Some would argue that the only truly successful challenger to Bitcoin is Ethereum. Developed by Vitalik Buterin, Gavin Wood, and Joseph Lubin, this cryptocurrency platform has seen a meteoric rise since it was officially introduced in 2015. In just three short years Ethereum has enabled massive improvements to blockchain technology through innovative concepts like Smart Contracts and Dapps.
Many people only understand Ethereum as a form of cryptocurrency. Technically, Ether is the digital token associated with Ethereum. The platform itself is much more than a cryptocurrency. It has many distinctions that its adherents believe make it superior to Bitcoin. Here is a brief guide that explores what Ethereum is and the potential it holds for blockchain and cryptocurrency development.
Some people want to know the basics of Ethereum without having to venture too far into technical matters. In layman’s terms, Ethereum is an open-software platform that uses a blockchain. Within that framework developers can build blockchain-based applications, create binding agreements, and perform other important functions in a decentralized environment. A digital token called Ether is a part of the platform.
Ethereum has the potential to allow centralized services to become decentralized. Just within the financial sector there are hundreds of services that must be managed by vast teams of individuals. Bank loans. Payment processing. Regulatory compliance. In other sectors there are also multiple services that require recording, things like the registration of car titles and filing of marriage licenses. All of these things have previously depended upon a centralized framework to achieve their objectives. One of Ethereum’s goals is to make it possible for all of these tasks to become decentralized.
Decentralized applications were always the ultimate goal of Vitalik Buterin when he first announced the Ethereum concept in 2013. In large measure, the project has been a success. There have been some bumps in the road – security flaws and such – but the developers have remained on track in building the platform to its current state.
Ether is the first cryptocurrency with a blockchain built on the Ethereum platform. It is common for those who hold Ether to refer to the token as Ethereum, but this is technically incorrect. In fact, many other altcoins have been developed on the ERC-20 model. This model uses the Ethereum blockchain to allow for the creation of tokens and their use.
The Differences Between Bitcoin and Ethereum
The differences between Bitcoin and Ethereum should be taken into account when discussing what makes Ethereum unique. To keep it simple, Bitcoin is a distributed public blockchain network that has one primary purpose. It exists for the peer-to-peer transfer of digital currency. The Bitcoin blockchain is only used to track transfers of Bitcoin. It preserves a record of transactions that anyone can view.
Buterin and his development team had another idea in mind. They wanted to create something similar to Bitcoin in the way it functioned. In other words, they wanted to have a blockchain as a core framework. But they also wanted that blockchain to facilitate more than just the creation of and management of digital tokens. They wanted developers to be able to create their own decentralized apps.
The Ethereum blockchain can run the programming code of any decentralized application. Application developers can then use Ether to manage the financial aspects of their apps. So, Bitcoin is simple a cryptocurrency token that can be traded. Ethereum goes beyond cryptocurrency to offer many other features.
Ethereum is a Blockchain Application Platform
A hallmark of Ethereum is its decentralized applications. These apps are decentralized, meaning that they have no need for third-party involvement once they are deployed. This has led them to be call Dapps, which stands for decentralized applications.
What are some of the things a Dapp can accomplish? Dapps have been created to:
- Exchange cryptocurrencies
- Exchange other items of value
- Track market prices
- Perform security functions
There is almost no limit to what a Dapp could achieve. An entire community has sprung up around the development of Dapps for the Ethereum platform, and this speaks of the projects goal to address real-world problems.
There was always a feeling that blockchain technology could provide more to the world than a new digital token. Ethereum has proven that to be true. In the future it is likely that the world will see Ethereum as an improvement on the Bitcoin concept. If Bitcoin were a neanderthal, then Ethereum would be a modern human. The evolution of cryptocurrency has occurred at a much faster rate!
Ethereum is a World Computer
Much has been made in the press about the World Computer concept of Ethereum. Most casual investors know little about this aspect. When the blockchain was originally conceived it was designed to accomplish a limited number of functions. Specifically, it was created to allow peer-to-peer transfers of Bitcoin. Buterin sought to improve upon that.
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The primary innovation of Ethereum is the Ethereum Virtual Machine, or EVM. This is a Turing complete software that runs on the Ethereum network. It will essentially permit anyone to run any program within the constraints of time and memory, and no specific programming language is required. The EVM is what makes it possible for multiple Dapps to be built upon the Ethereum blockchain.
Ethereum’s blockchain is both open-source and public. Public means that anyone can use the blockchain to create and store Smart Contracts, build Dapps, and perform other functions. Open-source means that individuals can use the Ethereum blockchain framework to develop and deploy their own blockchain through what is known as a fork.
The primary function of the EVM, or World Computer, is to compile code that is written by humans into machine readable code. The machine readable code is then stored on the Ethereum blockchain. The EVM can be accessed by all computers that are connected to the Ethereum network.
As one can see, Ethereum has become something of a game changer where cryptocurrencies are concerned. It has broadened the scope of what a blockchain can be and what it can help businesses accomplish. There are surely more exciting developments ahead for those who prefer Ether over Bitcoin and other alternative currencies.