Ethereum is a decentralized blockchain that underpins many cryptocurrencies. The cryptocurrency of the Ethereum blockchain is Ether.
Ether is the digital currency with the largest market capitalization after Bitcoin. It is completely digital and can be sent instantly to anyone anywhere in the world. The Ethereum project developed rapidly with its announcement in 2014. Thus, it enabled the creation of new tokens in the crypto money world.
Ethereum was developed by Vitalik Buterin in 2014. In the following process, it was developed and supported by many names such as Mihai Alisie, Anthony Di Iorio, Charles Hoskinson and Gawin Wood.
How Does Ethereum Work?
Ethereum works in a distributed way thanks to users joining as nodes instead of a central server as in Bitcoin. This way of working makes the blockchain network decentralized and resistant to attacks. If a node on the Ethereum blockchain fails, other nodes on the network keep the system alive.
Actions performed on the network are considered transactions. It is stored in blocks on the Ethereum blockchain. Verifiers check the records for accuracy before connecting these blocks to the network. Ethereum has a transparent blockchain structure just like Bitcoin. All transactions made on the network can be seen by third parties.
To be able to transact on Ethereum, you must have some ETH in your wallet. Every transaction is done with a fee called ‘gas’ paid by the user. Another way to get ether coins is mining.
Advantages of Ethereum
Ethereum has many advantages for users. The biggest advantage is that it is supported by smart contracts. Thanks to this smart contract, many tokens can be easily created.
The Ethereum blockchain has a rich ecosystem of applications built with smart contract support. Having many applications such as Dex and lending platforms on Ethereum creates a serious advantage in terms of user experience. On the Ethereum blockchain, investors can easily borrow and lend through platforms such as Aave. It can also simply trade on decentralized exchanges such as Uniswap.
Ethereum vs Bitcoin
Although Ethereum and Bitcoin are similar in terms of cryptocurrencies, they are two different projects with different goals. While Bitcoin has proven itself as the most successful cryptocurrency, Ethereum is a multi-purpose platform and only part of smart contract applications. Let’s list the differences between them:
- Ethereum’s block time is 14-15 seconds, while this is 10 minutes for Bitcoin.
- Ethereum mining often generates new digital coins at a consistent rate. For Bitcoin, this rate is halved every 4 years.
- Bitcoin transactions usually have fees that Satoshi specifies per byte. In Ethereum, on the other hand, each gas unit has a price that can be specified in a transaction.
