Saturday, June 25, 2022
No menu items!

What is Ethereum?

Must Read

The cryptocurrency market is fast rising, with whopping increments and returns within the shortest period. It’s the currency of the future, so you may be making some good investment decisions by buying some. There are more than 18,000 cryptocurrencies in circulation, but you’ve probably heard a lot about Ethereum. It’s among the top digital assets, second to Bitcoin. And you can use it to pay your bills or store it as an investment.

Ethereum is fascinating because it doesn’t exist just for digital value. It employs a blockchain that allows the interaction of users through the use of Ether, the cryptocurrency associated with Ethereum. Programmers commonly use the open-source blockchain, but many people invest in the currency because of its high value. The blockchain is so robust that other cryptocurrencies use its platform for executing smart contracts. A smart contract is a decentralized system that automatically manages, controls, verifies, and documents application codes.

As such, you can engage in financial transactions without a third party, like a bank or broker. This gives you and other users transparent and unmitigated access to the network. Ethereum and Bitcoin have been growing side by side since 2015. Vitalik Buterin created the former cryptocurrency after he realized that Bitcoin was designed to do only one thing: send money to anyone on the globe through the internet. It was the first decentralized finance coin.

And although Bitcoin certainly does its work well, Vitalik realized that it was designed only for that function. Hence the birth of Ethereum.

How does Ethereum work?

Ethereum was developed on the principles of decentralized finance. It employs an open-source concept, a platform that provides developers with the tools needed to build new cryptocurrencies. The blockchain is relevant because it uses the Solidity scripting language and Ethereum Virtual Machine on an open and programmable network.

Decentralized finance or DeFi is another use case for Ethereum. It works without a central authority, allowing developers to create several platforms for investing, lending, and trading cryptocurrencies. That’s not all Ethereum works for. But to understand the network, you need to get familiar with the concept of blockchains. This is a decentralized database that nodes of a computer network share.

It exists to store information digitally, and it’s valuable because it promises security and fast transactions. The system uses blocks for data, which have a storage capacity that can be exceeded. It closes and is added to the just-completed block when that happens. The data is sent to an irreversible timeline, which means transaction histories are set in stone. The timeline of the completed block is also documented.

Now that you know what a blockchain is, you need to learn how it works next. You already know data blocks are linked to the network when they get full.

This means nothing that has been recorded can be erased, leaving room for transparency. Banking and finance, healthcare, and property records are all areas where the Ethereum blockchain is handy. It also facilitates the exchange of Non-Fungible Tokens or NFTs.

What’s the difference between Ethereum and Ether?
Ethereum is a decentralized and open-source blockchain that offers smart contract functionality. On the other hand, Ether is the cryptocurrency that supports the platform or developers’ fee to access some services.

It’s called a gas fee, and it’s the price paid for using the platform. Thanks to the many use cases for Ethereum, the value of Ether rises every year. And, of course, the more significant your project on the blockchain is, the more you’ll pay.

That’s one of the ways the Ethereum blockchain continues to increase in value, but it’s also one of the banes of the project. Ethereum 2.0 promises to correct this discrepancy, alongside the problem with its low transfer speed per second.

Ether is the digital currency that users can invest, lend, and transact. And the platform that ensures the possibility of these processes is Ethereum.

The blockchain is also helpful for running decentralized applications and storing data. And since there’s no singular authority overseeing the system, you have more control over your data.

Ether is required for the execution of smart contracts. Through agreements finalized on the Ethereum blockchain, users can exchange Ether within minutes. No intermediary will oversee this transaction, but it won’t be marked as completed until all aspects of the contract have been executed.

In a nutshell, Ether is the digital asset used to finance any work executed on the Ethereum blockchain. And as the Ethereum network grows in value, the monetary worth of the coin also rises.

Who created Ethereum?

Eight people created Ethereum, even though Vitalik Buterin may be the face of the cryptocurrency. This is because he wrote the first Ethereum whitepaper. The team was created in Switzerland on June 7, 2015.

You’re probably wondering why eight people collaborated on a single project. Well, they had specific roles geared towards the development of Ethereum. Buterin was to write the whitepaper, and he did a fantastic job at it.

The Russian-Canadian programmer and writer and his team of eight managed to raise $18.3 million, justifying their unusually large number. Ethereum would not just be a store of value but would also provide advanced utility to developers.

The blockchain can be used to create applications that improve the process of buying, selling, and using digital assets. Some of the cryptocurrency apps on your phone were developed on the Ethereum blockchain. And that’s just a fraction of what it is capable of.

Through an intelligent contract, processes like borrowing and lending cryptocurrencies are safer and more feasible. This advanced tech replaces financial intermediaries through algorithms and protocols, giving you the ultimate experience. Essentially, the network won’t execute the contract until all stipulated conditions are met.

Cryptocurrency facilitates fast transactions, and the quicker a blockchain executes its contracts, the more efficient it is. Ethereum has a 34 transfer-per-second speed, which is fast for a first-gen digital coin.

However, it’s still slower than the latest digital assets. There’ll be an Ethereum 2.0 project, but Buterin will be working on it alone. It promises to be faster and more efficient, a better version.

Gavin Wood is another notable face of Ethereum. He’s a computer scientist who also contributed to the development of Polkadot and Kusama, two other prominent cryptocurrencies.

Let’s branch out a bit. The initial founders of Ethereum were five people, but three more joined to strengthen the project’s viability. Wood was one of them, and he came aboard the team when he volunteered to develop an implementation of Ethereum in a C++ programming language.

Charles Hoskinson was one of the first five co-founders. He’s a mathematician who realized digital assets could be more profitable and early hopped on the cryptocurrency trend.

Amir Chetrit is another co-founder, but a pretty mysterious one. He crossed from a crypto project called Colored Coins and made it big in Ethereum. Anthony Di Lorio and Joseph Lublin are other founders, and so is Jeffery Wilcke, the computer programmer who wrote the GETH language.

The Ethereum blockchain is now worth $27 billion, even though the eight-team members no longer identify as one. They’re still working in crypto spaces but on different projects.

Ethereum and Bitcoin – What’s the difference?

It’s hard to mention Ethereum without referring to Bitcoin or vice versa. They’re like twins in the crypto sphere, a pair of digital assets that grow simultaneously.

Bitcoin was created before Ethereum, back in 2009. The former is like digital gold because of its relatively scarce nature. However, it can be divided into fractions – you can own less than one unit. On the other hand, Ethereum holds a different value, serving as a platform for developing new decentralized finance apps.

In a nutshell, Bitcoin is a valuable digital currency for investing and transacting, while Ethereum exists to do so much more. There are several other differences between the two cryptocurrencies, but we can start with data about their market cap and trading volume.

They’re apparent competitors, even though their processes rise simultaneously. However, the reality is they exist to complement each other; perhaps this is why their value rose together.

Now, let’s backtrack to the history of the first cryptocurrency. Bitcoin was established for one reason – to do away with intermediaries for financial exchanges. Nakomoto and his team emphasized rules like how transactions are executed, their duration, the supply limit, and many more.

It was to function on a decentralized ledger technology, and it provided many solutions upon conception. The Bitcoin blockchain is a transparent network with no central authority, making the data available to all and sundry.

However, it would be impossible to get away with erasing or tampering with the data despite its easy access. This is thanks to hashes, which can be used to trace every piece of information that has passed through the system.

On the other hand, Ethereum is an open-source, decentralized network used to buy and sell tokens and develop decentralized applications or DApps. It has further utility, thanks to tools like Solidity.

Solidity is an Ethereum protocol that developers use to program smart contracts to function on the blockchain. This makes the use cases for Ethereum broader than that of Bitcoin.

Many of these applications haven’t been brought to life yet. That’s why the world is waiting to see what version 2.0 can do.

Now, despite the apparent similarities between these cryptocurrencies, a notable difference is the time block of the data that’ll join the blockchain. This is the transaction execution time or transfer-per-second speed.

Broken down, it’s the duration it takes to confirm transactions. Bitcoin works within ten minutes, while Ethereum works within fifteen seconds.

Additionally, these cryptocurrencies are different because of their public wallet addresses. These are identifiers for individual wallets used to receive digital currencies. Bitcoin assigns addresses starting with a 1 or bc1, while Ethereum uses 0x.

Bitcoin and Ethereum use proof-of-work consensus to run the network. Still, Ethereum is transitioning to a proof-of-stake algorithm, which is a protocol for confirming transactions and creating new blocks on the network.

The proof-of-work protocol is a cool one that employs users who can solve mathematical problems and complex equations to prevent the system from becoming penetrable.

On the other hand, the proof-of-stake is a system where approval for transactions can be done only by the miner with the highest number of coins. It relies on the currency’s value rather than its computational power. Therefore, it reduces electricity consumption by a significant percentage.

Now, Ethereum has moved to proof-of-stake, a system that replaces computational power with staking. The energy-consuming plague will now be replaced by validators or people with high amounts of Ether. Ethereum utilizes executable codes on its platform, while Bitcoin is only valid for record-keeping.

Ethereum is one of the more controversial digital currencies, but it shouldn’t be pitted against Bitcoin, considering how the Ethereum blockchain supports the Bitcoin network.

Bitcoin is merely a store of value, but Ethereum is a blockchain that offers developers and companies the opportunity to develop DApps without paying too much. Essentially, Ethereum is a digital universe, while Bitcoin is digital gold. The latter cryptocurrency is limited to payments and scarcity, but it shares a layer of blockchain technology with Ethereum.

Bitcoin may hold more monetary value, but ETH is leaving Bitcoin behind in technology. It has adopted a new system where buyers and sellers complete transactions based on codes.

Let’s sum things up.

First, Bitcoin is a cryptocurrency, while Ethereum is a platform. The transactions are faster on an Ethereum blockchain too.

Bitcoin was developed to reduce the stress of dealing with banks and other financial institutions, and it does the job efficiently. But it’s limited – you cannot build apps on its blockchain, sell NFTs, and other processes that are encouraged on the Ethereum network.

Ethereum has a market cap of $240 billion, while Bitcoin is valued at around $550 billion. But despite this, you can only hold Bitcoin on an ETH platform, but you can’t hold Ether on the Bitcoin blockchain.

Previous articleWhat Are Wrapped Tokens?
Next articleWhat is Terra?
- Advertisement -spot_img
- Advertisement -spot_img
Latest News

Immigrating to New Zealand for software developers

In December 2021 the New Zealand Government approved a Class Exception for certain tech workers to come to New Zealand as critical workers. This means that eligible companies may bring eligible people to New Zealand as "Other Critical Workers" holding a Critical Purpose Visitor Visa, provided they meet the criteria and are nominated by the industry via the process outlined here. The Class Exception allows for 600 workers who, if eligible, may bring partners and children with them. All applications are also subject to general immigration requirements such as character and health criteria.
- Advertisement -spot_img

More Articles Like This

- Advertisement -spot_img