What is Ethereum and how does it differ from Bitcoin?

Empowering Young Entrepreneurs in Ghana through Bitcoin

What is Ethereum and how does it differ from Bitcoin?

What is Ethereum and how does it differ from Bitcoin?

Ethereum, which many consider the future of the Internet, is a very hot thing in the cryptocurrency market. Since 2015, when it was created, this blockchain allows you to create smart contracts and easily securely charge your jobs without intermediaries. That is why many call it Web 3.0, which according to the market cap is in second place behind Bitcoin itself, and why it is special and different from Bitcoin, find out more below.

What is Ethereum?

Ethereum launched Vitalik Buterin in 2015 at the age of only 21. As early as 2013, Buterin first described how Bitcoin needed a programming language through which applications would be launched. Today, Ethereum is a special blockchain with a special token called Ether (ETH), and is used as a “gasoline” to power the Ethereum network and perform smart contracts, which you will read more about below. This is why Ether is often referred to as cryptocurrency, not cryptocurrency, because it is essential to power the Ethereum network, not as a currency. But what is Ethereum, why it is so different from Bitcoin, and why it is called the “future” of the Internet – read below.

The maximum amount of Ethereum has no limit

Bitcoin is considered by many today to be the gold of the modern age, both because it has a maximum limit of 21 million Bitcoins that can be created, and because of outdated technology (expensive and slow transactions). On the other hand, apart from the fact that Ether does not have the same purpose as Bitcoin, it does not have a maximum quantity limit, but it has a ratio that is produced on an annual basis. During the year (currently) slightly more than 15 million Ethers are produced (on average 5 ETH per second). This production ratio will be drastically reduced when Ethereum changes the method of mining to PoS, which you will be able to read more about at the end of this text. When this happens, the value of Ether will not grow indefinitely as with Bitcoin, but will achieve stability based on constantly replenished stocks, and this is exactly what is essential for its practical use.

Ethereum smart contracts

At the beginning of the text, we stated that the original idea of the Ethereum blockchain was the possibility of creating a program (contract) that would perform some additional action. You can write an ethereum script in the Solidity language, this language allows loops and thus allows much more to be written in it than what could be done with BTC. In short, you write a Solidity program that must be sent to the blockchain in order to run. Then you have to pay for a certain number of ETHs for every piece of data you send, which means that larger programs cost a lot more. That is why people aim to keep these programs as small as possible, and these small programs are called smart contracts.

An example of a smart contract Vitalik who is the founder of Ethereum explained on the example of a beverage machine. There are some agreement terms in that device, and those conditions are that when you put $ 2 in the machine, the machine throws you a drink. If you don’t put in $ 2, the machine doesn’t throw out a drink, and if the drink comes out anyway then it’s not a good program. That machine follows the rules and comes with an anti-thief mechanism, which is safe enough for $ 2 bottles of drinks.

On the other hand at Ethereum, when we pay the appropriate amount into some smart contract, then that amount we paid controls that contract. If the contract is fulfilled, he can send that Ether to another address, check the conditions, return it to the sender, etc.

Another interesting thing about applications based on the smart contract principle is that their abbreviation is not apps, but dapps, and this d added means that these applications are decentralized.

ERC20 tokens

Another interesting feature of the Ethereum blockchain is that it allows you to create tokens on your network. These tokens are “special” cryptocurrencies that are created with their smart contracts, and like everything can be sent from one Ethereum address to another. In short, ERC20 is a token that is the result of a smart contract and it is located on the Ethereum network, not its own, and therefore they are not literally cryptocurrencies. The standard is for tokens to be divided into 18 decimals, but when creating your smart contract you can choose how many decimals your token will be divisible.

This feature of the Ethereum network that an ERC20 token can be created is a complete revolution in our way of doing business so far. This can automate virtually the entire business of a company or allow a taxi driver to have their own “Uber” app. The potential of this technology is truly amazing and there could soon be big changes in the ways of doing business we are used to.

PoS mining

In the not-so-distant future, Ethereum is moving to a different mining system than it is now. So far, he has worked on the PoW (Proof of Work) system, and is now moving to the new PoS (Proof of Stake). Of course, PoS brings with it some downsides, and that is that in that system, an Ethereum blockchain user who wants to mine Ether has to invest his Ether and use it to guarantee that the confirmed transactions will be true. If he makes a mistake and other nodes (the name for a new type of miner) discover it, he loses his stake. If all goes well he gets his stake back in a few months, plus more earnings from the spent Ether by network users.

Ethereum and Bitcoin comparison

As you can read from the whole text, Ethereum is very different from Bitcoin. The Ethereum and Bitcoin comparison could read oil and gold, and below, briefly read a few items about the differences between Ethereum:

  • Soon a different way of mining.
  • Supports the creation of other tokens in your network.
  • Smart contracts – programming language supports loops and logic creation.
  • Bitcoin – digital gold, expensive, slow transactions, but its advantages are that it is only 21 million and thus attracts many investors as a potential gold of the modern age.
  • Ethereum – the oil of the modern age, a network that enables the creation of smart contracts and new tokens in its network. It brings a complete revolution in the way we do business.

How to buy Ethereum?

As with buying Bitcoin the first thing you need to do is register on Coinbase, one of the most popular internet exchanges. After registration, you need to confirm your identity by painting the documents and all you have to do is buy ETH. You buy Ether via card or SEPA transfer, and the purchase via card itself takes only a few seconds. With SEPA transfers, the fees are lower, but you have to wait one to two days for the money to reach the Coinbase wallet.

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