What does it mean for ETH to be more like “gas” than an actual currency?

462 views

[ad_1]

What does it mean for ETH to be more like “gas” than an actual currency?

In: Technology
[ad_2]

[removed]

In short, it allows it to do, rather than to have. In analogy: gasoline can get you to the other side of the continent, money can’t get you anywhere, unless you spend it to let someone else get you to the other side of the continent.

The Ethereum network allows addresses to contain code, scripts and values, to be executed in transactions. These scripts are called contracts. This means that a script execution is open and transparent, and the execution cannot be tempered with. But you’d need gas to execute it. So again, instead of paying a third party, like a bank or accounting agency, to do important, official business, you would be able to see and trust the actions of the network.

Let’s take the purchase of a house as an example. I do not have the funds to directly purchase a house, but the contract on address XYZ is written by a mortgage supplier, and allows you to register for a mortgage. An address making a transaction to this contract is registered in the contract. Now, why is this different to a website offing a mortgage? We have to trust whatever code we can’t see on the website, but any transaction and it’s content, including the publishing of the contract, is public. Whatever the contract is doing, you can see it.

It’s quite a complex matter, but I hope I did answer the question at least a little bit. I’m happy to answer any further questions

I just want to say this is a really tough ELI5, as I wouldn’t expect to be able to explain blockchain to basically anyone let alone someone who is 5 lol. So to anyone who is able to succeed in this challenge…kudos.

Really simply, bitcoin and other currencies are decentralized and not controlled by any one person or entity. So in comparison you have banks which take your money and loan it out to other people that isn’t happening with these. That’s why governments don’t like them because they can’t control them or regulate them.

Alright, I don’t know if I can get all the way to EL5, but I’ll give it a shot. First, we gotta start with blockchain vs banking.

Banking: Imagine a toy bank that keeps track of toy boxes. You have a toy box with 10 toys and I have a toy box with 5 toys. If I give you a toy, the bank subtracts one from my box and adds one to your box. However, they don’t know WHICH toy was moved, just that 1 of them moved. They only keep track of how many toys went in and out of each toy box.

Blockchain: Now imagine no bank exists. We each have our own toy boxes. Instead of tracking how many toys we have, we decide to track the history of each toy. Everybody knows the truck belongs in your box. If Tommy to tries to put the truck in his toy box, all the kids on the playground will correct him. The truck belongs in your toy box! Every single toy has an audit trail of every toy box it’s belonged to, going all the way back to the toy maker. The contents of every toy box are public, but the owner of the box is anonymous. So while the kids know the truck belongs in that box, they don’t know who owns the box. If you’ve got the keys to the box, you can move the truck and then tell everybody it has moved. The boxes are wallets, the toys are crypto, and the audit trail is the crypto ledger.

That covers Bitcoin, but how is ETH different?

Toys on the ETH ledger have an additional feature called Smart Contracts. Think of these as agreements between kids they can’t back out of. You tell Tommy that if he eats a bug, you’ll give him the truck and all the kids on the playground heard it. When Tommy eats the bug, everybody immediately knows the truck now belongs in a different toy box. Somebody has to go move that truck! The ETH ledger has a machine built into it to execute these contracts. So as everybody confirms that Tommy ate the bug and the truck needs to be moved from one toy box to another, the machine goes over to the boxes and moves it without you or Tommy intervening. The machine, however, consumes “GAS” to do this. ETH is literally the gas that powers this machine.

Edit: After reading through this, I realized I didn’t finish the last bit. The machine is called the EVM (ETH Virtual Machine) and is really just code that’s executed by miners. So, physically, the miners are executing the contracts and they get rewarded the GAS fees for doing so.