What is Ethereum explained

Ether is arguably the most widely known cryptocurrency today. Week in week out, the amount of buzz going on about Ethereum keeps a lot of people puzzled. The ubiquity of the internet has made the exchange of information amazingly not so costly. Developments founded in tech have shown over time that the internet can be used to create a cooperative value-transfer system at no cost. Due to problems of resource wastage, transaction ambiguity and the probability of centralization associated with bitcoin design, the Ethereum system ranks first among the varied alternatives. According to its developers, Ethereum offers a broader functionality spectrum, is more effective and highly secure.

Ethereum 101

Ethereum is the brainchild of The Ethereum Foundation who undertakes the task of developing its specifications, and also various open-source clients to operate Ethereum’s protocol of which Geth node is it’s most widely known. After being released in May 2015, Ethereum’s developers constantly work towards improving its protocol and also make available the tools needed to access it.

Built to surpass to your regular payment system, Ethereum runs smart contracts. Smart contracts are apps that are built and programmed to function without the risk of fraud or the intrusion of a third party. Due to its flexibility and maximized functionality, different kinds of Smart contracts can be programmed within Ethereum’s system.

Ethereum’s principal sources of information are:

  • Ethereum White Paper (But13), and
  • Ethereum Yellow Paper (Woo14).

Also, Ethereum blog (Pro) and GitHub (Homa) are regularly used to share the latest updates and tech discussions directly from the Ethereum foundation.

Smart Contracts & Programming Languages

Yes! You’d be surprised to know that Ethereum blockchain contracts are practically alive. Since they own a unique address and balance, transactions can be sent and received by them. Transaction receipts activate them and it is also very possible to deactivate them.  The Ethereum Virtual Machine is known to be turning complete which gives it an almost boundless versatility to be adopted for any purpose. The core programming language type run on the EVM which also includes all smart contracts on the Ethereum platform is known as Solidity, an invention of Buterin the Ethereum founder. The Solidity Programming Language is a highly specialized field and as of present, there are very limited software engineers around the world that are known to be proficient in this programming language which makes it among the highest paying skill sets to have in the tech industry.

Applications

Ethereum applications come in three different categories:

Financial Applications
Users are offered better ways of managing their money and entering into contracts (ranging from sub-currencies, financial derivatives, and hedging contracts, to savings wallets, wills, and some types of full-scale employment contracts).

Semi-financial applications
despite the fact that money is involved, a non-monetary side also exists (such as a bounty for solving problems related to computation)

Non-financial applications
applications which are not financial in nature e.g online voting.

Accounts & Currency

Objects referred to as “accounts” make up the state. Each account possesses an address worth 20-bytes and spells out transitions. These transitions are simply the exchange of value and information between accounts. An Ethereum account is basically made up of four fields:

  • the first field is the nonce, which serves to ensure that all transactions are only processed once.
  • The second field shows the account’s ether balance at present
  • The third field depicts the account’s contract code
  • The fourth field then shows the account’s storage

In the Ethereum system, “Ether” is the name of the currency used. Generally, two types of accounts exist in the Ethereum system. One is externally owned (controlled through the use of private keys), while the other is a contract account (controlled through the use of its contract code). Accounts which are externally owned do not possess any code. Messages can also be sent from externally owned accounts. To do this, a transaction has to be created and signed afterward. A contract account’s code activates whenever a message is sent to the contract account of the page. This enables it to carry out two tasks which are to establish communication with internal storage and to take turns in creating contracts.

Differences between Bitcoin & Ethereum

  1. Application
    Despite the fact that it is being used as an online currency, other decentralized apps also utilize Ethereum’s blockchain. These apps include voting systems, supply chain tracking systems, smart energy grids and even more. Ethereum is therefore proven to be very versatile as it can be utilized on more than one level other than just being an online currency.
  1. Algorithm
    Even though the schematics of Bitcoin and Ethereum are evidently similar, the hash function utilized is what really differentiates their blockchain algorithms. Bitcoin tends to use SHA-256 with which transactions are verified, while Ethereum tends to use Keccak-256 or 512.
  1. Duration
    The mining and transactional processes of both differ from each other. Ethereum possesses faster speed than Bitcoin. On per second basis, Ethereum processes twice the number of transactions that Bitcoin is able to process. In Proof-of-Stake, Ethereum’s block time will most probably fall even more, compared to Bitcoin’s rigid proof-of-work which is unlikely to change anytime soon.
  1. Energy
    Ethereum consumes far lesser energy than Bitcoin. In Proof-of-Stake, more energy consumption will likely be dropped by Ethereum. A lot of energy is consumed due to the fact that a lot of computational power is required during the process of. However, energy consumed will reduce drastically in Proof-of-Stake since these computations are unnecessary.
  1. Mining Reward
    The reward you get for mining Bitcoin differs from the reward you get for mining Ethereum. In the beginning, mined blocks used to be about 50bitcoins per block mined, but have now fallen to 12.5 Bitcoins. The reward you get for mining Ethereum differs, due to the fact that it is made up of various parts. The amount of gas used up in all block transactions is also included in the reward. This implies that the total Ether that can be mined is limitless. However, it is important to note that a limit has been put on the total quantity of tokens that can be created annually. Yearly, only 18 million new tokens can be created.

Boost your knowledge and read more about other cryptocurrencies.

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