What is Ethereum ? Created by Vitalik Buterin, it has scored itself the second spot in the hierarchy of cryptocurrencies. This digital currency launched in 2015 is predicted to surpass Bitcoin and may be the cryptocurrency of the future. Is Ethereum similar to Bitcoin? It is in a way, but not really. Like Bitcoin, Ethereum is a part of a blockchain network.
The main difference between the two currencies is that Bitcoin blockchain focuses on tracking ownership of the digital currency while Ethereum blockchain focuses on running the programming code or network.
Instead of having to build an entirely original blockchain for each new application, Ethereum enables the development of thousands of different applications in a single platform. In the Ethereum blockchain, miners work to earn Ether.
Ether is a crypto token that helps run the network. Another use of the Ethereum blockchain is its ability to decentralize any services that are centralized.
For instance, Ethereum is capable of decentralizing services like loans provided by banks, online transactions using Paypal as well as voting systems and much more. Ethereum can also be used to build a Decentralized Autonomous Organization (DAO). 14 A DAO is a fully autonomous organization without a leader.
What is ethereum in simple terms? What are DAO?
DAOs are run by programming codes on a collection of smart contracts written in the Ethereum blockchain. DAO is designed to replace the structure of a traditional organization and like Bitcoin, eliminating the need for people and a centralized control. What are the most obvious benefits of Ethereum? Firstly, a third party cannot make any changes to the data. The system is also tamper and corruption proof.
This is because Ethereum is built based on a network formed around a consensus as a result, making censorship impossible. Secondly, just like Bitcoin, Ethereum is backed up by secure cryptography. Therefore, the applications are well protected against any form of hacking.
What’s unique about ETH? Ethereum vs bitcoin
There are many cryptocurrencies and lots of other tokens on Ethereum, but there are some things that only ETH can do.
ETH fuels and secures Ethereum
ETH is the lifeblood of Ethereum. When you send ETH or use an Ethereum application, you’ll pay a small fee in ETH to use the Ethereum network. This fee is an incentive for a miner to process and verify what you’re trying to do.
Miners are like the record-keepers of Ethereum – they check and prove that no one is cheating. Miners who do this work are also rewarded with small amounts of newly-issued ETH.
The work miners do keeps Ethereum secure and free of centralized control. In other words, ETH powers Ethereum.
ETH will become even more important with staking. When you stake your ETH you’ll be able to help secure Ethereum and earn rewards. In this system, the threat of losing your ETH disincentivises attacks. More on staking
ETH underpins the Ethereum financial system
Not satisfied with payments, the Ethereum community is building a whole financial system that’s peer-to-peer and accessible to everyone.
You can use ETH as collateral to generate entirely different cryptocurrency tokens on Ethereum. Plus you can borrow, lend and earn interest on ETH and other ETH-backed tokens.
More on DeFi
DeFi is the decentralized financial system built on Ethereum. This overview explains what you can do.
Uses for ETH grow every day
Because Ethereum is programmable, developers can shape ETH in countless ways.
Back in 2015, all you could do was send ETH from one Ethereum account to another. Here are just some of things you can do today.
- Stream ETH – pay someone or receive funds in real time.
- Swap tokens – you can trade ETH with other tokens including Bitcoin.
- Earn interest – on ETH and other Ethereum-based tokens.
- Get stablecoins – access the world of cryptocurrencies with a steady, less-volatile value.
What is ethereum mining? Where to get ETH?
You can get ETH from an exchange or a wallet but different countries have different policies. Check to see the services that will let you buy ETH.
Why does ETH have value?
ETH’s valuable in different ways to different people.
For users of Ethereum, ETH is valuable because it lets you pay transaction fees.
Others see it as a digital store of value because the creation of new ETH slows down over time.
More recently, ETH has become valuable to users of financial apps on Ethereum. That’s because you can use ETH as collateral for crypto loans, or as a payment system.
Of course many also see it as an investment, similar to Bitcoin or other cryptocurrencies.
ETH isn’t the only crypto on Ethereum
Anyone can create new kinds of assets and trade them on Ethereum. People have tokenised traditional currencies, their real estate, their art, and even themselves! Ethereum is home to thousands of tokens – some more useful and valuable than others. Developers are constantly building new tokens that unlock new possibilities and open new markets.
More on tokens and their uses
Popular types of token
Stablecoins
Tokens that mirror the value of traditional currency like dollars. This solves the volatility problem with many cryptocurrencies.
Governance tokens
Tokens that represent voting power in decentralized organisations.
Sh*t coins
Because making new tokens is easy, anyone can do it – even people with bad or misguided intentions. Always do your research before using them!
Collectible tokens
Tokens that represent a collectible game item, piece of digital art, or other unique assets. Commonly known as non-fungible tokens (NFTs).
Next Article: Are Cryptocurrencies a good investment?
Next Article: Cryptocurrency Scams and how to avoid them
