Most people associate cryptocurrencies and blockchain technology with Bitcoin, but the technology has a vast number of potential applications in various industries that we have yet to see. Whilst Ethereum is also a distributed public blockchain network similar to Bitcoin, they differ in use cases and potential.
Bitcoin is purely a peer to peer electronic cash system, whilst Ethereum is a “Do it Yourself” blockchain platform for the development and deployment of decentralized applications (dApps) or smart contracts. The Ethereum network is the infrastructure for running these dApps and is not a currency, but a platform — with a goal to truly decentralize the internet. It currently has thousands of global computers or nodes running the network and making sure smart contracts execute as written and so is fully decentralized.
Think of the difference between something like a calculator and a smartphone, where a calculator [Bitcoin] does one thing and it does one thing well, but really people want to do all these other things. And if you have a smartphone [Ethereum] then on the smartphone you have a calculator as an app … and pretty much everything else. So basically taking that same kind of idea of increasing the power of the system by making it more general purpose and applying it to blockchains.
Vitalik Buterin (Co-Founder of Ethereum) on the issues with Bitcoin he is trying to solve in creating Ethereum
Ethereum is global, open-source and programmable with the ability to write code that controls digital value in a secure way, and accessible anywhere in the world. Building blockchain applications in the past required significant cost and resources, but now these applications can be built and deployed quickly and smoothly on the Ethereum platform, providing a foundation for:
- Global access to an open financial system
- An internet where users are in control of their own data
- An internet with money and payments built-in
- A decentralized internet controlled by no company or individual
Ethereum is the leading programmable blockchain network, and is the largest and most active blockchain community in the world.
Don’t know what a blockchain is? Find out more here
The Bitcoin network has BTC tokens for mining confirmation rewards, and in a similar way the Ethereum platform utilizes Ether (ETH) tokens which pay for transaction fees and services and incentivizes people to run the Ethereum protocol on their computer/node. ETH can also be digitally sent to anyone in the world instantly for peer to peer fund transfers and therefore also fulfills Bitcoin’s use case as a global digital cash system. ETH is the second-largest cryptocurrency in terms of market capitalization, and reached an all-time high of ~$1,400 USD in Jan 2018.
What is a smart contract?
Ethereum is built specifically on the programming language Solidity and is built to provide developers the ability to create any smart contract or operation they want. Ethereum developers write the conditions for the smart contract or application, and then the Ethereum network executes the contract.
A smart contract is essentially just a program that executes exactly as they are set up by the creator, so is a contract that is self-enforced by cryptographic code to automatically execute when specific conditions are met. This is important as a self contract is self-executing and immutable, so we can trust the code to facilitate an exchange of value without any censorship, downtime, fraud, or third-party interference.
What is a decentralized application?
Ethereum enables the building and deployment of decentralized applications or dApps, which are applications that are not controlled by any individual or central organization. With dApps we will be able to connect users and providers directly so no intermediary is required to manage a user’s information. dApps built on the Ethereum blockchain will benefit from the properties of blockchain technology, with a secure, tamper-proof, and immutable data and information transfers.
Financing, voting, regulatory compliance, and internet providers are examples of intermediaries in industries that are known for charging high fees or have exploitation or manipulation of the process. With decentralized applications we have the potential for any service or industry to become fully decentralized and allow individuals to source their own lower-rate financing, vote securely and store internet data securely, or follow regulation more efficiently.
As blockchains can be built on top of the Ethereum network, these blockchains can launch their Initial Coin Offerings (ICO) on the platform.
Ethereum uses ERC20 tokens as standard, and so the ICO’s launched on Ethereum are their own versions of this ERC20 token. EOS is an example of an Ethereum -based token, which is a top 10 cryptocurrency token in its own right in terms of market capitalization and is built for large scale applications and their transactions.
There is also a new standard ERC721 token available for tracking unique digital assets.
Who created Ethereum?
Ethereum was founded in November 2013 by Vitalik Buterin, a programmer from Toronto. The Ethereum whitepaper was published and the vision was for an alternative platform for any type of decentralized application developers would want to build.
The July 2014 crowdfunding campaign raised more than $18m and was the most successful crowdsale to date at the time. These funds are now managed by the Ethereum Foundation, a non-profit entity based out of Switzerland.
Ethereum has an immense network of developers, with estimates reaching 250,000 to 350,000 in the Ethereum ecosystem.
Ethereum has recently been a consistent no.2 in cryptocurrency market capitalization and has also reached an all-time high of ~$1,400 USD per token in Jan 2018.
What’s next for Ethereum?
Huge developments are on the way for Ethereum that aim to solve its issues of scalability and improving security.
ETH 2.0 (code named Serenity) is a series of potential updates to make Ethereum have higher functionality and efficiency. These include:
- A Proof-of-Stake (PoS) consensus algorithm for higher energy efficiency and scalability. This would provide a new chain that would run in tandem and be fully compatible with the existing Proof-of-Work (PoW) Ethereum chain.
- Sharding aims to improve long term scalability by breaking the database into pieces and putting each part on a different server. This allows each node to store only a subset of data with higher efficiency as it only needs to verify those particular transactions. Currently, Ethereum has the full state of the network and every transaction stored on all nodes.
- An off-chain layer Raiden to improve scalability, moving transactions off the main blockchain into off-chain micropayment channels like Bitcoin’s Lightning Network
- A second-layer scaling solution Plasma to allow for handling of more transactions on an additional layer
You can purchase Ethereum at our trusted partner exchanges Coinbase, CEX.IO, or Binance