What is Ethereum in simple terms? Quite a great portion of the people in the world today still find it hard to understand what Ethereum really is. They still use terms like Ethereum ether and blockchain interchangeably. Although these terms have actually conformed to what people have made them be they are still different from each other and we will cover a lot of them in this article Ethereum explained. We’ll explain what Ethereum is, what either is, how Ethereum is different from bitcoin, and some other terms that are associated with the topic.
What is Ethereum? Ethereum explained
Before discussing what Ethereum is I think you need a quick understanding of What Is Blockchain and Why blockchain was created?
So check it out this will help you understand Ethereum better when we talk about it. So bitcoin is simply a currency that runs on a technology known as the blockchain. This technology helps bitcoin stay decentralized, which means it’s not controlled by any one person or government transparent, unchangeable, and ultimately safe to use. With bitcoin, you can trade services with other people anywhere using bitcoin as the currency. Now since bitcoin up till now has no other proven use other than being used solely as a means of transaction. The worth of a bitcoin is largely dependent on the worth of the currency itself.
Ethereum explained, Ethereum on the other hand is totally different from bitcoin it is a decentralized, open source, public blockchain-based distributed evaluating software platform capable of running smart contract applications exactly as they were programmed, without any chance of downtime, censorship fraud, or third-party interference.
Decentralized means that it isn’t controlled by any authority or any given person. For example, if you wanted to trade your skills for money as a freelancer and Fiverr you won’t be able to do that by yourself. You will need Fiverr to help facilitate that agreement between you and your client. This helps protect both you and the client from fraud because Fiverr holds the money in escrow. Now after all that is done as a freelancer, you will need to pay 5 or 20 percent of your profit which is crazy. Here Fiverr is the decentralized authority that dictates what happens. Fiverr controls everything which means any changes can be made, anytime it’s convenient for them. In a situation where there’s no fighter or middleman or anybody to tell what to do or rules to follow just direct transactions between you and your client then that right there is what we call decentralized.
Open source means that the software is totally free to use and you can even make it your own. A quick example is pexels.com. It is open source and anyone can get stuff from there without getting copyright claims.
Blockchain-based simply means all the data and transactions and everything are stored in a public ledger that everyone can see which brings about transparency and less worry. Ethereum explained, The idea of Ethereum was introduced by Vitalik Butrin at age 19 with the intention of designing a system that could execute smart contracts while also being decentralized. Ethereum makes it possible for developers to design and execute smart contracts and also creates room for them to create their own cryptocurrency. This is done directly on the Ethereum blockchain eliminating the need for them to create a new blockchain for that purpose. So in the long run the developers save a lot of precious time and it also gives them the security and decentralization of Ethereum which is not something inherent to old blockchains.
Smart contracts are important part of Ethereum. What are these smart contracts we’ve been babbling about? Let’s quickly refer back to our fiber example behind the scenes there are other fees being paid by Fiverr to other third parties maybe for card processing and also other programs being run to determine how much you get after their fees have been taken out and lots more. This makes the payment system to be slow due to lots of things to be done after the other. Now wouldn’t it be better if it was automated?
Well, this is where smart contracts come in. These are a bunch of codes of statements designed to achieve automation. As long as you meet all the requirements the contract is executed. This goes to save time and also reduces the cost of carrying out that whole process. Now you can find several developers who are designing smart contracts for real-world problems. Smart contracts built on Ethereum are coded or written in a very particular language known as solidity. This language is specific to Ethereum. The Ethereum network that runs these smart contracts or scripts makes use of something to make transactions possible, that something is called Ether.
Ethereum explained, Ether is used as an incentive for people to keep writing nodes. Nodes are points all over the world where transaction data are stored. These nodes are run by people and they help to verify transactions. Unlike the company servers, if a single node goes offline for some reason, the whole system still continues as there are numerous numbers of nodes, which makes it hard for it to be hacked or stopped. For every transaction done on the Ethereum network, a fee is paid by whoever initiated the transaction.
This fee either has is what we call Ethereum gas fees. These fees are paid to the nodes that execute them. The amount either you pay is totally up to you in the number of operations or computations required, but like in everyday life, the more either you are willing to pay per transaction the faster these notes execute them. Everyone wants bigger pay, right? So if you want your transactions to be completed instantly consider raising your gas fees to speed up the transaction.
Difference between Bitcoin and Ethereum
Ethereum has a market cap of 208 billion dollars in market cap and is the second largest cryptocurrency in the world. While bitcoin system number one isn’t the only difference between these two there are more.
Number one is their supply the total supply of Ethereum currency is not fixed. Roughly 18 million either are minted every year. Bitcoin on the other hand has a fixed supply of about 21 million bitcoin.
Why is Ethereum price rising? Ethereum explained
One question that might go through your mind is if more either is being minted how come the price keeps going up? Since scarcity is one of the main drivers of crypto price. Well, the quick answer is utility. The demand for either keeps going up because as more and more apps are being built on the Ethereum network more either will be needed to be used for gas fees. So as long as ether has utility and real-world applications then more ether will most likely be in demand. Lots of other people buy Ethereum because they are very bullish on the price of ether in the future.
Another quick but huge difference is the speed of transaction completion. While bitcoin can take up to 16 minutes to go through Ethereum on the other hand takes anywhere between 5 to 15 seconds to complete. This is a big difference as it can be a determining factor for adoption. In the world, today Ethereum is being seen past its currency. Ethereum has more applications than bitcoin. While bitcoins are only seen as their currency and as a store of value. Ethereum is being widely adopted more and more from NFTs to other projects like uni swap, chain link, and so on. Ethereum has more real-world use. It is everything that bitcoin is but much more.
Consider this before investing in Ethereum explained
Now if you want to consider Ethereum as an investment there are some pointers you need to consider first.
The first is that Ethereum is the most used platform in the cryptocurrency world right now. Now as I said earlier it’s being adopted in a lot of different ways. Most notably the NFT space, but you can’t really say that same thing for meme coins like Shiba Inu. If there’s any value in coins like that then it’s hard to see cause I can’t see it. Ethereum being quickly adopted today is a bullish sign for its native coin either.
The second thing we should look at when investing in Ethereum is that there is what’s called network risk. We actually don’t know what’s going to happen to the Ethereum network in five years’ time. If they choose to change the circulating supply of the currency for example that could be a massive downside or a massive boom to the actual currency itself. The theorem is always making updates to how it works and those updates are being decided by a group of decentralized developers that are working on the Ethereum network.
So if you’re already investing or thinking of doing so then this is something you should definitely think of looking into, well there you have it.