For some, it is "Bitcoin 2.0", for others, its much more powerful alternative. Today, Ethereum is the second most popular cryptocurrency in the world, which has long been in the shadow of its older brother. So let's find out what Ethereum is and what possibilities it offers?
Most users associate the Ethereum with a cryptocurrency. However, it is worth emphasizing that this is only a part of the truth, because Ethereum is also an extensive development platform using blockchain technology. It is mainly used to create decentralized applications and to make smart contracts. This was the main motivation of Ethereum's developers. In this article we will try to explain what this platform is in a simple and illustrative way (without complicated and strictly technical arguments). Let's go back to the beginnings.
The history of Ethereum dates back to 2013, when less than 20 years old Vitalik Buterin, a young programmer strongly associated with the idea of Bitcoin, proposed a new platform. Knowing the possibilities (as well as limitations) of the first cryptocurrency, he prepared a concept of an alternative solution equipped with a system that was to enable the construction of decentralized applications, and to conclude smart contracts.
Joseph Lubin, then COO Ethereum Switzerland GmbH - the company responsible for network design - helped Buterin to implement the idea. The initiative was also demonstrated by the community itself, which was able to raise funds for the launch of the project, which were raised from the sale of the first ETH tokens. The result of this extraordinary crowdfunding action and cooperation with Lubin's company was Ethereum's debut in July 2015.
So what exactly is Ethereum?
Ethereum is mainly a platform for concluding smart contracts and building decentralized applications, and it was created for this purpose. It has its own crypto, but seeing Ethereum only through the prism of coins would be a big understatement. Currently, Ethereum is the main opposition for Bitcoin and is also gaining popularity as a great solution for investing, placing bets or supporting crowdfunding. Ethereum, like Bitcoin, uses block-based technology, but in order to build a block hash, it uses a modified version of the Dagger-Hashimoto algorithm. Bitcoin, on the other hand, uses the sha256 algorithm, but this is not the only difference between the world leader of the cryptocurrencies and the hero of this article.
How is Ethereum different from Bitcoin?
The first, obvious and already mentioned above in this article is the range of possibilities offered by both solutions. Bitcoin only has an implementation that makes it possible to make payments, and blockchain is a source of information about transactions / capital flow. Ethereum, on the other hand, is the whole platform with which we are able to create decentralized applications and conclude smart contracts.
Other noteworthy differences between Ethereum and Bitcoin are:
- Ethereum extracts blocks much faster than Bitcoin. This makes Ethereum's transactions flow more efficiently, and the entire payment system is much more efficient.
- Ethereum has a variable block size, which is determined by the customers (miners) connected to the network, while in the case of Bitcoin the block size is fixed. This results in a large number of pending transactions - for a miner to add our transaction to the block, a high commission must be granted to the miner. One of the consequences of this situation was the Bitcoin Cash fork, where the block size was set at 8MB
- Ethereum allows you to build and execute the application, not just send transfers
- Ethereum, due to its specificity, is seen as a much cheaper, faster and more flexible alternative to Bitcoin