Ethereum, also known as ‘Ether’ is a digital currency that is very similar to most cryptocurrencies. It is completely decentralized and open, which means that it is managed by its users – just like Bitcoin. However, the main use of Ethereum is to operate smart contracts within the network.
Basically, Ethereum has been a cryptocurrency deployed in different phases. Currently, the digital currency is in the 2nd phase called ‘Homestead’. These four planned phases are mapping the growth of the Ethereum network and are: Frontier, Homestead, Metropolis and Serenity. Even though Ethereum is still an experimental technology for operating smart contracts, its stability on the coin market has shown that it is one of the safest cryptocurrencies regarding ups and downs in its price.
Is Ethereum Very Similar To Bitcoin?
In a short answer – yes.
However, the only similarities are that these networks are both distributed and public, operating on blockchain. And even though there are some significant technical differences between them, the most important difference is that Bitcoin and Ethereum differ in their purpose and capability. While Bitcoin offers one particular app of blockchain technology that enables online payments – the Ethereum blockchain is used to track ownership of any digital currency (even bitcoins).
So, the Ethereum blockchain is not focused on mining for bitcoin. Instead, the miners work to earn Ether, which is a type of crypto token that fuels the network. Aside from that, many app developers use Ether to pay for their transaction fees and services within the Ethereum network.
The Ethereum Virtual Machine (EVM)
Before Ethereum was created, the blockchain applications were designed to operate a very limited set of operations. In short, cryptocurrencies like the Bitcoin were developed to operate as peer-to-peer currencies. However, there was a problem with this.
What Ether did was expand the set of functions offered by Bitcoin and other types of applications. The digital currency made the complicated and time-consuming processes easier and developed an entirely new platform for that.
This is how the core innovation of Ethereum came to light – the Ethereum Virtual Machine (EVM) as a Turing complete software that runs on the Ethereum network. Basically, this machine enables anyone to run software programs and create blockchain applications much easier and efficient than ever before.
What Are The Benefits & Where Can Ethereum Be Used?
Since Ethereum enables developers to build and deploy decentralized applications, it can be used on any blockchain network without being controlled by any individual or central entity. Simply put, the Ethereum makes the process of creating blockchain applications much easier and time-efficient than ever before.
So, any services that are centralized can also be decentralized using Ethereum. From transactions to loans provided by banks up to registries, voting system and regulatory compliance – Ethereum can make every process swift.
On top of that, Ethereum can also be used to build Decentralized Autonomous Organizations (DAO) with no single leader. Run by programming code in a collection of smart contracts, DAO is meant to replace the rules and structure of a traditional organization and eliminate the need for people and centralized control.
So, the benefits of Ethereum by now include:
Immutability – Meaning that a third party cannot make any changes to the data
No corruption or tampering – Every app within the Ethereum network is based on the principle of consensus, making any type of censorship impossible
Security – There is no central point of failure and the network is secured using cryptography and protected against any hacking attacks
Zero downtime – The apps can never go down or be switched off
Why Is Ethereum Changing Value – And Will It Scale?
If you are wondering why a technology like the Ethereum is changing its value on the crypto market, it is because of a simple reason.
Ethereum is traded for bitcoin, dollars, euros and many other currencies 24/7. This means that depending on the demand, its price can rise or drop any time of the day. Similar to stocks and properties, Ethereum is a digital currency that can be volatile compared to currencies such as the US dollar only because it is still an emerging technology with a small pool of liquidity.
Regarding scaling, no one knows if the price of Ethereum will significantly increase. That is only because Ethereum and bitcoin use a combination of technical tricks and incentives in order to record who owns what without any authority whatsoever.
In a situation like this, it is very tricky to preserve the balance while growing the number of users to the point where the price can significantly rise. That is only because Ethereum depends on a network of ‘nodes’ (just like Bitcoin) which store every transaction and record the current state of account balances, contracts and storage.
This is why many people decide to mine Ethereum and make the most of this digital currency.
How Ethereum Mining Works & How To Mine Ethereum?
As we said earlier, mining is what makes the decentralized app store possible – and what allows Ethereum to be sold and traded on the market. In a very similar process to Bitcoin mining, miners set computers loose in order to solve cryptographic puzzles and win ether. One of the most interesting things about this is that anyone can mine Ethereum and set their computer to focus on these cryptographic puzzles.
In order to mine Ethereum, you will need special computer hardware and a CPU or GPU as the two most common types of mining hardware. There are some mining profitability calculators you can use to see how much ether you can potentially earn at a given hash rate. As soon as you get your system up and running, you can install the software known as ‘geth’ and join the mining pools.
So, Will Ethereum Rise In The Future?
No one knows the answer on this question. However, according to some benchmarks and analytics, the development roadmap of Ethereum looks promising – and quite experimental. It is true that Ethereum is a precious technology that solves problems and as such contains value which would undoubtedly increase over time.