What is Ethereum?

what is ethereum

what is ethereum

Although the blockchain technology is commonly associated with Bitcoin, it has many other applications that go way past cryptocurrencies. Bitcoin is in fact, only one of several hundred applications that use blockchain technology today.

Nowadays, our personal information, passwords, and financial data are all primarily stored on other people’s computers – in servers and cloud provided by companies like Amazon, Facebook or Google. Even this article is stored on a server managed by a company that charges to make it available anytime it is called upon.

This setup has many conveniences, as these companies use teams of specialists to help store and secure this data, and eliminate hosting and uptime costs. But this convenience also comes with a significant vulnerability. As everyone knows, the government or any hacker can gain unwelcome access to your files without your awareness, by attacking or influencing a third-party service. That is, they can steal, leak or change important information. Creator of the Apache Web Server, Brian Behlendorf has gone so far as to name this centralized scheme the “original sin” of the Internet. Experts clarify the Internet was always designed to be a decentralized system, and a split movement has surfaced globally using new means, including blockchain technology, to help accomplish this aim. Ethereum is one of the latest innovations to be part of this movement.

While bitcoin strives to boycott PayPal and online banking system, Ethereum’s primary goal is to employ the blockchain in substituting internet third parties — those that store data, transfer mortgages and keep track of sophisticated financial instruments. Ethereum, in short, wants to be a ‘World Computer’ that would decentralize or democratize the current client-server model. The notion of a ‘world computer’ is mainly because, with the Ethereum system, servers, and clouds are substituted by thousands of “nodes” managed by volunteers from across the globe.

The idea is that Ethereum would facilitate this same functionality to people anywhere in the world, allowing them to compete to offer services based on this infrastructure.

For example, scrolling through a typical app store, you’ll see different types of banking, fitness, and messaging apps. These applications use third-party services to store your credit card information, purchasing history and other personal data. And of course, your choice of any of these apps also governed by third parties, as Apple and Google maintain and curate or censor the particular apps you’re able to download.

In theory, Ethereum offers the combination of the control people had over their data in the past with the easy-to-access information that we’re used to in the digital age. Each time you save edits, add or delete notes, every node on the network makes the change. Regarding Ethereum trading, Ether is the “money” used for payment on the Ethereum Network. So you’re not trading Ethereum in the real sense, you are trading Ether. For a detailed breakdown of the subject, below we have compiled all you should know about Ethereum to understand whether this cryptocurrecny is worth your time and money.

What is ethereum?

In simple terms, Ethereum is a decentralized, open-source public blockchain that facilitates the development of Distributed Applications (Dapps)and ‘smart contracts.’ These smart contracts which are developed on the Ethereum Virtual Machine (EVM), are executed on a network of computers called nodes.

Vitalik Buterin, who is a Bitcoin enthusiast and cryptocurrency programmer created Ethereum in 2013 at the age of 19. The Ethereum idea was invented in a move to use the blockchain concepts created by bitcoin for other purposes apart from just currency transactions.

The ethereum ICO took place between July and August 2014. After that, the network started operation using Ether as the cryptocurrency’s token coin on July 30, 2015.

Unlike other blockchain platforms and currencies, Ethereum is written in Turing- complete, which is a programming language that anyone can easily code to create decentralized applications.

How is Ethereum different from normal currencies?

– Unlike regular currencies, Ethereum is entirely decentralized and no central body, a government or financial institution, can take full control of it.

– It is not like fiat currencies which are printed and released for use. No one prints Ethereum’s token coin; ether.

– Instead, it is added to the network via a process that requires securing and completing transactions on the system.

So, what is this blockchain thing?

The blockchain technology is a database or public ledger that holds all the secured and verified transactions ever registered on the network, the EVM, in this case.

– Every concluded transaction is referred to as a block, and after all nodes on the network have verified it, it’s entered into the chain to form the blockchain.

– What really makes the blockchain technology attractive is this process of adding transaction blocks to the blockchain.

– Using cryptography to secure the blocks implies that after verifying and completing any transaction, it will be encrypted and can never be manipulated by anyone.

How blockchain can benefit ordinary users ?

Well, this may seem obscure until you fully understand it. Yet in simple terms, the blockchain gives users the opportunity to conduct transactions efficiently, with less risk and at a lower cost.

The other benefit of the blockchain technology is the fact that all nodes on the network must verify all transactions. By this then, the blockchain through its cryptographic mechanism is a permanent, tamper-proof record of whatever operation takes place on the system, forever secured and open to all the users on the network.

What principle lies behind Ethereum ?

First, the difference between ethereum and bitcoin as well as other cryptocurrencies is the fact that ethereum works by tracking the state of every account whereas Bitcoin only records the transactions in a sort of list. Ethereum, on the other hand, has value transfer and contact information between different accounts on the blockchain.

So how does ethereum work? Well, Ethereum is the network and Ether is needed to ‘fuel’ its vitality.

The basic Ethereum transaction unit on the blockchain is an account. Simply put, there are two principal types of accounts:

  •  Externally Owned Accounts that are safeguarded by using private keys
  •  Contract Accounts that are controlled by the special contract code that is on executable by an EOA
  • On the Ethereum network, a user will control the EOA with their private key.

This is how it works:

  • An EOA and sent to the ethereum network is used to create a transaction.
  • The person who sends the transaction pays a fee for computation and storage in Ether.
  • Ethereum blockchain nodes secure and execute the transaction.
  • After verifying and executing the transaction, nodes collect the transaction fees
  •  The miners then group the concluded transactions into blocks and then add them to the blockchain.
  • Nodes get Ether as the reward for securing the network.

Ethereum vs Bitcoin

bitcoin vs ethereum

Ethereum differs from Bitcoin in a number of ways, even though they are both open-sourced public blockchains. Let’s look at how Ethereum differs from Bitcoin.

  • Supply: the supply of Bitcoin is capped at a maximum of 21million BTC universally, but the supply of Ethereum is capped at 18 million ETH annually and will continue unbound.
  • Bitcoin is basically anonymous; Ethereum’s smart contracts imply that there is a traceable sort of document that is conveyed between the codes in the agreement.
  • Bitcoin has made a name for itself as a digital payment currency. On the other hand, Ethereum is much more than a currency. It is a token that can be used on the EVM develop decentralized applications for practically any conceivable idea.
  • Whereas Bitcoin has successfully used blockchain technology and the proof-of-work consensus to generate a valuable currency, we see how Ethereum has used the same concept and now proof-of-stake consensus to expedite the development of decentralized autonomous organizations.
  • Transaction time: While the block time for bitcoin is set at 10 minutes per block, Ethereum uses its Ghost protocol to complete a verification between 14 to 15 seconds. Ethereum is, therefore, faster than Bitcoin when it comes to transaction time.
  • Adaptability and flexibility: Unlike Bitcoin, Ethereum functions as a programmable blockchain. Therefore, instead of just transactions, ethereum lets developers create their applications as they wish.

Ethereum Growth and Gains

As an instrument of value exchange, Ethereum is the biggest altcoin that has market potential. By January 2018, Ethereum has grown to have a market cap of $130 billion.

Ethereum’s price has increased remarkably over the years. For example, in January 2017, Ether sold at around $1, by the end of the year, prices had risen by an astonishing 5800%.

Regarding growth, here is a brief timeline of what Ethereum has achieved so far:

  • Ether was valued at just $0.95 in January 2016, which was a long distance from then prices of bitcoin at over $1200.
  • By July 2016, Ether had increased in value to trade at a promising $12.04.
  • However, prices dropped to $8.24 in January 2017.
  • But by July 2017, ETH had gained in value to trade at a high of $269.76
  • Prices declined sharply in 2017 after the DAO event but improved well enough to end the year trading at above $860.
  • In January 2018, the value of ethereum increased enormously as that of bitcoin went sloping.

Ethereum prices surged due to the report that it was likely for the cryptocurrency to have a derivatives market. Apart from that, there were numerous ICOs that lined up to launch on the ethereum network.

What are the predictions of Ethereum price for 2018?


It is good to bear in mind that making price predictions for any cryptocurrency is a pretty challenging task. For ethereum price prediction, it is not easy to call the price of a single unit of Ether due to its volatility. Volatility tends to make short-term predictions very tricky.

Therefore, it is advisable to go long on Ether.

  1. According to surveys and analyst estimates, the Ether coin may hit the $4000 mark before the end of 2018.
  2. It possible ethereum market cap will overtake bitcoin in 2018, as it is imminent that ethereum and ether will perform better than bitcoin in 2018.

There are some quite bold price predictions out there for Ethereum in 2018 and beyond. Some investors are deciding to go neutral while some are giving bullish forecasts. As an investor, you are advised to analyze the market first before investing.

What is the Ethereum Virtual Machine?

ethereum related terms

The EVM (ethereum virtual machine) is the network that supports the use of smart contracts on ethereum. Every node connected to the network runs the EVM protocol and hence executes the same coded instructions like other nodes.

The EVM is implemented in different languages such as JavaScript, Python, Java, and C++.

How has the EVM transformed the application and development of blockchain technology? In several ways, but the most significant is how it has enabled developers to create decentralized applications for different transactions.

Just as in other programming languages, the EVM lets the entrepreneurs and app developers decide what type of application they wish to create on the blockchain.

However, it is evident that some applications that implement contracts and peer-to-peer transactions profit more from the EVM.

The critical question is how is the EVM going to affect the world in the future? In truth, Ethereum may have an even more significant impact than Bitcoin. One likely area that the EVM could help change is the financial sector.

– The fintech sector could see dapps that make all kinds of complicated transactions coded to execute automatic and reliable ‘contracts’ without third-party manipulation.

– More broadly, the EVM could transform the world by facilitating the development of relevant applications that could change the world’s systems like in governance, voting, and all Internet of Things.

What is Ethereum Based On?

Ethereum is not just an open source blockchain. Its token coin, ether gives the network value.

Ethereum is not like other digital currencies in the sense that ether is not just a currency, but also a token that has value for its users. It can be used to secure ‘smart contracts’ for decentralized applications, as well as store and transfer value.

On many exchanges around the world, ETH is traded for BTC and fiat currencies such as USD. The price of ether is dependent on the demand and supply in the market. Therefore, prices do fluctuate every day, at times many times in a day.

This situation can be compared to the stock market where the demand and supply determine the values of stocks.

For instance, stocks that are dependent on oil and gold deposits will gain or lose value depending on the amount of oil/gold available in the market. Gold deposits are reducing, but gold prices and value are increasing. If the supply exceeds the demand, prices reduce and vice versa.

What are Some of the Ethereum Features?

Ethereum’s decentralized nature and consensus mechanism give it great features that contribute significantly to the attractiveness of the blockchain technology.

Ethereum strives to have characteristics that would not only make it decentralized but also flexible and adaptable for future use cases.

These unique features make ethereum developers’ favorite, and hence, the ethereum network has become a leading blockchain platform.

Here are some of these features:

  • Decentralized.
  • Easy to set up.
  • Transparent.
  • Small fees.
  • Immutable and censorship-resistant.
  • Fast.
  • Non-reputable

Is Ethereum Safe?

Ethereum safe to use for all those who run its blockchain transactions, thanks to its exceptional technology and encryption.

Transactions conducted on the ethereum platform are not completely anonymous. It is possible to trace transactions because of the smart contract the network uses, as updates and all value points are registered on the blockchain ledger.

Transactions are also encrypted utilizing the solidity 0.4.3 keccak256 encryption that warrants all secured transactions are conducted.

Therefore, Ethereum is safe to use, and you can trust it for every sensitive transaction.

Is Ethereum going to show strength ?


To simplify this, Ethereum is here to stay, and the current trend is anything but a clear sign that the Ethereum network is going to be huge. It has the potential to rise out of the cryptocurrency era as Microsoft or Google out of the dotcom era.

Ethereum really is just one of the very few digital currencies out there that have something tangible to offer. The EVM and ether give developers a lot regarding the environment to traverse and create for the future.

The reason for this statement is the appreciation in value of ethereum in the short years it has been around.

  •  Today, by 24 hours trading volumes, ethereum is the biggest digital asset, and it doesn’t seem the price of ether will slow down anytime soon.
  • -Look at the number of decentralized apps that are being developed on the ethereum platform. If these apps go on to succeed, then the platform will continue to be instrumental in changing and shaping world technological progressions in cryptocurrency.
  • -The value of ethereum will gain even further, given its partnerships with major corporations like Microsoft on the BaaS technology.

Why Should I Use Ethereum?

use ethereum

Ethereum is both a digital currency and a platform on which other cryptocurrencies can be created. This is a desirable feature, and the decentralization will ensure there is no form of interference from a third party. Hence you can use the platform safely.

The reason ethereum is impressive is the short transaction time and cheaper fees compared to banks. For instance, banks can charge a transfer fee of up to 10% while Ethereum fees can be as low as 0.1% of the whole transactions.

Here are more reasons to use ethereum:

  •  Global and extensive use
  •  Security of transactions set in smart contracts
  • Ethereum is a platform for other digital coins

What is Casper and What Effect Will it Have on ETH?

Ether has seen a significant gain in price since the rolling of the original testnet of the blockchain’s Casper implementation.

Before 2018, Ethereum had been securing and verifying transactions on its network with the slower and more expensive proof-of-work consensus method.

However, that is no longer the case with the start of the Casper protocol that changes the consensus mechanism from Proof-of-work to proof-of-stake. This change is intended to make Ethereum faster and cheaper.

The release of the testnet has already affected Ethereum as prices have surged leading to a belief that it’s a matter of time before Ethereum overtakes Bitcoin as the leading cryptocurrency.

Casper protocol will be released and executed in two parts:

  •  The Casper Friendly Finality Gadget (FFG) that will be responsible for the proposed transition from PoW to PoS.
  •  The Casper Correct by Construction (CbC) whose duty will be to manage Ethereum’s consensus mechanism after the full implementation of the Casper FFG.

In short, the Casper protocol will transform the Ethereum network to a better, much faster and cheaper blockchain. This development will, in turn, make ether attractive, and price value will rise manifold.

What can Ethereum be Useful for?

There are many uses that ethereum could have. Such use cases are in the Internet of Things, the financial sector, in casinos/sports betting companies, and in the energy sector where electricity can be sourced and priced using the EVM.

Furthermore, Ethereum is useful in the developing of DAO (Decentralized Autonomous Organizations). Ethereum’s blockchain technology enables the creation of smart contracts that are coded to automatically execute thereby allowing parties that are diverse and unknown to one another negotiate without the need for leaders, legal framework or outside force.


Ethereum, as a blockchain technology and cryptocurrency, has many prospects for the future. Even though it is still in the early stages, the use of ethereum to develop decentralized applications is an attractive proposition for developers. What’s more, the smart contracts concept is one that is innovative and capable of making ethereum even more valuable in the future. If you are looking to invest in ethereum, there is still time to achieve that.

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