What is Ethereum?
Ethereum is a platform based on blockchain technology. The system was inspired by the Bitcoin protocol but aims to be much more the means of transferring funds. The Ethereum team has created a network that facilitates the creation of decentralized apps (also known as ‘dapps’). Dapps are apps like any other, except for the fact that they live on a decentralized network. What also sets dapps apart from regular apps is the use of smart contracts.
Who created Ethereum?
Ethereum was created by a young writer and programmer by the name of Vitalik Buterin. He started writing articles on Bitcoin, and would later go on to co-found Bitcoin Magazine. After building a global network of blockchain and Bitcoin enthusiasts, Buterin came up with the idea for Ethereum.
How does Ethereum work?
The fuel of Ethereum is the native cryptocurrency Ether (ETH). Like Bitcoin, Ether is a record of transactions between two parties. Unlike Bitcoin, Ether has multiple functions. Developers use Ether tokens to create dapps, and others spend Ether tokens to use the dapps.
How do you store Ethereum?
You will need an Ether wallet to store your tokens. There are some options available for you, including desktop, mobile, online, hardware, and paper wallets. The different wallets come with varying degrees of accessibility and security.
How do you buy Ethereum?
You can buy Ethereum on one of the many cryptocurrency exchanges. You will be able to purchase Ether tokens for fiat money or other cryptocurrency tokens depending on the exchange. You also have the option to acquire Ether tokens directly from holders via peer-to-peer exchanges like LocalEthereum. Although not as commonplace as Bitcoin ATMs, you may also be able to find Ethereum ATMs scattered around mainly big cities. Finally, you can also buy Ether directly from people you meet in person if you feel more comfortable doing so.
How do you mine Ethereum?
If you have a powerful computer, you might be able to mine Ether tokens. The process requires you to help verify Ethereum transactions made by other users on the network. Processing a block of transactions will earn you 5 ETH. This method is called proof-of-work because you earn Ether tokens once you prove you’ve done the work. Ethereum will soon move on to a new system called proof-of-stake. This system will see the verification method be carried out by holders of Ether tokens (those who have a ‘stake’) rather than miners.
What are smart contracts?
Despite the name, smart contracts are not legally binding contracts between two parties. Instead, they are contracts between two programs on the Ethereum blockchain. They have been compared to vending machines, in that they self-execute when a specific condition is met. A vending machine will only dispense an item if you insert the correct amount of coins. That is how smart contracts work.
Advantages of Ethereum
Ethereum has some advantages over Bitcoin. The most obvious one is that Ethereum is much more versatile, considering that it facilitates the creation of dapps. The second is that Ether transactions happen about twice as fast as Bitcoin transactions. Like Bitcoin, it is very cheap to make an Ether transfer.
Disadvantages of Ethereum
Unlike Bitcoin, Ethereum has no total supply of Ether tokens. The lack of a ceiling would generally make it susceptible to inflation. The Ethereum team has worked on a solution to prevent this, however. Like Bitcoin, Ethereum is facing an issue of scalability due to its decentralized nature.