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All you need to know about Ethereum

All you need to know about Ethereum

March 11, 2022

Imagine a decentralized world. A world where people directly, without the need to trust corrupt intermediaries, deal with decentralized programs, sign contracts, and use various financial and non-financial services; Systems controlled by the people never stop, and no one can interfere in their work. Ethereum has stepped in to achieve this goal.

At its simplest, Ethereum is a free infrastructure based on Blockchain technology on which decentralized computer applications can run. Decentralization means that the system does not belong to anyone and is not controlled by one or more specific individuals. Everyone can own this network, and everyone can play a role in controlling it. Thanks to the distributed and decentralized structure of Ethereum, once a program is implemented on its network, it can no longer be stopped and manipulated, even if its creator so wishes. 

Ethereum’s official website describes the project as follows: “Ethereum is a decentralized platform for executing smart contracts. “There is no possibility of disruption, censorship, fraud, or interference by third parties for programs running on the network.”

What is the purpose of creating this system?

When asked about the purpose of creating the network, Joseph Lubin, one of Ethereum’s leading developers, replied: Ethereum was created so that we would not need any bank, company, or institution other than ourselves to do our activities.

In 2008, a person named Satoshi Nakamoto introduced Bitcoin. As a result, it can be said that Bitcoin is the first decentralized, digital, and distributed monetary system. With the help of a concept called “blockchain”, the Bitcoin network distributes information about money transactions to computers around the world instead of banking and central servers, allowing it to deploy value (money) anywhere, regardless of companies, governments, or intermediaries.

Ethereum goes one step further and allows decentralized execution of computer code (smart contract) so that we can decentralize other processes in addition to money. The introductory article (Whitepaper) of this project was published in 2013, and in 2015, the Ethereum network officially started operating. The project’s main idea was introduced by a young Russian-Canadian named Vitalik Buterin, who was a supporter of Bitcoin and came up with the idea of “decentralizing everything”.

Decentralizing everything

To better understand Ethereum, consider apps like Telegram or Instagram. Today, millions of people around the world use these useful communications and messaging programs. But there is one fundamental issue that few people pay attention to: these programs are centralized. For instance, Instagram belongs to Facebook. The company may delete content, block access to certain people, or even sell users’ private data, following its policies. Theoretically, with Ethereum, it is possible to create an Instagram that, instead of Facebook, is the real owner of its users, and they can control their data only themselves.

Anyone can develop their own decentralized application (Dapp) in the Ethereum network. Before the advent of Ethereum, developers had to code a separate blockchain to build their own digital currency. Still, today everyone can easily use the Ethereum blockchain to make their own independent digital currency projects or tokens without building a new blockchain.

Ether; Ethereum’s Digital Currency

The digital currency of the Ethereum network is called “Ether”, and its abbreviation is ETH. This asset is considered the monetary unit of the network and a way to pay expenses and commissions. Therefore, as the acceptance of the Ethereum network increases, so does the value of Ether in theory. Among the digital currency community members, the digital currency of the Ethereum network is also called Ethereum, but in fact, it is called Ether.

Many people today are investing in this digital currency with hope for the future of Ethereum. Ether can be purchased from digital currency exchange sites and stored on a mobile phone or personal computer wallet software.

Since Bitcoin is the first blockchain network and decentralized digital currency, the best way to fully understand Ethereum is to examine its similarities and differences with Bitcoin.

Ethereum and Bitcoin similarities

  • Ethereum also has its own independent blockchain. Like Bitcoin, Ethereum has a blockchain. Information about smart transactions and contracts is recorded on the blockchain. Blockchain is a secure, immutable digital notebook for storing data and information.
  • Similarly, the Ethereum network is public and accessible to anyone. Anyone can use this network to create smart transactions or contracts without getting permission from anywhere. Of course, if one wants, one can create private platforms on the Ethereum network, but the Ethereum blockchain itself is transparent, free, and public.
  • Ether is the internal digital currency of the Ethereum network, which can be exchanged for other currencies and assets. Ether ownership is tracked on the blockchain, just like Bitcoin (BTC) ownership. Ether is also called “Ethereum Network Fuel” because its primary use is the fee and motivation to participate in the network.

Ethereum and Bitcoin differences

  • Ethereum transactions are faster. In Bitcoin, on average, blocks containing transactions are created every 10 minutes, while in Ethereum, this time is only 14 seconds. Of course, the size of the block is also important in discussing the speed of transactions, which is limited to 1 MB in Bitcoin. Looking at block time and block size, it can be said that Bitcoin currently performs a maximum of 7 transactions per second, but Ethereum can process up to 16 transactions per second.
  • Ethereum can easily execute smart contracts. Bitcoin can also be used to build smart contracts, but the network language of the script is very rudimentary and makes it difficult for developers. On Ethereum, programming code can be implemented much faster and easier. Ethereum’s smart contracts are called “Turing complete”; they can perform any calculations and operations needed.
  • The number of ether units will be unlimited. One of the main differences between Bitcoin and Ethereum is the number of units (supply) of the two. Bitcoin has supply restrictions, but unlimited Ether will be available.

Is Ethereum better than Bitcoin?

Since Bitcoin and Ethereum pursue two different goals, it is not possible to say which one is better than the other. However, in the digital currency community, Bitcoin is better in terms of security and credibility, and Ethereum is better in terms of network performance.

Are Ethereum Investment Schemes Valid?

Anything can be built on Ethereum, and creating a smart program and contract on it is like building a website on the Internet. It is safe to say that 99% of Ethereum-based investment projects are scams. Beware of schemes that promise guaranteed profits.

What is Ethereum Mining?

Assuming that miners must reach a consensus to make changes to any of the decentralized network applications, mining is the factor that holds Ethereum’s decentralized programs together. Ethereum mining is in many ways similar to bitcoin mining. However, there is a fundamental difference between the two; That Ethereum Blockchain stores, a list of all transactions and specifies the latest status of each block on the network.

Miners use hardware to solve encrypted issues and receive rewards. To do this, they need to solve a large number of computational problems so that one of the miners can perform the decoding operation and receive the ETH as a reward.

To start the mining operation, you need special hardware that is constantly mining. There are generally two types of hardware for Ethereum mining:

  • Central Processing Unit (CPU)
  • Graphics Processing Unit (GPU)

GPUs have a higher hash rate; This means that they solve these complex problems in a shorter time. As a result, GPUs are currently the only option for Ethereum miners.

All in all, Ethereum is one of the most essential and popular platforms in the digital currency and blockchain industry in the world. Moreover, with talented people entering the field, Ethereum is looking to become a global computer for future decentralized applications. In other words, it is one of the wonders of the blockchain that allows people to run and develop hundreds or even thousands of projects.

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