The Basics of Bitcoins and Blockchains: An Introduction to Cryptocurrencies and the Technology that Powers Them

by Antony Lewis

If you consider Bitcoin as trustless validation and distributed storage of (transaction) data, Ethereum is trustless validation and distributed storage and processing of data and logic.

Like Bitcoin, Ethereum is also a bunch of protocols written out as code which is run as Ethereum software which creates Ethereum transactions containing data about Ether coins (ETH) recorded on Ethereum’s blockchain.

Ethereum transactions can contain more than just payment data, and the nodes in Ethereum are capable of validating and processing much more than simple payments.

you can submit transactions that create smart contracts

invoked by sending Ether to them.

transactions and smart contracts are run by all participants using a sort of operating system called a ‘Ethereum Virtual Machine’.

Ethereum blocks form a chain by referring to the hash of the previous block.

A common database is a system which simply stores and retrieves data. A blockchain platform is more than that. It stores and retrieves existing data just as a normal database does. It also connects to other peers and listens for new data, validates new data against pre-agreed rules, then stores and broadcasts that new data to other network participants to ensure that they all share the same updated data.

Private blockchains can provide transparent multilateral workflows in the form of smart contracts, and demonstrate that the agreed workflows are adhered to. This is what is meant by ‘trustless automation’.

Non-financial industries are now becoming interested in exploring the technology for, among other things, digital identity, supply chains, trade finance, healthcare, procurement, real estate, and asset registries.