Even though Ethereum is often times linked to Bitcoin, blockchain technology features a lot more applications that are spread beyond digital money. How many? Just think of it this way: there are a few hundred applications that rely on blockchain technology as we speak. And Bitcoin is only one of them.
Up until not a very long time ago, in order to build a blockchain application, one was required to show complex mathematics, coding, and even cryptography skills. Things stand very differently today. Electronic voting and property assets that can be recorded digitally are just a few of the apps being created and spread at impressively fast speeds – faster that anyone would have imagined possible a few years ago. This means developers can take advantage of the wide array of complex tools and create completely decentralized apps. Ethereum is definitely making the wheels spin in this direction.
What Is Ethereum?
Shortly put, Ethereum is an open software platform that relies on blockchain technology to allow developers to build and use apps that are not centralized. It is also a ledger technology featuring the unique smart contract functionality.
While it might appear that Ethereum is similar to Bitcoin, this is not the entirely the case. The two do have some similarities, including the fact that they are both blockchain networks that are distributed publicly. However, they are fundamentally distinct in terms of scope and capability. Bitcoin is known to provide a very specific application of blockchain technology – the peer-to-peer electronic cash system that allows us to make Bitcoin payments online. Its blockchain therefore tracks ownership of bitcoins, whereas the Ethereum blockchain runs the code of decentralized applications.
What Is Ether?
Ethereum miners struggle to earn Ether, which is a token which provides fuel to the network blockchain. It has the ETH ticker and it can also be used to cover transaction fees as well as other services that belong to the network.
Application developers and other network users also receive ETH as incentives and compensation for bringing their contributions to the network. By looking at coin market capitalization, Ether is the second largest cryptocurrency on the planet. There are little over 101 million ETH in circulating supply, with a current market capitalization of $27.65 billion USD. This makes it the most valuable alternative coin in the market.
What Is A Smart Contract?
A smart contract is an application that runs exactly the way it was programmed, with zero risk of downtime, fraudulent activity, censorship, or any type of interferences from third parties. They can also be defined as computer code descriptions that simplify the exchange of money, shares, property, and other valuables. The moment a smart contract runs on the blockchain, it turns into something similar to a computer program that operates itself and executes when certain events occur.
All blockchains can process code, but most of them are strictly limited. Ethereum does not give developers a limited set of operations, but it rather allows them to create the exact operations they want. Imagine thousands of different apps that resemble nothing we have experienced so far. That’s the power of Ethereum.
Who Created Ethereum?
The creator of Ethereum is a Canadian programmer born in Russia. Vitalik Buterin was only 19 in 2013, when he published his idea of a decentralized mining and software development network under a single roof. His revolutionary idea was turned into Ethereum two years later. Before he came up with his brilliant idea, Buterin won third place at the International Olympiad in Informatics. So his genuine passion for mathematics and informatics was not hard to guess. He had also been writing articles for websites revolving around the Bitcoin a couple of years prior to proposing the idea for Ethereum. In 2014, he was awarded a scholarship worth $100,000 from the Thiel Fellowship, but he never used it, as he dropped out of university and chose to instead focus on his crypto projects. He later created the Ethereum Foundation Switzerland together with Joseph Lubin, an entrepreneur from Canada. Their project kicked off in August 2014, and ether was originally sold to raise the money needed for funding the project. 2015 was the official launch year for Ethereum. When it was first introduced to the public, Ether was trading at $0.05 USD. In the first quarter of 2017, Ether was worth less than $10. One year later today, at the time this piece was written, its value is of $274. But it even traded at $1,400 during a spike last year. Nevertheless, high volatility triggered a significant drop in the market value, and the price fluctuations brought Ether down to less than $400.
How Can Ethers Be Generated?
Ethereum mining is a complex process that also leads to the generation of Ethers. However, this is not the unique purpose of Ethereum mining. It is also mandatory for the inspection and proliferation of blocks on the blockchain database. Every data block is embedded with data on each transaction taking place on the network. Whenever someone initiates a transaction, the miner will check it by solving a cryptographic puzzle, as well as several complex math problems. When the puzzle solving is completed, the transaction is completed, which automatically adds it to the database so it is chronologically linked to other blocks.
Ethash is the algorithm that enables Ethereum miners to receive their rewards, based on their proof of work. They receive freshly minted coins, and a payment is valued at 3 ETH, plus the transaction fees. It only takes around 15 seconds to successfully authenticate a transaction. This is due to the GHOST protocol used by Ethereum. Users mine Ethers with the help of Graphic Processing Units with setups similar to those of graphic cards. These units have higher hash rates, which is the equivalent of faster block verification speeds. This makes mining a lot more lucrative.
Mining Ethers is a time consuming activity that eats up a lot of computational resources and processing power. This is the main reason why lots of miners embrace cloud mining or join other miners in pools and share the revenue among all active participants.
Nevertheless, it would seem that the Ethereum platform may not need miners for much longer, since the main plan is to replace the proof of work algorithm with a proof of stake one. The use of this algorithm would automatically mean that the platform would be secured by token holders that would be staking their holdings. This would lead to a distributed consensus system which would not be as time-, energy-, and resource-consuming.
Where Can You Buy/Sell Ethereum?
Any cryptocurrency exchange that supports ETH can be used to buy or sell ETH. You can buy or sell Ether against Bitcoins and alt-coins such as BCH or XRP. You can also trade it with fiat currencies such as the USD, EUR and others. If you wish to buy Ethers with the help of fiat currencies, you will need a credit or a debit card and a bank transfer to process the transaction. When the purchase has completed, the coins can be stored using an offline wallet, or the cloud. Wallets are similar to bank accounts used for cryptocoins. Users are allowed to store their funds on an address that will be generated by the exchange. They can also set up their wallets on different platforms. Some of the most trusted wallets for storing ETH are the native platform wallet, the Ethereum wallet, along with wallets on MyCrypto, Blockchain.info, My Ether Wallet, and others.
What Is Ethereum Good For?
Like mentioned in the beginning of this article, Ethereum allows developers to build and use decentralized applications. Also referred to as Dapp on short, decentralized apps serve individual purposes to different users. They rely on code running on a blockchain network. This means no one and nothing can control them.
Moreover, a centralized service has the potential of being decentralized with the help of Ethereum. Think in terms of intermediary services in a variety of industries, including bank loans or voting systems.
Developers can also build Decentralized Autonomous Organizations with the help of Ethereum. These are fully autonomous organizations that do not have a leader, but they are rather run by code on smart contracts found on the blockchain. The code replaces the rigid rules as well as the structure of traditional organizations. People and centralized management are no longer necessary. DAOs are owned by anyone who buys tokens. These give people voting rights, instead of equity shares and ownership.
Ethereum is turning into a de factor leader as the industry keeps investigating blockchain platforms and helps it reach its maturity. ETH is slowly, but surely changing the way we use the Internet. We are running towards the Internet of value, leaving the Internet of information behind. We are getting ready to exchange value on the spot, with zero intermediaries. Stay tuned and find out what are the unimagined possibilities that await.