Show Notes

Here are links and resources mentioned in today's video. Enjoy!

• If you're ready to take the next steps into the world of bitcoin, cryptocurrencies, and blockchain...and really wrap your head around all this stuff, then be sure to check out Understanding Bitcoin: Navigating The Divide To History's Next Great Era!

Transcription

When I try to explain what Ethereum is, I usually say something along the lines of, "It's a software development platform with a monetary component," but usually all that does is raises even more questions! So let's try to break things down here.

Before getting into bitcoin, ethereum, and other cryptocurrencies, I had a very strong understanding of gold, silver, sound money, and the current monetary system. So at least for me, making the leap to truly understanding all this stuff wasn't too hard.

Now at least as far as Ethereum is concerned, here's how I think of it: I think of it as digital silver. Let me explain:

Like gold, silver fulfills the five requirements for something to be money, but it doesn’t fulfill them quite as well as gold does. That said, silver’s better at being money than anything else on the planet (from sea shells to shiny rocks and everything in between).

So after gold, the next best money we've had historically is silver. But silver’s interesting because in addition to being money, it also has industrial uses. If you didn’t know, silver is used in solar panels, various medicines, electronics, and has many, many other applications.

This is because of silver’s unique properties and versatility. And wouldn’cha know, that’s exactly what Ethereum is, too. Ethereum has monetary properties but it also has a huge range of uses and applications. With that in mind, here’s the best way to describe Ethereum: It’s a blockchain-based software platform.

After bitcoin made it's debut, developers and programmers wanted to push blockchain technology further -- and that’s exactly what they did, naming their blockchain project Ethereum.

The result is a blockchain network that can be used to develop and run all sorts of different things, from software and games to something called smart contracts and can even be used as the foundation for other cryptocurrencies.

We'll take a closer look at some of Ethereum's uses in just a sec. Meanwhile though, while it does have monetary properties, Ethereum is really more of a platform for building things with...just as silver has monetary properties, but is also used to make things with.

That's why I say that in my mind, Ethereum is digital silver.

So like bitcoin, Ethereum is a decentralized, permissionless, non-hierarchical blockchain network. Ethereum is it’s own decentralized, open-source blockchain that, unlike bitcoin, can handle more than just money’s five characteristics.

In fact, the name of it’s blockchain is Ethereum. Now this might be a bit confusing because sometimes people refer to Ethereum as Ether or ETH.

But these are different things. As we just learned, Ethereum is the name of the blockchain network itself. Ether or ETH is the name of the cryptocurrency that’s native to the Ethereum blockchain network.

In terms of size, Ethereum is the second largest blockchain project by market capitalization after bitcoin (again drawing parallels to gold and silver). But in terms of adoption, Ethereum’s growing twice as fast as bitcoin.

On the functionality side of Ethereum, it serves as a versatile platform that developers, entrepreneurs, and programmers can use to build all sorts of different things with. Let's take a quick look at just a few things that the Ethereum network can support.

Probably one of the biggest developments on the Ethereum blockchain is the innovation of something called smart contracts.

Smart contracts, like traditional contracts, dictate the terms of any kind of an agreement between two or more parties, but they do it electronically.

Smart contracts themselves are simply lines of code that self-execute if certain conditions are met — hence why they’re “smart.” This eliminates the need for an intermediary like a bank, government agency, legal system, brokers, agents, or anyone else...and the implications of smart contracts are profound.

That said, probably the biggest disruption Ethereum will make in the upcoming years is DeFi or Decentralized Finance. Here, DeFi aims to completely replace (obliterate?) traditional, centralized financial services and instruments with completely decentralized ones.

This includes pretty much any traditional financial element you could think of, from equities and money markets to exchanges, investment funds, retirement plans, and more.

In this way, DeFi allows access to traditional financial instruments while eliminating the need for traditional financial intermediaries like banks, brokerages, exchanges, and everything in between.

And just imagine the potential here — including the ability for crypto users to earn interest on their holdings, borrow against their bitcoin, ETH, and other cryptocurrencies, and a whole lot more.

Next, let's take a quick look at Dapps or Decentralized Apps. Now, we know that the Ethereum blockchain really is a software platform, right? This means of course that developers, programmers, entrepreneurs, and others can build software projects on it’s network.

These software applications are called Dapps. What are the advantages of Dapps? Certainly decentralization is the biggest one. Dapps connect users directly together and remove central authority and control.

Who’s a current central authority who could be replaced? Uber, Ebay, Airbnb...the list goes on. These centralized services connect buyers and sellers together. Dapps aim to remove them. Again, the implications here are profound.

One final use for Ethereum that we’ll look at is NFTs or Non-Fungible Tokens. These have been in the headlines, so I’ll bet you’ve heard of ‘em. Typically, NFTs take the form of digital art — jpegs and things like this.

Now it’s easy to quickly disregard NFTs as being stupid or silly. I certainly did. That was until I started to wrap my head around the concept. And that’s when I started to realize the potential here.

Essentially what an NFT is, is provable ownership over any kind of digital asset. In fact, provable ownership over a digital asset is exactly what happens when we buy bitcoin after all, isn’t it?

NFTs take the concept of digital ownership beyond bitcoin and money and apply it to other digital assets, from original digital art, books, sports and music memorabilia, and so on. Of course, all of this is made possible by Ethereum’s blockchain network.