👋 Note: Originally published on March 8, 2016 (link). This was part 7 of 7 in a series of posts released under the pseudonym Creole.
Imagine thousands of computers all over the world connected by the internet. Some are home PCs, some are laptops, some are servers sitting deep underground. But each of them runs the same computer program, which connects all of these computers into a network of equals.
This program sets out rules for how the computers should work together. How to talk to each other. How to store data. Specifically, this program lets them behave as though they were all together a single, world-spanning computer. Every one of the thousands of devices that makes up the whole does the same thing, in the same order, in lock-step. They’re all recording the same information and running the same programs. In a real sense, it is one computer. This computer is Ethereum.
The Ethereum world-computer is slow. It has to be. Every one of the thousands of component computers — which we will call “nodes” — is doing doing the same things at the same time. This also makes it expensive, compared to a regular computer. Every operation must be performed in parallel, all over the world, requiring hardware and electricity.
But the point of Ethereum isn’t to be fast or cheap. The point is to be trustworthy. Any program that runs on Ethereum is guaranteed to run the same way everywhere, on every node. Data stored on Ethereum is available everywhere, and it is permanent. Ethereum is a place to run programs and store data that are simple, but for which trust is paramount.
Imagine you need to record something important. Like ownership of a house. It’s a simple piece of information, but it must have permanence. You need to be sure, first, that no one else can delete or edit this information. You also need to be sure it will always be there— so that even years later, you can refer to it as proof of ownership. And you need other people to be able to see it, and to be able to verify for themselves that it is authentic, and has not been edited. Ethereum lets you do this.
Or, imagine that you need to run a simple piece of code. The code is an agreement between two parties. It’s a bet — Alice receives money if the price of oil goes down, Bob receives money if the price goes up. Both parties must have confidence that the program will operate in the way they intend, and that it cannot be deleted or edited without their permission. Alice wins. Ethereum lets them do this, too.
It turns out there are many situations where we do not need fast or powerful computers, just trustworthy ones. People are already building applications on Ethereum that take advantage of this. Devices like locks or cars that can respond to payments of cryptocurrency, or make payments themselves. Voting and governance systems that are automatically enforced. Prediction markets where people can bet on future events. Triple-entry accounting systems. Platforms for musicians to sell their music, without anyone else getting a cut. These applications are only the first — the network is not yet even a year old.
Our world is full of systems that depend on trust. Any activity that involves money, value, property, or control requires a way to create trust, to convince people that they can rely on it. No one engages in trade or casts their vote unless they have confidence that the system will work as it is supposed to work. Today, we rely on trusted intermediaries for this purpose. Banks, financial institutions, legal systems, and governments all act as middlemen in different contexts.
Now we have a new way to create trust, a new technology unlike anything that has existed before. It doesn’t rely on any person or company or government. It doesn’t exist in any one place and can’t be permanently destroyed. Anyone can use it to create trust, and to create applications or services that are inherently trustworthy.
The traditional middleman won’t disappear. But they face a radically new form of competition.