Ethereum 2020 Explained: What is Ethereum & How it Works (Ultimate Beginner's Guide)

**Casey** (0:01)
Hello, I'm Crypto Casey. In this podcast, we are going to talk about Ethereum. Many people associate Ethereum with Bitcoin, and some people use the words Ethereum, Bitcoin, and Blockchain interchangeably. By the end of this episode, you will know the key differences between Ethereum and Bitcoin and their relationship with Blockchain technology. Specifically, we will discuss what Ethereum is, what Ether is, how they work, and what the future holds for this Blockchain project. I've divided this guide about Ethereum into 7 chapters to make it simple to follow and easy to understand. And stick around until the end of this podcast for an interesting bit of information that most beginners aren't aware of that makes Ethereum an exciting project to follow. Before we get started, make sure you check out my YouTube channel at youtube.com forward slash Crypto Casey for video versions of these podcasts. Please note that the best way to contact me is by visiting my website, cryptocasey.com forward slash help to fill out a contact request form. Or you can email me directly at Casey at cryptocasey.com. Also, I conduct a weekly AMA or ask me anything every Wednesday on Instagram at instagram.com forward slash Crypto Casey. So please use the link to my Instagram account listed in the description area to follow me and ask me anything you want every Wednesday. Awesome. Now that we've got that covered, let's learn about Ethereum.
Chapter 1 What is Ethereum? Vitalik Buterin is a Russian-Canadian programmer and cryptocurrency researcher who came up with the idea for Ethereum in 2013, which finally went live in 2015 The most plain and simple explanation of Ethereum can be broken down into two words. Software Platform. Now what makes Ethereum different from other software platforms is that it is a blockchain-based software platform. So, what is blockchain?
The most plain and simple explanation of blockchain is that it's records of data stored on a network of computers. And there are three pillars of blockchain that make it unique. 1 Decentralization 2 Transparency 3 Immutability So let's break down these three pillars.
Pillar 1 Decentralization The word decentralization with regard to blockchain is twofold. 1 It means that the data is recorded and stored on multiple devices in multiple locations around the world as opposed to one central place. And 2 Decentralization also means that no one person, company, government, authority, or entity controls the data record and storage process. So instead of traditional centralized entities like the IRS, JP Morgan, or MIT recording, storing, managing, and controlling their data by following their own protocols, deciding which servers to use, where these servers are located, and using their own proprietary software and security systems to protect their data, blockchain allows for decentralized record keeping where data is recorded, stored, and managed on a network of computers with open source software all around the world. Any changes to the blockchain protocol go through a consensus process that no one person or entity has control over. So that is the essence of the decentralization pillar. Pillar 2 Transparency The word transparency with regard to blockchain relates to the way in which transactions are recorded on a ledger that is available for everyone to see and that is saved on a network of computers around the world, making the data impossible to change or alter.
The best way to see the value of transparency in data recording, storage and management is by comparing these two scenarios. Scenario 1 Currently, common citizens of the United States are not privy to where and how every tax dollar is spent by the United States government. We just have to take the government's word for it. And even if the government had to show their records, it would be very easy for them to create, forge or manipulate any data they chose to share with us since they control their own data. You can see how that scenario is not transparent and not exactly trustworthy. So let's imagine if everyone in the United States had the ability to see a live, running ledger of where every single tax dollar was spent by the US government at any moment in time. Basically, all US citizens could see a full disclosure of how our government is managing our money. And in this scenario, there is more trust and transparency, the second pillar of blockchain technology.
Pillar number three, immutability. Immutability simply means that the data recorded and stored on the blockchain cannot be changed, forged or altered. And this is achieved through cryptography and blockchain hashing processes. If you would like to listen to a more in-depth podcast explaining what blockchain is and why it was developed, please check out my Blockchain Guide podcast episode.
So to summarize the three pillars of blockchain technology, blockchain's recording and storage protocols make it such that once new data is verified, it is unmodifiable, it's distributed across a vast network of computers around the world so it's hard to destroy, and no one person or entity controls the data or network, creating a transparent environment.