What is Ethereum?
If you want to learn about Ethereum, how it works, and what are its uses, this article could be extremely helpful in understanding the concepts without getting into the technical abyss.
What is Ethereum?
Ethereum is commonly confused as a cryptocurrency, but it is not. It is a programmable blockchain network that runs the smart contract. Ethereum was created by Vitalik Buterin to enable innovation in three major areas:
- Currency issuance – through Ether (ETH), native cryptocurrency, or coin for Ethereum
- Decentralized autonomous organizations (DAOs) – gives autonomy to users, and helps in democratic decision making
- Smart contracts – allows development and deployment of contracts
Want to know more about smart contracts click here
In Buterin’s words, “Ethereum is a decentralized platform that runs smart contracts.”
Ether (ETH), the coin for Ethereum, became the second most valuable cryptocurrency in terms of market cap that is estimated at $262,432,066,143 USD (as 0f 19th April 2021). Ethereum’s blockchain network is the most powerful because it has built-in programmability. This means that developers can use the platform to develop decentralized applications (dApps) – applications based on blockchain or peer-to-peer networks of computers instead of a single computer.
1 Ether = $2,271.40 (as 0f 19th April 2021)
Source: Coinmarketcap
Learn more >> What is Blockchain? And How it works?
Key Features:
- Security: It is not possible to tamper or add fraudulent transactions to the blockchain network.
- Community support: Ethereum has gained a lot of attention from the public across the globe.
- Corporate friendly structure: Many corporate giants have shown their support to Ethereum and have tested and created different applications.
- Asset issuance: It can help in creating new assets on a blockchain such as virtual shares, digital currency, etc.
- Fast: Transactions are processed much faster, merely within a few seconds.
- Uncensored: Open-source network allows users to have access to every transaction.
- Decentralized: There is no central authority or intermediary involved, as it uses a consensus mechanism to verify transactions.
- Reliable: It was created using blockchain technology that prevents fraud, downtime, and third-party interference.
- Programmable: Developers can use it to make decentralized applications such as games, financial services, smart contracts, etc.
How does it Work?
Ether (ETH) is the native cryptocurrency of Ethereum, but the two are often confused. When people are usually talking about Ethereum, they are actually referring to Ether (ETH). Blockchain technology has become synonymous with its digital coin.
If someone wants to do a transaction on the blockchain system, they need some Ether. Ether is often referred to as “gas” because it is used to fuel the Ethereum system. To get the job done on the system, a certain amount of ‘gas’ is required. The greater the task, the more gas you need.
What is Ethereum Mining?
Both Bitcoin and Ether are created by a process called ‘mining’. When a transaction occurs, miners use computational power to solve a mathematical algorithm to confirm a transaction as legit. The process is like gold mining, but instead of digging in the ground miners are verifying transactions on the blockchain.
The block’s data is run by miners using a hash function that returns as a combination of long and complicated numbers or letters. The miner who can match hash with a current transaction is awarded Ether. The block is then shared on the network to validate each node, update the record, and store it in the ledger.
This process is called ‘proof-of-work and is created to prevent double-spending and hacking. Although miners are trying to move away from ‘proof-of-work’ to ‘proof of stake’. In this process, token owners will secure the network instead of miners and the current algorithm.
Where to Buy Ethereum?
Ether can be purchased from three sources:
- Brokerages are a coin exchange that buys and sells Ether for a fee. You can buy Ether using fiat currency (EUR, USD, GBP, etc.), or credit/debit card, or with a direct bank transfer.
- Trading platforms are another major source where buyers and sellers are connected through a middleman. It used to trade one cryptocurrency for another, for example, buying Ether with Bitcoin, or selling Steller for Ripple.
- Peer-to-peer platforms help buyers and sellers contact each other directly to negotiate prices. There is no middleman involved, so you are not required to pay any fees. But this option is riskier as you are trading with someone you do not know.
The Future
There are many tasks that we do in our everyday life such as buying a car, renting an apartment, or obtaining a driving license, etc. All these tasks involve trusting an intermediary or authority with our money and personal details. With Ethereum this issue is resolved, now you can have control of your activities, money, and information.
Smart contracts and dApps have the power to automize transactions in a secure and reliable environment. Also, it gives autonomy to the users and gives access to transactions in real-time to everyone in order to prevent tampering and hacking.
Conclusion: Is Ethereum Worth the Investment?
Given the work that has been done to create Ethereum, it is safe to say that it has the potential to change the world of technology. Ethereum can be anything you want it to be, from trading Ether to building a new dApp, the possibilities are endless. However, cryptocurrencies, in general, are highly volatile, so it is recommended to exercise due diligence.
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