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What is Ethereum?

BitForex Editor
Aug 28, 2020

To grasp the concept of Ethereum, it is necessary to understand some factors, the general impact and core properties of Ethereum, which is why concerning this term, the first question that should be duly answered is; what is Ethereum? In its most simplified term, Ethereum is a decentralized system, meaning it is not governed or controlled by any or a single entity. Over time a lot of businesses, online services have been built on a centralized system of governance; however, the system has shown on countless occasions why it is flawed and vulnerable to attacks from hackers, among other factors. Ethereum, on the other hand, which is a decentralized system besides being autonomous, has no central point of failure. It has no chance of ever going offline due to any unforeseen factor, and this is based on the fact that it is run from various volunteer computers around the world.

It is no news that Ethereum is arguably the second-largest cryptocurrency platform based on market capitalization after Bitcoin. For a while now, there has always been a direct comparison between Ethereum and Bitcoin, even though Ethereum took the project further and explored more possible potentials. For example, by making it a whole network equipped with its Internet browser, a stable payment system, and coding language. The Ethereum system makes use of a global system known as nodes, who are volunteers that download the whole Ethereum blockchain on their device and are tasked with enforcing all the entire system consensus rules. This is aimed at ensuring the network is honest plus receiving rewards in return. The fundamental aspects of the network, as well as the consensus rules, are dictated by smart contracts) that serve the purpose of automatically performing transactions and other actions within the network parties that are not trusted. The Ethereum platform provides users with a cryptocurrency token, which is known as ETHER as well as an Ethereum Virtual Machine (EVM), which is separate from the Ethereum platform major network. This makes it an efficient sandbox-tool that can be used to test and improve smart contracts.

Who Created Ethereum?

The concept of Ethereum was first proposed by a cryptocurrency researcher and programmer Vitalik Buterin in 2013. In July and August 2014, the project development was funded by an online crowd sale. It later went live on 30th 0f July 2015 with a total of 72 million coins minted. In 2016, due to exploitation among other factors including theft, there was a split as Ethereum was separated into two blockchains consecutively with the separated version adopting the name Ethereum(ETH) and the original platform which continued as Ethereum Classic(ETC).

Is Ethereum A Cryptocurrency?

Ethereum is a cryptocurrency of the Ethereum network, as earlier stated, Ethereum is a platform that operates on a decentralized system including a decentralized app store. It is necessary for a system like that to have a currency in other to be able to fund the computational resources, which are essential for efficient operations and running of the program. This is where Ether comes in, which is a digital bearer asset that doesn’t need a third party in other to process payment. Ether is not just digital currency, but it also serves as fuel for decentralized apps in the network. For instance, users are charged with a transaction fee when they want to make changes in the app in other for the network to process the change. The calculation of the transaction fees is automatically done based on the amount of computing power necessary and how long the process will take.

How Does Ethereum Work?

As stated earlier, Ethereum’s design is based on the protocol and blockchain of Bitcoin; however, the program has been changed and improved on in some areas so that it can support applications beyond the money system. Ethereum’s blockchain provides a lot of function, apart from transaction history, every node present on the Ethereum network is tasked with downloading the most current state as well as the current information of every smart contract in the network. The Ethereum Blockchain ism more of a transaction-based state machine. A state machine is simply something that can efficiently read a series of inputs as well as transition to a new state in relation to the read inputs. Every aspect of Ethereum is made up of multiple transactions, and every transaction is grouped in other to form “block,” every block is chained or tied together with its previous blocks. A transaction needs to be validated before it can be added to the ledger; hence it goes through a process known as mining.

Mining involves the effort put by a group of nodes into the completion of a proof of work challenge based on their computing skill. The challenge in this aspect could be a mathematical puzzle. The power of their computer determines how quickly a puzzle can be solved. The puzzle answer is regarded as proof of work, and it is what guarantees the validity of a block. Numerous miners around the world compete with one another all in an attempt to create and validate a block as ether tokens are generated and awarded to any miner who can prove a block. Miners are seen as the strength of the Ethereum network, as they don’t just only oversee other operations, validate and confirm transactions, but they also generate new tokens of the network’s currency.

Benefits that Ethereum Can Provides

The Ethereum platform provides a lot of advantages from the properties of the Blockchain technology it runs on. It is free from the intervention of a third party, meaning all decentralized apps among others that are deployed in the network can’t be overseen or controlled by anyone. All blockchain technology is governed by the principle of consensus, which means all nodes present in the system need to agree based on any change made within it. This helps curb corruption, fraud possibilities, thereby making it secure and safe. The entire platform is decentralized, and as such, there is an absence of any possible single point of failure, based on this, all apps will be present online without switching off. The Ethereum network is secured against potential fraud-related acts as well as hacking attacks based on its cryptographic security and decentralized nature.

Problems Associated With Ethereum

Even though the impact of small contracts is supposed to make sure the network is fault-proof. They can only be as efficient as their programmers. The possibility of human error should be taken into account as any unforeseen mistake in the code might be exploited. In a situation where this happens, it would be next to impossible to stop the influence of hackers and the only way to solve it will be to reach an agreement to write an underlying code which off course goes against the very concept of a blockchain that ensures that a blockchain must be unchangeable.

However, Cryptocurrency experts are very optimistic about the future of Ethereum as it has been able to gain a massive mainstream media and the attention of the general public. It is indeed evident that their technology is bound to revolutionize the world.

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