In order to understand what is Ethereum , it is better to learn what its core properties are. But first let’s be clear about something, if bitcoin is the gold of cryptocurrencies, ethereum will be it’s silver undoubtedly. Now are you ready for bigbangminer version of ethereum?
Ethereum is a decentralized system that means it is not control by anyone or any authority. A majority of online services, businesses and governments are based on a centralized system. This system has been used for a long time while it is wrong but in this situation that parties don’t trust each other it is still necessary. A centralized system means it is under control of one person or one entity but it is extremely vulnerable to be hacked. As most social media and online services at least want some of our personal data which is stored in their services, so it can be easily stolen.
Ethereum in a nutshell
Ethereum is a decentralized system, and it is fully autonomous and it has no central point of control, this system is being run by all the users around the world, so it won’t be able to go offline. In additional, user’s information like personal information is stored in their own computers and is on their control without having to obey by the rules imposed by hosting services like Facebook.
We have to understand the differences between Bitcoin and Ethereum, bitcoin is the first cryptocurrency system, built on a distributed public ledger called Blockchain. Bitcoin and Ethereum have entirely different goals. Ethereum took this technology and expanded it. It is a network with its own internet, coding language, payment system. Ethereum lets its users to create decentralized system they want.
New applications in Ethereum can be entirely different ideas or copy of existing services. This system cuts out the middle man and all the expenses associated with the third party. For example, if you like or share a music on facebook, the profit of that goes to the Facebook then to the artists but in Ethereum version, both artist and audience receive awards from that communication. Finally, Ethereum will remove all sorts of payments to third parties.
In short, Ethereum is a public, open-source, Blockchain-based distributed software platform that allows developers to build and deploy decentralized applications.
Ethereum utilizes a peer-to-peer approach. Every interaction between its users is supported by the users who take part in it and there is no authority to control over it. The entire Ethereum system is supported by a world system of ‘nodes.’ Nodes are volunteers who connect to this system by their computers and force network to be honest by the rules of the Ethereum’s blockchain system.
The rules are dictated by Smart Contracts. These contracts are design to automatically perform transactions and other actions between two or more users that you don’t trust necessarily. Smart contract is the future and surely replace the current agreements and law because it provides security, reduce transaction fees and build trust between two parties that don’t even know each other.
Who created Ethereum
In 2013, Vitalik Buterin published a white paper, he sent it out to a few of his friends and they did so. After a while 30 people came to him to discuss about it. People pointing out critical mistakes and it never happened. The project announced in 2014, with the core team consisting of Vitalik Buterin, Mihai Alisie, Anthony Di Iorio, Charles Hoskinson, Joe Lubin and Gavin Wood. Buterin talked about Ethereum on stage of bitcoin conference and after that they start to sell Ether, native token of the ethereum in order to fund the development.
Is Ethereum a cryptocurrency?
Ethereum is a software platform that act as a decentralized Internet. A system like this in order to run an application needs currency to be paid. We call this currency Ether. Ether is a digital bearer asset that doesn’t need any third party for its payments. If a user wants to change something in the apps, they have to pay transaction fee in order to process the change. The amount of required Ether is calculated on how much your change needs computing power and how long it takes.
Is Ethereum similar to Bitcoin?
If it is about cryptocurrency Bitcoin and Ethereum are the same but the reality is that they both have different goals. While bitcoin has established as a stable and most successful cryptocurrency to date, Ethereum is recognized as a component of its smart contract applications. Even if we compare the two project’s aspects they are vastly different. For example, Bitcoin has a limited amount of 21 Million bitcoin that can ever be created, but the amount of Ether is endless. Bitcoin average block mining is 10 minutes but the average of Ether being created is 12 seconds which means it is much quicker.
Another difference is that as the difficulty of bitcoin network is rising every day, bitcoin mining is being complex and requires a lot of computing power and much electricity and the only way to get profits from it is industrial-scale mining farms. On the other hand, Ethereum’s proof-of-work algorithm encourages decentralized mining by individuals.
How Ethereum works?
Ethereum is based on bitcoin’s protocol but its blockchain design is different, it can support applications beyond money transferring. Ethereum’s blockchain does a lot more than bitcoin’s bockchain. It can store all transactions and also all contracts. Essentially, the Ethereum Blockchain can be described as a transaction-based state machine. When it comes to computer science, a state machine is defined as something capable of reading a series of inputs and transitioning to a new state based on those inputs. When transactions are executed, the machine transitions into another state.
Every block of Ethereum is consist of millions of transactions and chained together with its previous blocks. But before adding transactions to ledger, it needs to be validated by a process called mining. Ethereum mining process is like Bitcoin that needs powerful computer which has to calculate and compute mathematical puzzle to solve a block. We call it “proof of work”. A lot of miners all over the world try to guess the answer and get the reward. The reward is Ether token which is generated by proving a block. Miners not only confirm and validate transactions but also generate new token of the network.