You're reading from Blockchain for Business 2019

Product typeBook

Published inJan 2019

Reading LevelIntermediate

Publisher

ISBN-139781789956023

Edition1st Edition

Languages

Solidity

Tools

Ethereum

Concepts

Blockchain

Author (1)

Peter Lipovyanov

Ethereum - A Global Platform for Decentralized Applications

In this chapter, we'll discuss Ethereum, which we call Blockchain 2.0. As you'll soon find out, Ethereum takes smart contracts and smart assets to a whole new level with its complete and flexible programming language. This opens up an even broader range of opportunities and futuristic concepts, such as decentralized autonomous organizations, which can potentially be managed automatically without much human involvement. That said, the underlying blockchain architecture still remains similar to that of Bitcoin. This highlights the proven technological breakthroughs and foundational importance of the Bitcoin blockchain.

Nevertheless, the blockchain space is undergoing heavy development and continued innovation, so we should expect more interesting projects to come. The following topics will be covered in this chapter...

Decentralized applications based on Ethereum

We already learned that Bitcoin is the first public blockchain system designed for peer-to-peer payments. It is the pre-eminent cryptoasset.

Ethereum took blockchain technology a step further aiming to become a global decentralized computing platform. It started the second generation of public blockchain technology. The goal of Ethereum is ambitious and enterprising: it aims to enable a large ecosystem of decentralized applications on the blockchain, and thus create a more decentralized version of the World Wide Web—a project known as Web 3.0.

OK! So, what would these decentralized applications look like?

Types of decentralized applications

We can broadly distinguish three...

Ethereum and initial coin offerings

Ethereum has made it very easy for anyone to create and issue virtual tokens on its blockchain. This is done with the help of standardized Ethereum smart contracts, such as ERC20. In this way, people, businesses, or governments can issue their own virtual currencies, assets, or application tokens using the Ethereum blockchain, without the need to build their own blockchains.

The facility of issuing new digital tokens or coins based on Ethereum stimulated a massive wave of new start-up ventures that innovate and fund their projects on the Ethereum blockchain. The funding comes in the form of initial coin offerings (ICOs), also known as token-generation events. In this way, start-ups can issue digital tokens that can be exchanged for services on their future platforms. They can also issue tokens that represent financial instruments, such as equity...

Decentralized autonomous organizations

Decentralized autonomous organizations (DAOs) are envisaged as autonomous entities that operate on the blockchain in a completely automated, transparent, and publicly-managed way.

These entities can also be referred to as DACs. The relationships among investors, owners, employees, and other stakeholders, as well as the assets and resources of such enterprises, are managed by smart contracts on the blockchain, rather than by legal contracts and organizational bylaws.

Imagine a set of smart contracts that cooperate to manage an organization according to its mission statement and a set of logical rules. They can autonomously execute a business strategy according to plan. They can buy resources or services, hire people or machines for jobs, pay suppliers, partners, and employees, run marketing activities, logistics, distribution, sales, and so...

Summary

Let's recap everything we've covered about Ethereum.

We started by introducing Vitalik Buterin, the polymath visionary whiz kid, who came up with the idea of Ethereum, at the age of 19, in 2013. We learned that the key differentiating factor of Ethereum is its Turing-completeness. The Ethereum Virtual Machine and Solidity programming language enable a complete set of smart contracts that can be programmed to do pretty much any computer task or function. This powerful innovation unlocked unprecedented opportunities to create an entire universe of decentralized applications that run on the blockchain. But it also created some additional risks of software bugs and hacks, as we have seen with The DAO, Parity wallet, and multiple other mishaps. Hopefully, with time and experience, such cybersecurity threats in the blockchain space will be mitigated and greatly reduced...

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Author (1)

Peter Lipovyanov

Peter Lipovyanov is an experienced investment banker and venture investor currently focusing on blockchain projects and crypto-assets. A firm believer in the potential of blockchain technology to change the world for the better by facilitating financial inclusion across the globe and improving the efficiency of financial markets and other sectors of the economy, he has been involved in several promising blockchain projects building decentralized applications. His passion for education also led him to create a bestseller online course about the fundamental principles of blockchain technology and its business applications, which is the basis for this book.
Read more about Peter Lipovyanov

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