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What is Ethereum (ETH)?

What is Ethereum (ETH)?

14 May, 2020

It’s impossible to spend much time in the cryptocurrency and blockchain world without hearing about Ethereum, or ETH for short. In this article, you’ll learn what Ethereum is, what makes Ethereum different, and why Ethereum is better than Bitcoin, at least for certain purposes.

What is an Ethereum currency?

Strictly speaking, Ethereum refers to an open-source software platform that is based on blockchain technology, enabling developers to create decentralized applications that are also called dApps. However, Ethereum is also used to refer to the Ether coin (ETH,) a cryptocurrency built on the Ethereum platform. When someone talks about buying, trading, or paying with Ethereum, they mean the Ether currency.

Ethereum history

The story of Ethereum starts with Vitalik Buterin, who got involved with Bitcoin as a 17-year-old programmer in 2011. Buterin became aware of Bitcoin’s shortcomings and created Ethereum as a superior blockchain technology.

Ethereum co-founder Vitalik Buterin

I thought [those in the Bitcoin community] weren’t approaching the problem in the right way. I thought they were going after individual applications; they were trying to kind of explicitly support each [use case] in a sort of Swiss Army knife protocol. - Vitalik Buterin, Ethereum co-founder.

Timeline of Ethereum’s early history:

  • 2013: Buterin released a white paper describing the basis for Ethereum.
  • 2014: Buterin and the other co-founders crowdfunded Ethereum through an ICO that raised more than $18 million.
  • 2015: The first live release of Ethereum known as Frontier was launched.

What is the purpose of Ethereum?

Ethereum is a blockchain technology platform, designed to enable a large variety of functions. A popular comparison is: if Bitcoin is email, then Ethereum is the whole Internet.

Ethereum is symbolically represented by an arrangement of triangles.

Ethereum is used for computer services that are based on dApps and smart contracts, saving time and money by eliminating middlemen, third-party brokers and inefficient monopolies like big companies or even government authorities.

In essence, it follows the decentralized philosophy of Bitcoin, but it is applied to much more than just money.

What is Ethereum written in?

Given that the Ethereum Virtual Machine (EVM) functions as a ‘world computer’ with many nodes, it actually uses multiple programming languages including C++, Python, Ruby, Go, and Java. A specialized language called Solidity is used to write smart contracts in the Ethereum Virtual Machine.

ETH hard fork

In 2016, $50 million worth of Ether was stolen by a hacker, an act that raised concerns about the platform’s security. The resulting controversy split the community and Ethereum forked into two blockchains: Ethereum (ETH) and Ethereum Classic (ETC).

ETH tokens

Ethereum not only has the Ether (ETH) crypto coin, but also Ether tokens. The latter can function as currency within the Ethereum Virtual Machine (EVM). ETH tokens are transferred within the EVM to execute smart contracts.

What is a smart contract in Ethereum?

A smart contract is a computer program that functions as a contract - i.e., it binds individuals and/or businesses to meet obligations.

The smart contract’s code automatically executes the terms when tokens are deposited. The benefits include:

  1. Digital: no need to print or post paper, easily shareable.
  2. Autonomous: cuts out the middleman, no back-and-forth.
  3. Trust: information on the smart contract is encrypted and backed up on a shared ledger.
  4. Security: encryption makes the contract info incredibly difficult to steal.
  5. Speed: automatic execution makes smart contracts faster.
  6. Cost: saves on paper costs, lawyer fees, etc.

Smart contracts act as multi-signature accounts, only executing if the specified percentage of parties agree.

Smart contracts can be encoded on any blockchain, but developers working on Ethereum can program smart contracts with a much broader range of instructions than is possible on Bitcoin. This allows Ethereum smart contracts to be more complex and versatile. They can serve as the base for a decentralized application, or other autonomous functions on the blockchain.

Why is Ethereum better than Bitcoin?

ETH has several advantages over Bitcoin. It isn’t limited in the same way as BTC. As to what algorithm Ethereum is mined with, ETH uses the Ethash method. As a result, block processing speed is faster.

What is the difference between Bitcoin and Ethereum?

BTCETH
Coin Limit21 MillionNone
AlgorithmSHA-256Ethash
Mean block time10 minutes12 seconds

However, Ethereum’s main advantage over Bitcoin is functionality. Bitcoin can only record transactions. Ethereum powers apps that can be used for almost anything the programmer desires.

What is an ETH wallet?

An Ethereum wallet is where the private keys to access the cryptocurrency are stored. The StormGain crypto trading platform comes with a built-in ETH wallet, in which you can earn 10% annual interest on your currency.

Cryptocurrency trading

Ethereum is the crypto coin with the second largest market share after Bitcoin. Ethereum also has the second-highest trading volume among cryptocurrencies. By using StormGain, traders can earn significant bonuses and rewards for trading Ethereum.

The price history of ETH, in USD and Bitcoin

Ethereum mining

Ethereum is currently ‘mined’ via a proof-of-work algorithm. Much like Bitcoin, Ethereum miners dedicate their computing hardware to solving tasks that support the blockchain and receive ETH in return.

What is a good hashrate for Ethereum mining?

The frequency with which the ETH mining hardware can process hashes determines how likely it is to earn a reward.

An Ethereum mining rig composed of GPUs (via Wfcctech)

A hashrate of around 45.0 MH/s is considered good for a consumer GPU. However, the whole system of mining may soon become irrelevant for Ethereum.

What is the future of Ethereum?

Ethereum will upgrade in the near future, with the update to Ethereum 2.0 planned for 2020. The main feature is a change from a proof-of-work to proof-of-stake validation.

Ethereum 1.0 is a couple of people’s scrappy attempt to build the world computer; Ethereum 2.0 [with PoS] will actually be the world computer - Vitalik Buterin

The current system is notoriously wasteful of energy. A proof-of-stake protocol will mean that users ‘stake’ their ETH as collateral to verify a transaction (and claim the reward).

What is happening with ETH?

The current value of Ethereum is $188 and is continuing to hold second place to Bitcoin in the cryptocurrency trading market. Nonetheless, the usefulness of the Ethereum platform and the improvements that come with version 2.0 should keep it as a major player in the crypto market and wider tech industry.

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