Ethereum (ETH) Explained
Ethereum vs Bitcoin
Ethereum, like Bitcoin, is based on blockchain technology. Ethereum transactions also travel via a decentralized network from sender to receiver. The essential difference is that Bitcoin aims to act as a digital means of payment, while Ethereum was developed as a decentralized programming platform. Every user can write decentralized applications (dApps) using the ‘Solidity’ programming language.
Of course, Ethereum has a dApp with which you can pay with Ether (ETH, the coin used on Ethereum), but apps such as Smart Contracts are much more interesting. These smart contracts contain metadata from a transaction and can thus achieve responsible marketing that the sender and receiver cannot escape. Think of track and trace coordinates of a shipment or the automatic payment of money after property damage. Written apps can be controlled throughout the Ethereum network. In addition, numerous projects develop DApps that eventually have to run on the Ethereum network. Because the Ethereum network is decentralized, DApps will have no censorship, downtime or influence from third parties.
Features of Ethereum
There is much to write about Ethereum, as its introduction of DApps was revolutionary. Because of this innovation, founder Vitalik Buterin received much attention, and interesting collaborations followed.
Ethereum Enterprise Alliance
The enthusiasm about Ethereum will not have escaped even most crypto beginners. Ethereum attracts attention not only from private individuals but also from the business community. In February 2017, as a result, the Ethereum Enterprise Alliance was founded, a partnership of more than 30 companies that wanted to look at the possibilities of using Ethereum. With established giants such as Microsoft, JP Morgan and BP, this was already a list that attracted attention. At the beginning of May, another 86 companies joined the new alliance. Airbus is exploring the automation capabilities Ethereum could provide for its supply chain, and the National Bank of Singapore is already using Ethereum to digitize and automate domestic financial transactions.
Meanwhile, more blockchains are suitable for dApps, but the Ethereum network was the first. dApps can be anything and serve various purposes, but the Ethereum network is optimized to process conditional transactions like a contract. That is why Smart Contracts appear in many texts and explanations about Ethereum. Smart Contracts are digitally recorded and automatically execute predefined instructions based on data received on the network. Think of it as an automated ‘if this, then that’ principle. If the incoming data on a contract meets the conditions of the agreement, the elaboration follows.
Because the Smart Contracts are located on a decentralized network, they should be secure and cost-effective. Also, no third party is needed for any form of contract mediation. An example is a will. If your choice is on a Smart Contract and it goes into effect after issuing a death certificate (if), then (then) the inheritance is automatically distributed according to the Smart Contract (that). A notary is then no longer necessary.
Russia-born Vitalik Buterin developed the Ethereum network. Vitalik has a wealth of knowledge of Bitcoin and blockchain technology in general. He eventually converted this knowledge with Joseph Lubin into the Ethereum network. Vitalik is considered a genius visionary in the crypto world who has set a new path for global, decentralized, secure and equal peer-to-peer systems.
Technology behind Ethereum
The proof-of-work principle is used to achieve consensus in the Ethereum network and create blocks. This also means that there is mining and rewards.
The Ethereum network works with a proof-of-work protocol. This means that blocks are verified and created by computing power. That computing power is provided by software on the computers of individuals or organizations. Often organizations have large servers for this. Verifying blocks is therefore called mining.
Mining and block rewards
Mining keeps the network safe and healthy. The Ethereum network rewards this mining because it costs a lot of computing power. In the crypto world, we call these ‘block rewards’. In the case of this particular network, the block reward consists of Ether (ETH). The assigned ETH consists, on the one hand, of a new number of Ether created by the network and, on the other hand, of the costs charged for the transaction. This inflation does mean that there is no maximum number of ETH.