Ethereum: all about the second most popular cryptocurrency

It has always been said that Bitcoin is the future of money, but what about Ethereum? For those who are very familiar with cryptocurrency, it is quite normal to ask this question, given that Ethereum always appears next to Bitcoin during exchanges and in the news. However, it should be noted that Ethereum does not compete directly with Bitcoin. In fact, the latter has different purposes, features, and even technology .

Ethereum: what is it?

Ethereum, which is an open source platform, uses blockchain technology . Indeed, it is a complete ecosystem where anyone can create and run decentralized digital applications, smart contracts and even own cryptocurrencies.

In other words, Ethereum allows users to make transactions directly with each other to buy, sell and trade goods and services without a middleman. Thus, users can bypass banks to transfer money and also avoid having to hire a lawyer to draft a sales contract. In fact, everything is accessible and readable by everyone , so it’s easy to avoid getting ripped off.

A little story

Ethereum is currently one of the oldest cryptocurrencies on the market. The latter was founded by a programmer called Vitalik Buterin , a 19-year-old Russian-Canadian. In fact, he created Ethereum in order to address Bitcoin’s shortcomings .

The Founder Released Ethereum White Paper in 2013, detailing smart contracts to enable the development of decentralized digital applications. In fact, Buterin intended to unify them. For him, unifying the way dapps (decentralized applications) work and interact was the only way to adoption. Ethereum 1.0 was born.

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Think of it like Apple’s App Store: a space for tens of thousands of different apps, all following the same set of rules. The latter is hard-coded into the network and is enforced autonomously, with developers able to use their own rules within Dapps.

Of course, building such a network is not easy. So Buterin and his co-founders (Jeffrey Wilcke, Mihai Alisie, Gavin Wood, Anthony Di Iorio, Charles Hoskinson, and Amir Chetrit) staged a token pre-sale to raise $ 20 million, funding Ethereum’s present and future developments.

The group also set up the Ethereum Foundation in Switzerland, with the mission of maintaining and developing the network. Shortly after, Buterin announced that the foundation would operate as a non-profit organization. This caused the departure of some co-founders.

The DAO

Over time, developers came to Ethereum with their own decentralized ideas. In 2016, these users founded The DAO , a democratic group that voted for changes and proposals to the network. However, Ethereum suffered the biggest setback in its history that year. In fact, hackers discovered the vulnerability in the Ethereum blockchain hence the total collapse of the project.

This sparked massive debate. Indeed, this crisis has drifted to the point that the original Ethereum blockchain split in two . In this context, the original network is known as Ethereum Classic , while current Ethereum is a new branch of the original blockchain created by hard fork .

The evolution of Ethereum

In 2017 and 2018, most of the cryptocurrencies launched in this period were created in the Ethereum blockchain. Therefore, he was able to gain worldwide notoriety. Additionally, many large companies have started to think about how they could take advantage of Ethereum.

How does Ethereum work?

Like Bitcoin, the Ethereum network exists on thousands of computers around the world. In other words, Ethereum operates through a global network of computers that work together like a supercomputer. In fact, the network collects and executes smart contracts as well as applications which are, in theory, independent of any interference or censorship from third parties because the blockchain is resistant to tampering.

Smart contracts are programmed and self-executing, which significantly reduces the risk of fraud. It’s like an automaton or vending machine that executes the terms of the contract digitally. Once certain conditions are met, such as the transfer of a payment for example, then the goods are sent or made accessible to the buyer.

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Ethereum Virtual Machine (EVM)

Ethereum is essentially a single decentralized system that runs a computer called the Ethereum Virtual Machine (EVM). Each node contains a copy of this computer, which means that all interactions must be verified so that everyone can update their copy.

Network interactions are also considered “transactions”. These are stored in blocks on the Ethereum blockchain. Miners validate these blocks before committing them to the network and serving as transaction history. Note that each block has a unique 64-digit code .

What is Ether?

Running the codes to power dapps is expensive and consumes a lot of power. That’s why Ethereum created Ether, its own cryptocurrency, to trick programmers into running the protocol on their computers. Indeed, these professionals are paid in virtual Ether coins for their contribution to resources and to writing quality applications so that the network remains healthy.

Just as Bitcoin miners are paid to maintain the blockchain by solving computational issues that allow them to add transactions to the public ledger, developers also use Ether to create and launch a smart contract on the Ethereum platform. In this context, they receive 3 ethers for each new block they add to the ledger. Ether is also intended for users who want to access smart contracts on the ethereum blockchain.

The differences between Bitcoins and Ethereum

While Bitcoin is the most common cryptocurrency, the Ethereum community has ambitions to expand the project. In fact, Bitcoin is struggling to expand, leading some to believe that it is more of a store of value, similar to gold.

On the other hand, Ethereum intends to overtake our current internet infrastructure. Indeed, the latter plans to automate many processes that still require intermediaries. This includes using an app store or working with fund managers. Therefore, Ethereum is used more as a means of interacting with the network than of transferring money, although it can do that as well.

Developers can leverage Ethereum, creating a unique, Ether-enabled token for each Dapp. While the process isn’t perfect, it does mean that all Ethereum-based tokens are technically interoperable. On the other hand, the Bitcoin network is just for Bitcoin.

What are the advantages of Ethereum?

Besides decentralization and anonymity, Ethereum has various other advantages as well. For example, if someone tweets something offensive, Twitter may choose to remove and punish that user. However, on an Ethereum-based social media platform, this can only happen if the community votes to do so. This way, users with different points of view can discuss as they see fit, and people can decide what should and shouldn’t be said.

Avoid intermediaries

Smart contracts automate many steps taken by central authorities on the traditional web. This considerably reduces falsifications. Indeed, there will be no third-party intermediaries such as lawyers who draft and interpret contracts, banks which mediate financial transactions or third-party web hosting services.

Easy to acquire

Other than that, it is easy to acquire Ether cryptocurrency. Indeed, companies like PayPal and its subsidiary Venmo support the purchase of crypto with fiat currency directly in the application. Considering the millions of customers on each platform, they are compelled to get involved as soon as possible.

Constant innovation

A large community of Ethereum developers are constantly looking for new ways to improve the network and develop new applications.

Conclusion

While this appears to be the perfect platform, Ethereum has a few key issues that need to be addressed. The first drawback is scalability . In fact, Buterin imagined Ethereum as it is on the web today, with millions of users interacting at once. However, due to the PoW consensus algorithm, such interaction is limited by block validation times. The second drawback is accessibility . Indeed, the interaction is difficult for those who do not know the technology.

 


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