Ethereum is a peer-to-peer network of virtual machines that any developer can use to run distributed applications (Dapps). These computer programs could be anything, but the network is optimized to carry out rules that mechanically execute when certain conditions are met, like a contract. Ethereum uses its own decentralized public blockchain to cryptographically store, execute, and protect these contracts.
Each computer on their network downloads a small virtual machine to sync with the Ethereum blockchain and remains available to execute contracts. This distributed network of computers conveniently provides the security, reliability, and computing power necessary for carrying out designed arrangements. Of course, this consensus network isn’t free or private, so developers only use it for consensus on outcomes and when their data can be public. The Ethereum blockchain is publicly searchable here.
While most examples of these contracts depict various human interactions, the technology is currently preferred for industrial use-cases like strict business logic between organizations or machine-to-machine communication. For instance, some energy companies are researching ways to create a smarter grid, where houses can automatically buy and sell power. Another example is the International Business Machines Corp. (IBM)/Samsung Group “Internet of Things” collaboration. However, they used a fork of the Ethereum’s code – for the sake of privacy – to run how these “things” communicate with each other.
The financial industry loves the promise of controllable blockchain, but not the lack of privacy. So, consulting companies like Eris have forked Ethereum to sell it, bundled with their consulting services, to help banks construct their own private networks.
Ethereum is certainly a novel implementation of virtual machines with amazing possibilities. However, we don’t yet know how large the unforked Ethereum network will grow nor how scalable this network could be.