With the interest in the digital currency market as a whole continuously growing, other options have emerged to join the most famous of them all, Bitcoin. Inspired by innovation, programmers like Vitalik Buterin have developed their own versions. Why, you may ask? Well, people like Vitalik address the shortcomings of Bitcoin by creating these new cryptocurrencies which aim at providing a superior service.
This is the case of Ethereum, developed by a longtime Bitcoin enthusiast. This platform, with its own currency, Ether, has captured a large market share and caught the attention of multiple institutional investors. In this post, we will delve deep into the world of Ethereum and discuss:
- What is Ethereum?
1.1. The History of Ethereum
- How does the platform work?
- How does it differ from Bitcoin?
1. What is Ethereum?
Ethereum provides developers with the deployment of basically every form of decentralized application. While Bitcoin remains the most popular cryptocurrency, Ethereum’s progressive growth has led many people to speculate that it will soon become the # 1 platform.
The versatility of operation is one of its main differentials. This is because it is possible to find cryptocurrency groups that do not work with their own Blockchain but operate within the Ethereum node network. This way you can determine how many units will be issued and the rate of that issue. In addition to this, users fund application development on top of the Ethereum Blockchain and acquire cryptocurrencies issued in public offerings (ICOs) with Ether.
1.1. The History of Ethereum
Bitcoin, the best known option on the market, was created to be used exclusively as a currency. The idea behind Ethereum’s development is different: to create a system of its own for Blockchain applications – a kind of permanent and public record of operations.
The initial idea was published in 2013 by Russian-Canadian programmer Vitalik Buterin. By the following year, the system started working effectively.
According to Buterin, his idea took shape and got off the ground after he realized that Bitcoin wasn’t working the way he thought was the best way. It is interesting to note that the creator of Ethereum was not exactly a detractor of other currencies, as he himself was the editor of Bitcoin Magazine.
However, according to Vitalik, cryptocurrencies should use a scripting language for its development. As he was unable to reach an agreement with the developer community, he decided to start his own system.
Even as he edited Bitcoin Magazine, Buterin began to brainstorm about a specific platform that could use the payment methods allowed by Bitcoin. The main focus of this new structure would be to exchange more than just digital currencies.
The idea was a success as the developer and his collaborators managed to raise about $ 18 million in the crowdsourcing campaign that led to the establishment of Ethereum. Since then, it has been growing dramatically and hundreds of developers have joined the platform.
2. How does the platform work?
In the Ethereum platform, it is possible to use and program the so-called smart contracts. This will automatically execute them, and by using Blockchain technology, users will be able to ensure that these contracts are safe from fraud or any changes to their terms.
The reason behind this level of security is due to the fact that the other computers associated with this network will audit the entire process to ensure as much legitimacy as possible in the agreements.
In addition, Ethereum works with two people, who do not know each other, to operate with a higher level of trust, even if there are no intermediaries or a central authority. Thus, the user no longer needs to register the contract with an official agency and bear the costs of this mediation.
Terms and conditions can be directly programmed into a smart contract. As long as all agreed standards are met, the contract runs on its own – without human interference, reducing the costs of the entire operation.
To get the coin, you can bet on one of two ways: buy or mine. The easiest way to purchase is through reliable platforms that offer this option. The other method involves mining which is performed on high-powered computers.
You can track price fluctuations on specialized platforms (for both beginners and advanced users) or even on a direct Google search, which shows you the data from Coinbase, a San Francisco-based digital currency bank.
3. How does it differ from Bitcoin?
Bitcoin was the first cryptocurrency to achieve worldwide success. Becoming something of a synonym for this new form of financial transaction. As we have seen, Ethereum was born from Vitalik Buterin’s enthusiasm for this new form of negotiation. But with a slightly different approach.
Moreover, as previously mentioned Ethereum is powered by the digital currency known as Ether. In a relatively short amount of time, it has become the second main option in this market, with optimistic estimates of growth in the near future. Both Bitcoin and Ether were developed using complex algorithms designed to encrypt transaction-related data and protect invested amounts from cyber attacks.
The similarities, however, end there. When it comes to transaction time, for example, Ethereum takes the crown. On one hand, Bitcoin takes around ten minutes to complete an operation while Buterin’s currency takes less than 15 seconds as of lately. You can follow the variation online.
Thus, it is possible to say that more confirmations, regarding Blockchain blocks, are made through Ethereum transactions. As a result, this significantly increases profitability for the mining community.
3.1 We will explain better
Perhaps the main difference lies in the transactions themselves. While Bitcoin performs its operations through cryptocurrencies, the Ethereum platform provides a variety of means of exchange. This encompasses smart contracts and other services in your chain.
Another important difference is that Bitcoin miners receive rewards. It works like this: the first computer that can perform the block operation (solving complex mathematical equations) gets its rate. In the case of Ethereum, there is no block reward – everyone gets a participation fee.
Also, unlike Bitcoin, Ethereum does not have a limitation on digital currencies being generated and made available directly to users. Regarding usage, Bitcoin allows only the execution of public transactions – known as without permission or censorship proof.
Ethereum enables transactions with or without permission. The security protocols adopted by the two options are also different. Bitcoin uses “Proof of Work”, while Ethereum has moved its operations to the model known as “Proof of Stake”.
Proof of Work, or PoW, involves creating a new valid blockchain block. It is employed to validate and authenticate transactions. Its name derives from the need to prove that the mathematical challenges imposed to validate the operation were properly solved.
In recent years, Ethereum is increasingly using the “Proof of Stake” approach. In this method, what really matters is the final number of coins the user has in their wallet. The higher this value, the higher your stake in the currency blockchain.
It is with each stake that users compete against each other to forge new blocks. As we can see in the article, Ethereum has been distinguished by the speed of transactions and the innovations introduced.
The trend is that it is increasingly valued by cryptocurrency enthusiasts and commented on in the mainstream media. It also helps that every person who joins this community is allowed to create their own currency or token, hence increasing their revenue.