In case you haven’t noticed, the world is changing in a big way. If you forgot already, cryptocurrencies are here to remind you. Just when we got used to hearing about bitcoin and all that jazz, we get bombarded with more of them.
A reasonably new crypto coin that you might have heard about is called Ethereum. In fact, if you pay any attention at all to the blockchain world, then you should’ve already heard about it.
Ethereum is currently the third largest of all cryptocurrencies. But it does way more than just being a virtual coin. This is why it became huge in a short amount of time – it’s a bit of a revolutionary in the crypto world.
What Is Ethereum anyway?
Like bitcoin, etherum is also a blockchain instrument that conducts transactions on its own platform like the other crypto coins. However, the actual currency used in the Ethereum blockchain is called ‘ether.’ But many people refer to it as Ethereum.
The ethereum platform is an open-sourced one that also uses blockchain technology to develop and process decentralized digital applications, which is also called ‘dapps.’ These apps let users create agreements and makes transactions directly with each other – eliminating the middle man like banks, financial institutions, and even lawyers.
Ethereum functions as a global computer network that is combined to work as a supercomputer. The network itself is what creates and runs these smart contracts. These applications are entirely independent of interference from a third party because blockchains are resistant to hacking or tampering.
Smart contracts function precisely as they were designed, which drastically reduces any risk of fraud or corruption, and they can execute independently like a digital vending machine. Whenever all predetermined conditions have been met and verified, such as agreements and transfers of payments, only then will merchandise be made accessible to the buyer.
Difference between Ethereum and the Internet
Many people make the mistake of comparing blockchain transactions to simple online transactions – no two things could be any more different.
With an ethereum transaction, all agreements and digital information reside in blockchain ledgers. Data recorded in the blockchain ledgers are safe and secure and virtually impossible to compromise with the network’s consent.
Conversely, data from online transactions typically reside on a server that is at the mercy of whoever runs the server and whatever security they installed there – if any. As we all know, hackers are forever compromising servers of every kind on the Internet. It’s been a perpetual problem for the Web, and frankly, it’s a reason that many people are attracted to blockchain platforms today.
What Is Ether?
To run computers capable of executing the code to power dapps requires a lot of power and is costly. So the developers of ethereum created Ether, which is its native cryptocurrency, to incentivize programmers to use ethereum’s protocol on their computers. Thus, these programmers get compensated in Ether coins to add resources and create quality applications that fuel the network and make it more robust.
In roughly the same manner that those who mine bitcoin are paid to drive bitcoin’s blockchain by solving computational problems, developers use Ether as a means of paying others for using smart contracts on the ethereum platform.
Specifically, there are given three Ether for every new block they supply to the platform’s ledger. Additionally, Ether is also for those wanting to access smart contracts on the ethereum blockchain.
How Does Ethereum Work?
Using blockchain technology, ethereum comprises a set of cryptographic public records that are linked together. These records are pretty much impossible to change because each of them is stamped with unique user data – including the date and time. And any changes would require the approval of all users in the blockchain.
Because of this platform ledger, anyone can make a financial contract or maintain ownership registries, so there is no need for an external record keeper or trust officer. These are known as “trustless” transactions since they remove the need to rely on a third party to complete the transaction. Basically, these contracts are self-fulfilling.
Due to its vast scope and size, ethereum’s platform has struggled with storage and speed. When other crypto platforms carry out roughly hundreds of transactions per second, ethereum can only manage a few transactions per second.
The crypto world has been eagerly awaiting the release of “ethereum 1x,” which is expected to address the platform’s greatest shortcomings.