Imagine a world where you can perform transactions(deal with?) with no mediators or middlemen in between. Welcome to the world of Ethereum, a platform based on blockchain with decentralization as the core feature. Ethereum facilitates smart contract functionality.
The following are the core components of Ethereum:
Blockchain: The blockchain is a distributed database spread across multiple nodes(computing devices). The blockchain maintains a public ledger consisting the records of all the transactions. Since the records are public anyone can view the transactions.
Contract: The contract is a primary feature of Ethereum. A contract can be used for multiple purposes. For example a contract can be written to sell a commodity or a contract can be written representing an exchange between two different commodities. To extend the idea, a contract can be created for representing shares of a particular individual in a company. A number of other possibilities are possible. A contract in Ethereum is written in Solidity programming language.
Decentralized Computing: Decentralized computing is harnessing the computing power from various interconnected computing devices such as desktops, workstations, smartphones etc. rather than from a single computer. In Ethereum context, this can be understood as Ethereum using multiple interconnected computing devices for transactions rather than a centralized server computer. An example of decentralized computing is the popular peer-to-peer network, BitTorrent.
Decentralized Application (DApp): Decentralized applications or DApps are computer applications that operate over a blockchain (or have their own blockchain). Ethereum's framework design enables various DApps to work on top of it. In Ethereum's purview, DApp can be anything that enables transactions over Ethereum framework.
Ether: An Ether is a token that can be used for transactions on Ethereum. Every time a contract is executed, Ethereum consumes tokens which is termed as 'gas' to run the computations. Ether can be used for executing contracts or manage transactions over Ethereum. An Ether(ETH) is mined from the Ethereum blockchain or can be bought in exchange with currencies such as INR, USD and many other.
Account: An account in Ethereum is a password protected system to control contracts as well as to hold ethers. For example, a contract is sent from account A to account B. Technically speaking, an account stores private/public keys.
Wallet: A wallet in Ethereum is an application that can be used to store accounts, Ethers and contracts. A wallet is a smart contract and is owned by one or multiple accounts.
DAO: A DAO or Decentralized Autonomous Organization can operate autonomously over a blockchain. Ethereum supports DAOs. For example, a DAO can be implement for self driving cars involving transactions(using contracts) at each stage such as highway toll, parking lot fees, verification of identity at restricted areas etc.