What is an Ethereum?
Ethereum is an open platform based on the blockchain, which helps developers to create their decentralized applications. The platform has its own cryptocurrency – Ether (ETH). It is mined and used as the means of payment for the services within the network of the Ethereum. Users trade it for speculative purposes as well.
Ether is often compared to Bitcoin. But in fact, they are very different.
Difference between Ethereum and Bitcoin
To begin with, it is worthwhile to understand what a blockchain is. It is a database that is stored immediately on multiple computers and transmitted over the Internet. Also, this data can not be changed and anyone can see it. This makes the system as transparent as possible.
The technology of blockchain is used for a variety of tasks. It is literally a platform for creating and running applications. As the Internet for the mail service. And the cryptocurrency is one of such applications of the blockchain.
Bitcoin and Ethereum are decentralized networks based on the blockchain. But their goals are different.
Bitcoin made one application on the blockchain – a system for transactions of the digital currency BTC.
Ethereum uses blockchain to run the code. With this code, you can run any decentralized application.
Previously, the creation of blockchain-based applications the required serious knowledge in programming, cryptography and mathematics. Therefore, it consumed a lot of time and resources. Ethereum changed it. It provided developers with all the tools to create their own decentralized applications.
One of the distinguishing features of the Ethereum from other applications based on the blockchain is smart contracts.
What are the smart contracts of the Ethereum?
Smart contracts trigger the code when certain conditions occur, therefore, the contract will work automatically and launch a certain process: enforcement, management, execution or payment.
All blockchains are capable of processing code, but normally, they have many restrictions. As a result, this usually causes a set of limited operations. Bitcoin, for example, allows only transactions.
Developers can create any required operations (applications) without limitations. Founder of the Ethereum, Vitaly Buterin, says about this:
“The Bitcoin community sought to make separate applications and did not try to cover each use case in the “protocol for all cases”. They approached the solution of the problem in the wrong way”
The platform created a virtual machine (EVM). Therefore, EVM allows running any program of any programming language. If you have enough time and memory. In addition, this greatly simplified the creation of applications based on the blockchain for programmers. Consequently, you no longer need to create a new blockchain for each application.
Pros and cons of the Ethereum platform?
- Continuity of data. Hence, no one can change it.
- An absence of censorship and interference. Therefore, applications work on the network according to the principle of reconciliation.
- Security. Due to cryptography, the platform provides security and protects itself from hacker attacks, as well as from actions of fraudsters.
- No downtime. Applications do not freeze or crash.
- The possibility of mistakes in code. People write the code of the contracts and they can make mistakes. An error in the code is harmful to the contract. You can fix the error by rewriting the code, which contradicts the essence of the blockchain.
First of all, possible usage of Ether depends on your goals: you can use ETH technology to create new applications or simply use it to pay for services/speculation. Let’s start with the first one.
Ethereum is especially relevant to decentralizing any centralized services. It is true for intermediary services. Numerous projects use Ethereum to create decentralized autonomous organizations (DAO).
DAO is an autonomous and decentralized organization without leadership. The program code regulates the work of such organizations in the form of a set of smart contracts of the Ethereum network. As a result, there is no need for employees and offices anymore. Most noteworthy is that owners of such organization are users who purchased tokens. This is almost something like a deposit with the right to vote.
Ethereum is developing and is consequently pushing the world economy towards decentralization. Nowadays, the application on the Ethereum blockchain penetrates a wide range of spheres: finance, education, insurance, public services, healthcare and other sectors.
Most of all, people purchase Ether for payment of services, participation in ICO and speculation.