What is Ethereum?
Ethereum is a second-generation, blockchain-based cryptocurrency platform fueled by the cryptocurrency called Ether (ETH). Built from scratch by Russian computer programmer wunderkind Vitalik Buterin, Ethereum offers several advancements on bitcoin’s blockchain system. Chiefly, network participants can create their own coins (known as “tokens”), which can have a wide array of applications and integration with real-world data systems, thanks to Ethereum’s open-source user API (application programming interface). This has created an Ethereum-based “digital economy,” leading to the creation of decentralized cryptocurrency markets, which allow for tokens to be exchanged with one another and for Ethereum.
History of Ethereum
Ethereum was launched in 2014 by Vitalik Buterin, a blockchain developer and long-time bitcoin fanatic, with the significant addition of API scripting for application development. Two Swiss companies, Ethereum Switzerland GmbH and the Ethereum Foundation, were involved during its development. In July 2014, Ethereum went public with a crowd-sale where people purchased Ethereum by paying through its predecessor, bitcoin.
Since its launch, Ethereum has enjoyed massive success, but not without controversy. Hackers used a software exploit to steal several million dollars worth of Ethereum from a token crowdfunding project known as The DAO in 2016. This was remedied by a rollback in the Ethereum blockchain and the creation of an Ethereum “fork.” The original Ethereum blockchain, with the stolen coins still incorporated into its ledger, is now known as Ethereum Classic (ETC). In contrast, the new blockchain, free of transactions created by The DAO hackers, is still called Ethereum (ETH).
How Ethereum Works
Ether is a cryptocurrency that works almost in the same way as other cryptocurrencies like Bitcoin. However, there are a few big differences.
Like bitcoin, Ethereum is a peer-to-peer cryptocurrency without any central repository or governing administration. Thus, any transaction between two Ethereum wallets is done directly, with only the miner(s) getting involved in establishing a transaction record.
Unlike bitcoin, in the Ethereum network, network nodes store the most recent ‘state’ (information on each user’s balance, their smart contacts, and where it is all stored) along with all the transaction details, in addition to such information residing in the Ethereum blockchain.
Ethereum also acts as a cryptocurrency platform, with advanced API functionalities that allow for user-built applications and the creation of “tokens,” or custom-made coins that operate within the Ethereum network.
Why Should I Buy Ethereum?
It’s rather unfair to compare Ethereum with bitcoin as they have different purposes and visions. However, Ethereum still has some advantages over Bitcoin in direct comparison.
- Decentralized Apps (DApps): Ethereum allows decentralized applications to build over the EVM and public nodes. Bitcoin and similar coins are only interested in being the ‘money of the internet,’ while Ethereum tries to become an integral mechanism of the internet itself.
- Faster Transactions: Due to the fund transfer mechanism described above, Ethereum transactions are faster because they are direct transfers between two accounts. The block time is 12 seconds, and it also makes good use of finding Stale Blocks to complete any transaction swiftly with an average confirmation time of about 20 seconds.
- Cheaper Transactions: Ethereum transactions are much cheaper than bitcoin, and it’s easier to make transactions when the unit is smaller. This allows Ethereum to act as a more suitable coin for micropayments.