Ethereum – A Simple Explanation


Hi everyone, welcome to the podcast and thank you for tuning in. I’m Elean Mendoza and I’m here with Evan Shorten, the Firm’s founder and principal. 

Hi everyone, I hope you are all doing well and staying safe. This week we are going to continue our series covering digital assets with a simple overview of Ethereum. If you have not had a chance to listen to our last episode discussing Bitcoin, I highly recommend you go back and have a listen. Please don’t forget to subscribe to the podcast on the Apple Podcasts App or Stitcher Radio on Android. If you’re listening to us on YouTube please subscribe to the channel and hit the bell notification icon so you don’t miss any future episodes. 

So before we start the specific discussion on Ethereum, I want to review the two main concepts we discussed in our last episode regarding digital assets. That’s the blockchain and cryptocurrencies. 

Cryptocurrency refers to the various tokens you’re most familiar with such as Bitcoin and Ethereum. It’s the cryptocurrency tokens that people most often trade and the media most often discusses. 

However, the blockchain, or the network powering cryptocurrencies, is the technological innovation. For example, the Bitcoin Network powers Bitcoin, which as we discussed in our previous episode, is essentially an open source, accounting ledger, with no central authority or group. The Ethereum network most prominently powers the ERC-20 token on which smart contracts can be built on. 

So with that said, let’s get on to the discussion of what Ethereum is. Evan?

So to understand Ethereum we need to go back and review a little bit about Bitcoin and what its technological breakthrough is. Bitcoin essentially took money which has always been controlled by governments and central banks and created a new decentralized network, also known as a blockchain, where money, or value, in the form of Bitcoin tokens can be transferred between individuals without a single authority, figurehead, or a point of failure. In other words Bitcoin is decentralized money. 

So that begs the question, if it’s possible to decentralize money through the use of blockchain technology, what else can be decentralized? What other things could be improved if we removed the central authority, or the central point of control? 

I can think of a big example – voting. Think back to the last presidential election and all of the drama that surrounded it. Whether you believe there was some level of voter fraud or not, one thing that cannot be denied is that votes are counted by individuals who are granted an immense responsibility. Imagine if we could remove those individuals from the vote counting process and instead let a decentralized program with no central authority count all of the votes? Furthermore, imagine this decentralized program is on a public blockchain that anyone can view, meaning the votes counted would be open for anyone to see. 

This is essentially what Ethereum aims to accomplish. Ethereum aims to decentralize applications, programs, services, and essentially decentralize the internet. 

Ok, so essentially Ethereum is similar to the Bitcoin network in that it’s a decentralized, public blockchain, but Ethereum adds the additional functionality of smart contracts; and it’s through the use of smart contracts being implemented on a public blockchain that Ethereum is able to create decentralized applications, programs, and services. 

To take it one step further, similar to how Bitcoin has a goal, to decentralize money, Ethereum also has a major goal of its own – to make the internet decentralized and censorship resistant.

Hopefully this episode provided you with a basic understanding of Ethereum. We really focused on keeping this episode simple and easy to understand. The reality is that cryptocurrencies and digital assets are new technologies based on mathematics, cryptography, and computer networking whose technical details are outside the scope of this podcast. Furthermore, the rapid pace of innovation makes it difficult to keep up with even for those who are regular participants in the digital asset space. 


And to give you an example, Ethereum itself is in the process of changing how its blockchain operates and verifies transactions. If you want to take a deeper dive into the technical details of Ethereum and its ecosystem, we’ll include a link to the Ethereum Foundation on this episode’s blog post located on our website. 

With that, I want to thank you for tuning it. Please don’t forget to listen to our previous episode discussing Bitcoin if you haven’t done so already and please subscribe to the podcast. 

Ethereum Foundation:

Author: Paragon Financial Partners

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