What is Ethereum?
The concept of Ethereum was originally mooted by a programmer named Vitalik Buterin, who discussed the possibilities of creating decentralised applications (dApps) using scripting language on the Bitcoin network. However, when Buterin failed to receive widespread approval of his idea, he opted to create a new project; Ethereum. This was funded by an online crowdsale where Ethereum tokens known as Ether could be purchased using Bitcoin.
Why was Ethereum Invented?
The Ethereum blockchain goes to far greater depths than the Bitcoin blockchain has to date. While Bitcoin utilises the blockchain to monitor and control its currency, Ethereum has allowed developers to launch and operate pretty much any program they like on the innovative Ethereum Virtual Machine (EVM). The EVM allows for thousands of decentralised applications to utilise the same blockchain without requiring central control of an individual or entity, with each guarded against fraudulent activities.
The Ethereum network’s fuel is its cryptocurrency, Ether. Ether helps to pay for the resources and power required to operate applications and programs on the Ethereum network. Rather than acting as a 'currency' coin that can be spent on goods and services like Bitcoin, ETH is a utility token, spent on powering a user’s experience within the Ethereum network. It has sometimes been called ‘digital oil’ due to the way in which it keeps the cogs of productivity turning.
How does Ethereum Work?
Ethereum works by allowing developers to design, build and deploy decentralised applications, known as 'dApps'. Rather than having to create separate blockchains for each application, Ethereum allows for the development of potentially limitless dapps on a single network, all of which are powered by Ether.
Smart contracts are one of the most intriguing aspects of Ethereum. These autonomous agents, deployed onto the Ethereum blockchain, are filled with data and code and can facilitate the exchange of anything of value, from money and property to shares or digital content. As smart contracts operate on the blockchain, they are highly secure; protected against fraud, censorship or downtime.
What are the Pros and Cons of Ethereum?
For any decentralised applications that operate on the Ethereum blockchain, there are a number of benefits and some minor limitations too, which we will explore below.
- The immutability of the Ethereum network means that third-parties cannot make any changes to data stored within the Ethereum blockchain without prior approval.
- As the Ethereum platform is secured by cryptography, all applications on the Ethereum blockchain are well-guarded against cyber-attacks.
- Applications are designed never to go down, offering 24/7 reliability.
- The execution of smart contracts is an evolutionary leap that combines technology with legally binding agreements. These have the ability to automatically execute an exchange of value when specific conditions are met, without fear of third-party interference or manipulation.
- In terms of capabilities and functionality, there are already many altcoins that offer more features than Ethereum.
- Continual server updates to Ethereum’s progressive network can be a disadvantage to applications that depend on them.
Did you know?
There is no cap on the amount of Ether available in the ecosystem. While most leading cryptocurrencies, Bitcoin included, have a maximum supply already declared, Ethereum is without limit. However, only 18 million ETH can be mined within a single year.
How Safe is Ethereum?
As the second most valuable and well-established token by market cap, Ethereum is a safer bet than any other altcoin. Like Bitcoin, Ethereum is a pioneer of the cryptocurrency industry, by expanding the use cases of blockchain technology. In terms of price, Ethereum is a lot cheaper to buy than its predecessor, and has enough support to ensure its place in the foreseeable future.
Can Ethereum be used Anonymously?
Anonymous payments are now possible on the Ethereum network. The Tornado Cash tool was introduced in August, 2019 and allows users to make transactions without providing a record of how much Ether was involved, or records of previous transactions. Tornado is based on the privacy-based cryptography, known as zero-knowledge proofs; such proofs have been part of the fundamental design of the token Zcash since its inception. Its use in Ethereum means that users can send Ether via smart contracts anonymously.
Ethereum Transaction Fees and Charges
The fees associated with Ethereum can be somewhat higher than those of its main competitors, but these are still extremely low when compared to charges incurred through bank transfers and other outdated systems that are still in use.
Should you Invest in Ethereum?
There’s no doubt that Ethereum is a leading cryptocurrency, maintaining its rank as the second highest token for years now. It’s already experiencing significant trading volume on a daily basis and the price of Ether reached an all-time high valuation of $1,430 at the beginning of 2018. Those who invested in Ether at its lowest recorded value back in 2015 would have purchased at a price of just 42 cents. This means that a ROI of 9000% would have been made!
There’s no doubt that buying Ether is one of the most positive long-term cryptocurrency investments you can make today. Investment in Ether is welcomed by the crypto industry, as this ‘digital oil’ is then used by other innovators looking to create new dApps on the blockchain. Ethereum also allows for the creation of new cryptocurrencies based on the ERC20 token, and has been the launchpad of almost every single one of its current competitors.
Are There any Similar Crypto Coins?
There are some new cryptocurrencies on the block that have a similar relationship to Ethereum and its token, Ether:
Widely referred to as the ‘Ethereum of Japan’, as 95% of its initial coin offerings (ICOs) were based in Japan, the Cardano network is another platform that transfers digital money using its digital token ADA. The Cardano network also aims to operate decentralised apps on the Cardano blockchain. Continued development of Cardano has allowed it to overtake Ethereum in some ways. For more information, visit our Cardano page.
Another emerging crypto platform and digital token, NEO allows the development of smart contracts and assets on its blockchain. Its objectives are aligned closely to Ethereum as it aims to become the number-one platform for a ‘smart contract economy’. Neo's focus on regulatory compliance has caused many supporters to believe it has as real shot at mass adoption, especially throughout Asia.
What We Do
At Best Bitcoin Exchange, we’ve tested and reviewed Ethereum brokers, e-wallets and more in order to recommend the best providers. We research, so that you can start trading Ethereum quickly and in a safe, reputable environment.
We have trailled and tested many, and have shortlisted a few that we personally recommend. The top ranking platforms will have the best user ratings and are therefore considered the most trustworthy exchanges to trade Ethereum using fiat currencies.