in the traditional sense. A contract is a legally binding document between two parties, which is overseen by a third-party (usually a lawyer). A smart contract works in a similar manner, except for one or two game-changing modifications.
First, a smart contract is self-executing. Second, it does doesn’t need a third-party for overseeing.
To give you a proper definition:
“A smart contract is a computer protocol intended to digitally facilitate, verify, or enforce the negotiation or performance of a contract. It allows two parties to directly interact with each other, without going through a third-party.”
Smart contract history
Computer scientist and legal scholar, Nick Szabo, coined the term “smart contract” back in the ’90s in his seminal article “Smart Contracts: Building Blocks for Digital Markets.” To understand the philosophy behind how they work, let’s take Szabo’s now-famous vending machine example.
Here is how you usually interact with a vending machine:
- You choose the item that you want.
- You put cash inside the machine.
- The machine gives you the item.
Pretty straightforward right? However, there are two things that you need to note during this entire interaction:
- Each step cannot be executed until the preceding step has been fulfilled. For example, you cannot put in the money until you select what you want. Also, the machine can’t give you an item until you put in the money.
- During this entire interaction, you and the machine are directly interacting with each other. There is no third-party, like a shopkeeper, between the two of you.
Smart contracts work in the same way. Thus, the core principles behind smart contracts are:
- The two parties bound in a smart contract can directly interact with each other.
- Each step in a smart contract can only be fulfilled after the execution of the preceding step.
By incorporating this simple innovation, Ethereum’s founder created a protocol where users could directly interact with the dApps without going through a third-party. Smart contracts in Ethereum allows the same thing, though traders buy “ether”. Buterin’s method uses the coded language called “solidity.” Solidity happens to be a “Turing-Complete” programming language, which means that as long as it has enough resources, it should be able to solve any problem.
Ethereum’s Smart Contracts
This is the reason why smart contracts need to have a “halting mechanism,” which lets them know when to terminate operations. In Ethereum, smart contracts use a “Fee-meter” for termination. Every line of code in the contract costs “gas.”
To execute a smart contract, the user must specify a gas limit before they submit it to Ethereum’s miners. If the gas limit isn’t enough to cover the contract, then it will revert back to its original state and the user must pay the gas fees to the miners. The gas fees are paid in the native Ethereum currency called “Ether.”
What is Ether?
A lot of people make the mistake of assuming that Ethereum is the name of the cryptocurrency. Ethereum is actually the name of the project, while the native currency is called “Ether.” Ether has multiple utilities inside and outside Ethereum’s ecosystem.
Some of its most important functions are:
- A mode of payment.
- A store of value.
- A reward to the miners for their services.
- Staking (in the near future).
Along with Ether, the dApps built on the Ethereum platform can issue their own tokens and have their own unique tokenomics. On the cryptocurrency exchanges and in bitcoin wallets, Ether is denoted as “ETH”.
Like most altcoins Ether’s value has fluctuated significantly over the years. There are 107,545,404 ETH currently circulating in the ecosystem. Ether reached an all-time high of $1,432.88 USD on Jan 13, 2018 (as per coinmarketcap).
Gambling with Ethereum
Naturally, bettors must wonder whether you can use Ether tokens to gamble in online crypto casinos. The answer is “yes” – most certainly. In fact, a certain segment of the gambling community believes Ethereum is the future of cryptocurrency betting.
Remember how we told you about creating dApps on top of the Ethereum blockchain? As it turns out, a lot of these happen to be gambling dApps. We are going to pull some stats from DappRadar to show you some of the more popular gambling dApps.
When we rank the dApps by the number of users they have attracted in the last 24 hours, then we can see that “X2BET.WIN” is by far the most popular gambling dApp with 472 users.
When we rank by transactional volume in the last 24 hours:
Dice2.win has had a transaction volume of $350,400 in the last 24 hours.
Along with the gambling dApps, some “traditional” online crypto casinos like Fortunejack, Stake, 1xBit.com, mBit, and 7Bit also accept Ether tokens.