Ethereum is another gem of the cryptocurrency world that has become immensely popular since its birth in 2015. Wanna know What is Ethereum, all the ins and outs of the Ethereum, then you are at the right place!
What is Ethereum
Ethereum is an open software platform based on a distributed public blockchain network. Created in 2015 by Vitalik Buterin, the idea behind Ethereum was to create a platform for decentralized and collaborative applications. It is a multipurpose platform with its own currency. The key feature of this Cryptocurrency is the smart contracts.
Smart Contracts are basically the scripts or computer codes that can be created by anyone and then uploaded on the Blockchain. Being stored on a public ledger, it makes the transactions tamper proof without the requirement of a middleman. Ethereum also has its token Ether that works similarly to Bitcoin, meaning you can buy and sell it.
Why is Ethereum Important?
With bitcoin’s introduction, people believed that its blockchain could be used in other spheres of lives too. However, bitcoin’s design is to serve the currency purpose that limits its application. In a way, this led to the emergence of Ethereum. Buterin created this cryptocurrency with a plan of a blockchain system that can facilitate the decentralized applications.
Ethereum has a programming language written in it that enables people to customize it as per their specific requirements. All the new applications that are created on this platform are based on its smart contracts.
To put it succinctly, Ethereum allows to carry out all kinds of functions in a transparent and trustable manner without the need of a central authority or a trusted third party.
What Problem does Ethereum Solve?
Most of us deal with third parties on a daily basis, sometimes without even realizing it. For instance, a simple purchase of a coffee involves a middleman in terms of your credit card company recording your purchase.
Intermediaries are usually the trusted parties where the buyers and sellers may or may not trust each other that performs a successful completion of a transaction. Ethereum network basically enables two people or organizations to transfer value, that could be a digital asset or money, securely and confidently without requiring a middleman like PayPal or a bank.
The smart contracts of Eethereum define the rules as well as penalties of an agreement while helping you exchange anything that holds value in a conflict-free and transparent environment.
Current Market Trends for Ethereum
Just a three years old cryptocurrency, Ethereum is riding at a price of $900 at the time with a market cap of $88,202,687,601. It has been a popular platform to build the applications on, so much so that over 1000 decentralized apps have already been created on it.
Usually, the price of ether moves in trend with bitcoin and it did saw some ups and down in the last few months. At the start of 2017, ether got a rise in its prices and by the end of it, its price was riding on $300.
Ethereum has become the most preferred choice when it comes to transferring money and asset. Moreover, there has been an increased adoption of this digital currency platform that will further bring a surge in its prices in the future.
Pros and Cons of Ethereum
The focus of Eethereum is to act as a platform where decentralized applications can be built and run.
A few essential pros of Ethereum network are:
- Developer support – The development team of this platform is extremely efficient and solid that actively works on new technologies. There is a continuous attempt to improve the security, scalability, functionality, and security of its blockchain.
- Easy to use – The ERC20 token of Ethereum blockchain is easy and simple to create. Also, it’s fast but you do need to have a basic technical knowledge of the token program to achieve your results.
- Utilize Ethereum’s blockchain – When you build your application on Ethereum, you don’t need to create or maintain your own blockchain, you can simply run on Ethereum’s blockchain.
- Save your resources – By letting the Ethereum blockchain manage your work, you save your efforts, time and money through this sync. Even the most complex of contracts can run on this network.
- Launching an ICO is easy and fast – Ethereum has made it easy to launch ICO projects faster. A set of detailed instructions to start an ICO is available on its website.
It does have its Cons too:
- Not effective enough – Being a platform, Ethereum can’t be as effective as other blockchains that are designed to be a cryptocurrency. Ethereum is basically trying to be a smart contract generator, supercomputer, and ledger for a number of users. Surely this provides it with a flexibility but at the same time, it becomes less optimized for one use case.
- Technical glitches – The smart contracts of Ethereum are prone to bugs and errors that can turn out to be disastrous for any business. Moreover, due to the decentralized nature of the blockchain, there is no central control point to contain a problem.
- Gas fee – While using Ether, every time a transaction occurs on your token, a particular fee go into Ethereum network to enrich it. It is basically a way of ether to complete the transactions. This fee might not be much initially but later on, as your business scales, the fee will multiply and you have out pay the bill out of your profits.
How does Ethereum Work?
Just like the bitcoin blockchain structure, Ethereum shares the record of the entire transaction history. Every node on this network store a copy of the history which is the most recent state of each smart contract.
The network tracks the current information of all the applications that are inclusive of the smart contract code, users’ balance and the place it is stored, for each of the Ethereum application.
As for the Smart Contracts, a currency or an asset is put into a program where it will run a code. These contracts will automatically determine if an asset should be transferred to another person or to be refunded to the original bearer of that asset. All the while, the decentralized ledger of this blockchain will store and replicate the document providing it with security and transparency.
Do you have more questions about ethereum, blockchain or smart contracts? Let us know below in comments, we will include them in our next knowledge base article.
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