In this explainer article, we’ll cover all the basics of Ethereum. Even so, we assume that you have some background knowledge of blockchain, and perhaps a little more about cryptocurrency. You can refer to our previous posts to get started on these topics.
Right out of the block, we have to mention that Ethereum, inasmuch as it’s associated with Bitcoin, is not actually a cryptocurrency. In essence, ethereum is a software that operates on a network of computers (nodes) that makes sure that data and smart contracts (small computer programs) are processed, replicated, and recorded on all the nodes on the said network, without the need for centralized control. The aim of Ethereum is to create a decentralized, self-sustaining network on the blockchain.
Technically speaking, Ethereum is an open-source software platform that leverages the power of blockchain to build and deploy what they call dApps, or decentralized applications. Put otherwise, Ethereum is an autonomous network that’s powered by the world’s second most popular cryptocurrency, Ether. Abbreviated ETH, ether is the second most prominent crypto by market capitalization, only trailing Bitcoin. However, Ethereum and Ether have gained incredible traction in the past couple of years and is forecast to outperform Bitcoin in the next few years.
What is a dApp?
A decentralized application is an app that doesn’t require the intervention of a third-party to control/manage the processing of transactions/data/information. Instead of a central authority having direct control of the processing of data, blockchain does all the heavy lifting. This is only possible because there are no restrictions on whatever developers and programmers can build using the so-called Ethereum Virtual Machine, EVM. In other words, developers are not required to construct new blockchains every time they want to create a blockchain-powered application.
Who and When was Ethereum Created?
The brainchild of Vitalik Buterin, the concept Ethereum was first proposed in 2013 and went live a couple of years later. Unlike Bitcoin, which already is a fully-scaled cryptocurrency, Ethereum was created with the aim of enabling users to generate their own currency tokens. Of more importance is that every transaction or operation that occurs on the Ethereum network calls for a certain amount of “gas.” As such, the more complex or the harder the action, the more gas it requires, and the more costly the task.
What is Ether?
Again, Ether is the crypto component of the Ethereum network. As defined by Ethereum, Ether is the cryptocurrency fuel of the Ethereum network. Although it was created back in 2015, it gained particular popularity in tandem with the rise of Bitcoin in 2017. And, just like Bitcoin, Ether can be used to purchase products or services on the Ethereum network as well as traded at several different crypto exchanges, including Coinbase. Unlike Bitcoin, however, Ether supply theoretically has no cap.
Ethereum vs Bitcoin: The Similarities
Both have blockchains
So, Ethereum vs Bitcoin.? Both Ethereum and Bitcoin are backed by blockchain technology, implying that they comprise blocks of data (smart contracts and transactions). These blocks are mined by those who can solve complex mathematical problems. Once they have been mined, the blocks are distributed to other nodes/participants who ascertain their validity.
Both are permissionless and public
Ethereum, just like Bitcoin, is public and permissionless. That means that anyone anywhere can use the software to create an application or connect to the network without permission from a central authority.
Both can be mined
Users interested can mine Ethereum by spending electricity to solve complex mathematical problems.
They both feature in-built cryptography
Ethereum vs Bitcoin: Differences
Shorter transaction time lapse
Ethereum transactions take much shorter time (approximately 14 sec) to be recorded into the network, unlike Bitcoin transactions which last about 10 mins.
More power to process code
Ethereum allows developers to create applications on top of the network — not just to process value transactions like in the case of Bitcoin.
Bitcoin supply is capped at 21 million BTCs, whereas Ether circulation and mining has no limit.
Bitcoin has much bigger blocks (each being around 1MB) than Ethereum which usually vary depending on the gas limit per block. You can expect an Ethereum block to be around 12 KB.
Unlike Bitcoin which is plagued by valuation and cap issues, the future of Ethereum is bright. The platform provides users and developers with innovations and possibilities that could not be achieved with Bitcoin.