What is Ethereum? Everything you wanted to know about Ether
Ethereum is an online platform for application developers, built on distributed database technology called blockchain. For an uninformed person, the words ‘cryptocurrency’ and ‘blockchain’ are automatically associated with the most popular blockchain development – Bitcoin cryptocurrency. But blockchain has little to do with Bitcoin, just like Ethereum is not Bitcoin and has a completely different purpose.
Everything started in 2011 when a young developer Vitaly Buterin took interest in blockchain technology and Bitcoin cryptocurrency. Having become fully convinced of the practical blockchain advantages a few years later, Vitaly created technical documentation for a new product now known throughout the world as Ethereum.
The Ethereum network’s cryptocurrency is Ether. Ether, like Bitcoin, carries out functions of the circulating payment medium. However, apart from other payments, application developers use it to pay transaction fees and services. Generally, the Ether mining process is similar to that of Bitcoin mining.
You can calculate the Ether mining profitability inclusive of electricity consumption rates. To do this, you can use our website’s dedicated mining calculator.
At first glance, Bitcoin and Ether may seem identical. But even though both cryptocurrencies are based on the blockchain technology, they do not possess much in common. Announced in 2013, Ethereum platform’s practical purposes are completely different.
The main practical purpose of Bitcoin is the anonymous and decentralized means of financial transactions which are irreversible and open to all network members. Blockchain technology in the case of Bitcoin has exclusively one purpose – to record data on all transactions that have ever been conducted in the network, as well as current ownership rights.
The Ethereum’s blockchain ledger stores software codes data and powers all decentralized applications developed on the Ethereum platform.
Consequently, the Ethereum platform pursues its main objective – to provide a decentralized platform for application developers.
Ether as a cryptocurrency
The main purpose of Ether (ETH) is to transfer the digital currency as payment for the execution of an action set in a Smart Contract. Smart Contracts are also available in the Bitcoin network, but their capabilities are very much simplified on that platform. Read more about Smart Contracts in the next section.
The Ethereum network capabilities
All applications (for instance, Bitcoin) that operate using the distributed blockchain technology are completely autonomous and exclude human interference or any legal body control. You can make changes to a blockchain network exclusively by the consent of all network participants. All actions or transactions are final and cannot be reversed.
When creating Ethereum, the developers took into account travails experienced while working with a pure blockchain. It is possible to decentralize any centralized systems and applications using Ethereum. Granting loans and borrowings, voting processes, and intermediary services are the simplest examples. And again – no one can change the completed actions including the application creator. This condition excludes any fraud and corrupt actions.
Ethereum Smart Contracts
The Ethereum blockchain platform supports Smart Contracts. These are pre-determined irreversible actions automatically executed when specific conditions are met. You can consider a Smart Contract to be an automatic and autonomous application which excludes external interference once launched in the network.
Betting on football match results is a good example of the Smart Contract operation. The contract creators bet an Ether each on two different teams in the match scheduled. Having created the Smart Contract, no one can change its terms. When the match ends, the application considers its results and pays one of the parties the total bet amount in Ether according to the Contract. This action is completely transparent and irreversible.
Smart Contracts are able to create conditions for an ideal contractual relationship system used by people. Furthermore, this technology is limitless in its development in daily life.
The Ethereum Virtual Machine
Developers often experience limited functionality while creating applications using a pure blockchain network. The Ethereum platform employs the unique Ethereum Virtual Machine technology (EVM) which allows complementing the application with any functions limited only by the developer’s imagination. Moreover, due to EVM, the platform supports applications built in any known software code.
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