Ethereum:Beginner Guide


Let us start with the very basic definition of Ethereum. Ethereum is a Decentralized System or Platform or Software Platform, which member nodes can use to build and deploy Decentralized Applications or DApps. The Ethereum Virtual Machine (EVM) which is a Turing Complete software, runs on the Ethereum Network and can be used to create new blockchain applications using any coding language. You can write codes using programming languages like Solidity to build Decentralized applications accessible to anyone in the Ethereum network.

The original Ethereum development team consisted of Vitalik Buterin, Mihai Alisie, Anthony Di Iorio, and Charles Hoskinson.

As you might know Decentralized systems are accessible and governed by all the members of the network. There is no Central Authority which governs the system. Contrary to this a Centralized system is governed by a Central Authority. For example, Facebook is a Centralized System in which all the data resides in the Central Server of Facebook. For more clarity on Decentralized Systems please refer to my article here.

Use Cases

Ethereum covers a wide spectrum of usage from developing complex Blockchain Applications like Electronic Voting Machines, Digitally Recorded Property Assets, etc. to developing other cryptocurrencies and also Smart Contracts. Please see the list below.

  1. Developing Decentralized Applications: Ethereum allows users to develop thousands of decentralized applications or DApps. (By the way, the Bitcoin software is also a DApp, which helps its users to transfer peer to peer electronic cash without the involvement of any third party). Ex: Applications in Finance, Real Estate and Insurance are being developed on the Ethereum Blockchain.
  2. Any Centralized Services can be Decentralized by using Ethereum to build a DApps for the specific service. Ex: bank loans, voting systems, title registries, regulatory compliance, etc.
  3. Smart Contracts: Ethereum allows users to create Smart Contracts, discussed below.
  4. Building of Decentralized Autonomous Organizations (DAO): Ethereum can be used to build DAO, which is a decentralized organization, which is hence not controlled by any single organization. It is governed by a collection of Smart Contracts written on Ethereum. The DAO is owned by anyone who purchases its token. The token gives voting rights to the member.
  5. Launch other cryptocurrencies: Ethereum is also being used as a platform to launch other cryptocurrencies.
Ethereum Use Cases

Benefits of Ethereum Applications

Applications built on the Ethereum platform are decentralized and they have the below listed benefits over traditional centralized applications.

  • Zero down time: Ethereum applications are decentralized and hence are contained in all the member nodes or computers of the Ethereum Network. They are not hosted by any Centralized Server, the crashing of which can stop the applications from working.
  • Secure: With no Central Point of Failure and secured by cryptography, Ethereum Applications are well protected by any potential hackings or fraudulent activities.

Accessing the Ethereum Network

Now you might be wondering on how to access the Ethereum blockchain platform to develop applications or to trade Ether ( the cryptocurrency of Ethereum).

Earlier till 2019 the easiest way was to use the native browser of Ethereum called Mist. Mist provided a user friendly browser and wallet for users to trade Ether and write codes to develop Smart Contracts and DApps. Like web browsers give access and help people navigate the internet, Mist provides a portal into the world of decentralized blockchain applications.

Note: The Mist Browser failed and was discontinued in 2019 owing to some security issues

Another way is the MetaMask browser extension which turns the Google Chrome browser into an Ethereum browser. MetaMask is also supported by Firefox.

Smart Contracts

Smart Contracts are computer programs or codes that run on the Ethereum blockchain, that can facilitate the exchange of anything of value (ex: money, content, shares, property, etc.). The Smart Contract code runs or executes when a certain pre-determined set of conditions are met, for example after a specific duration like 2 years, when the price reaches a certain value, etc.

Smart Contracts

An ideal Smart Contract should have the below properties:
1. Automatically executable and enforceable: In a normal legal contract it is the State of Law or another trusted third party which is the final authority to enforce and execute a contract. Or generally both the parties involved will abide by what is documented in the contract and execute accordingly. For example, let us take an example of a Contract for a new hire for a project. Suppose the Payment terms of the contract lays out the realization of the monthly salary of the new hire after every 30 days from the day of joining the services.In a normal scenario, a mutual trust is needed between the employer and the employee and after every 30 days the employee expects the employer to process his salary. In the case of any disputes (like payment defaults) the State of Law will intervene and resolve the matter.
Now in the case of Smart Contracts the computer code will enable automatic deduction of salary payments after every 30 days. This is a preset criteria in the Computer code.
Hence in an ideal Smart Contract, there is no need for any third parties for the proper abiding of the terms of the contract.
2. Secure and Unstoppable: An ideal Smart Contract should be secure and unstoppable. This means that the computer code should be non-permeable (secure) from any hacking to tweak the terms and should be unstoppable, meaning should not be dependent on external factors such as system failure, natural calamities.

Note: I am always mentioning “ideal Smart Contract” in place of just “Smart Contract” because the research is still going on in this space to make the Smart Contracts even more automatic, secure and unstoppable.

An Ideal Smart Contract

Computer Language and Frameworks for Creating a Smart Contract

There are Domain Specific Languages (DSL) which target on the creation of Smart Contracts. These are languages which are not as vast as a General Purpose Programming Language (GPL) and are only suited for creating Smart Contracts for the specific domain (domains like insurance, Energy, trading, etc.).
An example of a DSL is Solidity which was introduced with the Ethereum Blockchain. Another lesser popular DSL again introduced with the Ethereum Blockchain is Serpent.

More details on DSL can be found here

Graphical User Interface or Canvas for Non-Programmers

The idea of using a DSL for creating a Smart Contract is further eased for non-programmers who are Domain Experts to create a Smart Contract in their specific domain. Here we are given a platform or a Canvas where the Domain Expert can define the semantics and performance of a Contract. Once the semantics and flow are finalized, the system can emulate it to first test and then implement a Smart Contract which can be transferred to a target platform (which is a Blockchain).

Ricardian Contracts

Ricardian Contracts are a type of Smart Contract which was first used in a bond trading and payment system called Ricardo. The idea is to create a Smart Contract which is acceptable by both a Court of Law and Computer Software. In the general scenario a Smart Contract which is a computer code can be interpreted and validated by a computer programmer but not so easily by the Court of Law. In the case of the Ricardian Contract, the terms and clauses of the contract are written in a code format as well as document format so that it can be well accepted and understandable by the Court of Law and Computer Software.

  • This type of contract is issued by a issuer (of a bond or security) to the holders.
  • The terms and conditions are well documented in legal prose (easily readable by humans) and machine tags (readable by computer software).
  • It is digitally signed by the issuer to establish authenticity of the contract.

Oracles in Smart Contracts

We have seen that a Smart Contract is a computer code which is able to automatically execute a contract once a set of pre-defined conditions are met. For example a Smart Contract in trading and finance can auto release payment of dividends once the value of a Stock reaches a certain amount. Or let us take the example of a Smart Contract which has an in-built code to release the payment to a vendor once the project is completed satisfactorily. But the question arises that how will these External Data such as the value of the stock and whether the project has been satisfactorily completed or not (in the above examples) be fed in the Smart Contract.

Here comes the concept of Oracles. Oracles are the framework or platform which is connected to a Smart contract to provide external data (stock prices, government decisions, corporate news, etc.).

But how can we be ensured that the data that is provided by Oracles is not manipulated for personal interests. Generally Oracles are large trusted houses, but again the problem of Centralization appears in which we are trusting a third party for our critical data.

Hence in order to combat this issue, Decentralized Oracles were introduced in which the Oracle sources data from a Blockchain which is managed by decentralized consensus, and hence the worthiness of the data is ensured.

Conclusion and Summary

This guide starts with the basic definition of Ethereum, its use cases, benefits and Smart Contracts. It further elucidates Smart Contracts, its types, and the frameworks used to develop one. We should know that till now Smart Contracts is an area of research and a formal definition is still not in place. Then we understood traits of Smart Contracts followed by the languages and other GUI used to create a Smart Contract. We further checked a type of Smart Contract, namely Ricardian Contract and then understood the concept of Oracles in Smart Contract. Hope you find it well understandable and in any cases of doubts, request you to reach out to me at

Happy reading:)

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