Ethereum versus Bitcoin
Ethereum, like Bitcoin, is based on blockchain technology. Ethereum transactions travel through a decentralised network from sender to receiver. The essential difference is that the purpose of Bitcoin is to act as a digital currency, whereas Ethereum was developed as a decentralised programming platform. Any user can write decentralised applications (dApps) using the ‘Solidity’ programming language.
Of course, Ethereum has a dApp with which you can simply pay with ether (ETH, the coin used on Ethereum), but much more interesting are apps such as Smart Contracts. These smart contracts contain meta data of a transaction and can thus create a responsible transaction that sender and receiver cannot escape. Think of track and trace coordinates of a shipment or the automatic payment of money after damage to property.
Written apps can be controlled by the entire Ethereum network. There are also numerous projects developing DApps that will eventually run on the Ethereum network. Because the Ethereum network is decentralised, DApps will not be subject to censorship, downtime or influence from third parties.
This chart offers the up-to-date Ethereum price:
Characteristics of Ethereum
There is a lot to be written about Ethereum, as its introduction was revolutionary in terms of the use of DApps. Partly due to this innovation, founder Vitalik Buterin received a great deal of attention and interesting collaborations followed.
Ethereum Enterprise Alliance
Even most crypto beginners will have noticed the enthusiasm surrounding Ethereum. Ethereum is attracting attention not only from private individuals but also from the business world. As a result, in February 2017, the Ethereum Enterprise Alliance was established, 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 was attracting attention at the time. In early May, another 86 companies joined the brand new alliance. Airbus is exploring the automation potential that Ethereum could bring to their supply chain and the National Bank of Singapore is already using Ethereum to digitise and automate domestic financial transactions.
There are now more blockchains that are suitable dApps, but the Ethereum network was the first. dApps can be anything and serve all sorts of purposes, but the Ethereum network is optimised to process conditional transactions like a contract. That is why Smart Contracts appear in much of the text and explanation of Ethereum. Smart Contracts are digitally recorded and automatically execute predefined instructions based on data coming into 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 contract, the execution follows. Because the Smart Contracts are located on a decentralised network, it 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 will is on a Smart Contract and it goes into effect after a death certificate is issued (if), then (then) the inheritance is automatically distributed according to the Smart Contract (that). A notary public is then no longer needed.
The Ethereum network was developed by Vitalik Buterin, who was born in Russia. Vitalik has a wealth of knowledge on Bitcoin and blockchain technology in general. Together with Joseph Lubin, he eventually converted this knowledge into the Ethereum network. In the crypto world, Vitalik is considered a genius visionary, setting a new path for global, decentralised, secure and equal peer-to-peer systems.
Technology behind Ethereum
To reach consensus in the Ethereum network and create blocks, the proof-of-work principle is used. This includes mining and rewards.
The Ethereum network works with a proof-of-work protocol. This means that blocks are verified and created by processing power. This processing power is provided by software on the computers of individuals or organisations. Organisations often have large servers for this purpose. The verification of blocks is therefore called mining.
Mining and block rewards
Mining keeps the network safe and healthy. This mining is rewarded by the Ethereum network, because it takes a lot of computing power. In the crypto world we call this ‘block rewards’. In the case of this particular network, the block reward consists of Ether (ETH). The allocated ETH consists of a new amount of Ether created by the network on the one hand, and the costs charged for the transaction on the other hand. This inflation means that there is no maximum number of ETH.