Details

This page will be going more in-depth about Ethereum, as we already talked about the history. Lets talk about what it actually is, it's functions and how it has changed peer-to-peer transactions.

Essentially Ethereum is a global decentralized global software platform that is powered by blockchain technology. You may also see it be referred to as ether or ETH. It can be used by any user to create any secured digital technology, and has it's own token which is designed for use in the blockchain network. But it can also be issued as payment for work that a user has done on the blockchain. Ethereum was designed to be saleable, programmable and decentralized, and has been the platform of choice for developers and companies that are beginning to create similar technology that is based on it. In an effort to start and change the way that many industries are currently operating and even people in their everyday lives.

Ethereum supports smart contracts which are an essential attribute to decentralized applications, as you will notice many DeFi and other applications use smart contracts in combination with the blockchain technology.

Just like other cryptocurrencies, Ethereum uses blockchain technology, which is essentially if you would picture a long chain of blocks and all of the information that is contained inside of the blocks is added to every newly created block. And throughout the network, an identical copy of the blockchain is dispersed. This blockchain is kept validated by a system of automated programs that come to a consensus as to the validity of transaction information. No changes can be made to the blockchain unless a consensus has been reached on the network.Making it very secure.

These consensus is reached by the use of a protocol that is referred to as the consensus mechanism. Ethereum uses what is called the proof-of-work protocol, which is where a network of users runs software that attempts to prove that the encrypted number is in fact valid. This is the process that is called mining, the first miner that is responsible for proving the validity of a number is rewarded with ETH.

Proof of Stake Protocol

At the moment Ethereum is using the proof-of-work consensus protocol, and soon at some point it is going to switch to using another consensus protocol known as proof-of-stake. This is where users with ETH will stake a certain amount of their ether. The process of staking will prevent the ETH from being used in transactions. It is used as incentive and collateral for the privilege of mining. Mining will work differently when Ethereum switches to use the proof-of-stake protocol, as it will not require everyone on the network to compete for the rewards. Instead what will happen is the protocol itself will randomly choose users that have staked ether to verify the transactions. The validators are then rewarded with ETH in exchange for their work.

Ethereum vs Bitcoin

Ethereum and Bitcoin are often compared to each other, while they do of course have some factors that make them similar. There are also some important differences that we will take a look at and explain.

By it's organization Ethereum is described as "the world's programmable blockchain" situating itself as an electronic, programmable network with various applications. Where as the Bitcoin blockchain was created specifically to only support the Bitcoin cryptocurrency.

Maximum number that can be in circulation:

Ethereum - Unlimited

Bitcoin - 21 Million

Remember that the time that it takes to process a block of ETH limits how much ether that can be minted each year.

Transaction processing fees:

Ethereum - Gas fees are payed by the participants in Ethereum transactions

Bitcoin - The fees that are associated with Bitcoin are absorbed by the broader Bitcoin network.

Pricing

Ethereum's pricing history just like like most is full of ups and downs throughout. In the early days of ETH it traded at $2.00 at some points. The difference in price can be various, for example in early 2017 ETH was being traded for less than $15.00 per coin, but then went all the way up to $1,400 per ETH in January the following year. After that high ETH began to fall back down bellow $100 at some times during the next months and even years. Then in 2021 climbing up yet again, went over the $4000 mark.