5,000,000

In order to fully understand what ICOs are all about, we first need to understand what dapps are. Although it is not difficult to build your own blockchain, it is difficult to maintain its continuity. This is why many developers are currently building dapps that are running on top of the Ethereum Network. This has the advantage that they do not have to maintain their own blockchain in order to operate. Dapps are like apps which you currently find in the Apple or Google play store. But dapps are not hosted by one authority, such as Apple or Google, but hosted and shared across all the computers that are part of the Ethereum blockchain.

Dapps are nothing more than the interface of the smartcontract who is connected to the blockchain. The easiest way to understand this is to imagine how traditional websites work. A traditional website uses HTML, CSS, and javascript to create the interface of a webpage (or app). Behind this webpage is a database, on a central server, where all data is available. Take Facebook for example, the page you see with all your personal details is made in HTML. Your data, such as your age, occupation, music, and movie preferences are all in a database. When you open a specific page, the web page must grab your data from that database. This is done through an API (application programming interface). This program communicates between the web page and the database to get the right information on the right page, like this:

Webpage → API → database

A dapp is similar to a traditional website, the interface uses the same technology to make the page (or dapp). However, the big difference is that the dapp does not contact a central database through an API. The smart contract acts like the API. The smart contract communicates between the dapp and the blockchain, like this:

Dapp → smart contract → blockchain

Dapps are essentially decentralized apps who cannot be censored or shut down by one authority.

Each smart contract is executed (calculated) by all computers in the Ethereum blockchain. This means that there is much redundancy (good) but also that it costs a lot of energy (bad). It is therefore costly to carry out these calculations. These costs are directly linked to the calculation that your code performs when you make a transaction through your smart contract. These costs are calculated in the form of gas “fuel”, in this case ethers.

The word gas is completely random, it’s just a label for the costs you have to pay to perform a calculation on the network.

The cost of gas is determined by the market, when you decide to pay more gas for a transaction, the computers in the network will prioritize your transaction. This gives the miners who calculate the transaction, additional revenue.

The entire Ethereum blockchain is a giant mass of computers connected in a peer to peer network. This creates a supercomputer that competes with existing centralized systems. In fact, the entire network can be visualized as a single entity called the ‘Ethereum Virtual Machine’ or EVM in short. All the transactions that have happened and will ever happen in this network are automatically updated and recorded in an open and distributed ledger. So what is the advantage of this?

Before we explain, it is important to know what a ‘smart contract’ is. Smart contracts are a series of instructions, written using the programming language ‘solidity’, which work on the basis of the IFTTT logic aka the IF-THIS-THEN-THAT logic. They can control, for example, the exchange of: money, possessions, communications, documents or anything else that has value.

A smart-contract is basically just computer code that is executed (calculated) by all the computers in the Ethereum network. The Ethereum blockchain gives the code some unique features, such as: unchangeability, distributed, and verifiable state. This unchanging and verifiable state is stored on the blockchain and is accessible by everyone.

The best way to understand how a smartcontract works is by imagining a coffee machine. Each and every step that you take acts like a trigger for the next step to execute itself.

• • I give the coffee machine some money.
• • I push the button corresponding to the coffee i want.
• • the coffee comes out.

The machine delivers the coffee without any human intervention. Now an example of an application that uses a smart contract:

A start-up called Slock.it, has developed a smart contract for renting apartments. When a tenant has paid the bill, arrives on the right date, and identifies himself as the correct person, the door automatically unlocks. A scanner, which is built into the door, verifies these facts on the blockchain and when approved, the door is opened. The blockchain eliminates the need for a trusted intermediary or counterparty. Every transaction that you do through the smart contract will get recorded and updated by the network. What this does is that it keeps everyone involved with the contract accountable for their actions. It takes away human malice by making every action taken visible to the entire network.