What is Ethereum?
The concept of Ethereum was originally mooted by a programmer called Vitalik Buterin, who discussed the possibilities of creating decentralised applications 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, funded by an online crowdsale where Ethereum tokens known as Ether could be purchased using Bitcoin.
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 operate pretty much any program they like on the Ethereum network using the innovative Ethereum Virtual Machine (EVM). The EVM allows for thousands of decentralised applications to utilise the same Ethereum 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 genuine cryptocurrency that can be spent on goods and services like Bitcoin, Ether is spent on powering a user’s experience on the decentralised apps 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‘, in Ethereum circles. The Ethereum network makes the process of developing blockchain applications easier and more efficient than before. 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 and 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 sets the Ethereum network apart, with its ability to automatically execute exchange of value when specific conditions are met, without fear of third-party interference.
- Ethereum remains a relatively new concept to most in the tech world. In terms of their capabilities and functionality, it will take some time before Ethereum’s full potential is realised.
- Continual server updates to Ethereum’s progressive network can be a disadvantage to new applications that depend on the servers to make progress.
Did you know?
There is no cap on the amount of Ether available in the ecosystem. While most leading cryptocurrencies, Bitcoin included, are capped, Ethereum is not limited. However, only 18 million Ether can be mined each year.
Should you invest in Ethereum?
There’s no doubt that Ethereum is at its relative peak in terms of popularity. 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 already invested in Ether a year ago would have purchased at a price of just $30. This means that Ether has experienced year-on-year growth of around 4000%!
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 innovative developers looking to create new decentralised apps on the Ethereum blockchain.
Are there any similar crypto coins?
There are some new cryptocurrencies on the block that have a similar relationship to Ethereum and 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.
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’.
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