Get asked is what is a lot of people know already what bitcoin is it's already been around for ten plus years but second to Bitcoin the second largest cryptocurrency is  and  has quite a few distinct features that make it a lot more than just a simple way of sending money back and forth so in this article I really want to create a simple explanation that's not too long that goes over.

                                 ~Img source: Pixabay.com

What exactly a Ethereum is and why I think it's an important technology moving into the next decade to understand Ethereum we need a brief recap of Bitcoin see before the invention of Bitcoin the only way to send money digitally was through third-party intermediaries like PayPal or traditional banks and while these methods have traditionally worked for transfers of money they come with a ton of caches banks and payment processors often have things like monthly fees for accounts daily transaction size limits holding periods massive exchange rate premiums all sorts of caveats that make the regular transfer of money across the world and extremely slow and often expensive process even more troubling than that has been the collapse of many larg.

Financial institutions and banks since 2008 do large in part to something called fractional reserve banking fractional reserve banking basically entails that rarely ever does your bank carry the actual cash represented on each and every dollar in an account holders balance your savings accounts 401ks checking balances are often the same cash streams used to provide others with mortgages loans or other investments this means that if I snap my fingers tomorrow and convince 25% of everyone in a given country to withdraw every single bit of currency from their bank we would have a full-on financial and economic crisis much of what happened in a place like Cyprus in 2012 and 2013 so come early 2009 and bitcoin was born with the mission of replicating the store of value that cash and dollars have without the middlemen and intermediaries of banks and money transfer services true decentralization of money. 

Across the globe Bitcoin was created anonymously and without getting into the details mechanics of it all but could essentially allows you to transact virtually any volume of money anywhere in the world with an internet connection without the need to identify yourself pay banking fees or spend days or even weeks waiting for a transaction to clear over the years Bitcoin has seen massive fluctuations in value and because of this it's become a lot less of a currency and a lot more of a commodity with only 21 million in all of existence and with an inflation rate that drops by 50% every four years Bitcoin is a scarce resource and to this day nobody has been able to successfully fake or Forge a Bitcoin transaction due in part to the technology of the blockchain so if bitcoin is decentralized money currency or a store of value.

What is a theory well the short and dirty of it is if you consider Bitcoin a version of digital goals then Ethereum should be classified as digital oil see Ethereum essentially has and improves on all the functions of Bitcoin it's fast you can send it all over the world the fees are next to nothing and you can also just use it like Bitcoin as a way to send money but what etherion was founded in 2013 it came with one killer feature that opened up the possibilities for digital currency to reach a whole other audience that feature is called smart contracts see the big problem with exchanging or transferring money generally is that there has to be a system of trust so when I walk up to a vending machine let's say and it tells me it costs one dollar for a diet coke I'll put in one dollar a machine and I'll get a diet coke everything is run on a coding language in that vending machine and I trust it because I've used other vending machines and it seems pretty inconspicuous this is a contract of trust and we deal with these everyday payroll from employers credit card purchases loan agreements hospital records.

We have to deal with these systems of trust with our money and information every minute of every day but why do we trust them we have things like insurance reputation government agencies to hold businesses people and machines accountable the upkeeping of trust mechanisms in our society is its own industry entirely but these systems like payroll loan agreements they always require yet another person another verifying body something to give us the comfort of credibility so that we can give them our faith so maybe now you walk up to another vending machine and this one tells you if you put in a thousand dollars it'll give you five thousand dollars back same logic as the Diet Coke machine except now the stakes are a whole lot higher why is this vending machine giving away free money who put together the machine and what if it eats your money this is where you really start thinking about trust because on a bigger scale it becomes a huge factor in how anything and everything in our society works more importantly.

How do you create trust in this situation when there's nobody to call about the weird vending machine no reviews online nobody who guarantees you a refund if the transaction doesn't work you use something called a smart contract a mixture of automation and traditional programming combined with transactions of value see every Ethereum transaction can have a smart contract coded into it meaning that you can set parameters that have to be met by one or both parties beforet transactionis deemed valid or complete think of a smart contract like a binding agreement except unlike most binding agreements which require lawyers and judges to sign off on them.

Everything is governed by a fully auditable computer code and the magic with the theorem is we have binding contracts with everything in our day-to-day life not just money voting is a contract between you and your electoral district but you need to trust humans or machine vote counters that can be swayed by bias or corruption gambling is a contract between you and a casino but you need to trust humans aren't cheating or bending the odds in the houses favor when you implement fully auditable transparent code is your way to verify trust you can completely revolutionize every aspect of day-to-day life if you've ever taken over for example you know that trust plays a massive factor the rider has to feel that they can trust the driver to arrive on time and drop them off at their destination and the driver has to trust that the rider will be at the pickup point and will pay them for the ride both parties pay an intermediary company.

To make this happen uber an uber collects massive fees for making this trust or contract feel secure twenty-five to forty percent of the total fee generating billions of dollars of revenue every single year but what if you could automate all of that without the head office of uber taking their portion every time what if more of that money could be earned by the drivers who actually execute on that contract to make a better and more sustainable wage it can all be done with smart contracts and the world is being taken by storm by the next wave of applications that enable this type of decentralized contract aptly titled d apps or decentralized applications developers on Ethereum have already made a platform for example called maker Dow that allows you to create stable US dollar equivalent loans using your Ethereum tokens as collateral without the need for any banks whatsoever all run via smart contracts here's another example of a smart contract say I'm a farmer and I need to get insurance for my crops over the winter.

If something happens to my crops and they die of a cold surge an insurance agent would usually have to come out and verify everything that has happened was legitimate and unpreventable or in the era of smart devices I could install a smart heater equipped with cameras sensors whatever that maintain the well-being of my crops with an Ethereum smart contract built into it that says if the temperature drops under zero degrees celsius for over two hours release five thousand dollars of insurance proceeds to Farmer John with a technology like this I can get much cheaper insurance and save a ton of time and energy that would be required from an insurance agent to verify the accident every transaction or smart contract execution on Ethereum increases the overall value of the Ethereum network because each and every action requires spending a little bit of ether just like Bitcoin to execute the transfer of funds or signing of a contract this means that the more that we build decentralized applications on Ethereum that are getting irregular and sustained usage the more that the demand for the asset Rises ultimately making it akin to the oil we use to power everything from our cars heating factories and so on it's a truly limitless technology and as of making this article the entire market cap of all the available theorem in the world is only worth a little more than half the market cap of Dollar Tree Incorporated now this isn't saying you should go out and load up your bags with Ethereum I don't give investment advice I'm not licensed to do that but for such a powerful technology that is already executing major feats of usage I really think it's quite undervalued and I do think the potential for growth is absolutely enormous 

So what I've done is I've attached a bunch of links below for more in-depth explanations about blockchain and programs being built on the Ethereum network right now if theory omitting every day on the internet on our smart devices on a computer and so on it's a technology that has not really been fully realized yet because it's in its very early days but much like the Internet in the 1990s with basic website layouts I think applications that are built on Ethereum today are going to be the absolute killer apps of 2020 and beyond things like loan agreements things like renting cars or renting ubers all of these things are going to be based on the Ethereum network over time I'm really hoping that this article turned out to be an easily digestible explanation of what Ethereum is I haven't gone over the finer details of how blockchain and all these things work and I've embedded links in the description that explain the finer points but essentially if Ethereum is going to be the next digital oil of the Internet I think has a long way to go in terms of realizing its full potential and value and that's really why I wanted to make this article so that more people can understand the potential of this technology and get involved themselves.