Ethereum is said to be the second most valuable cryptocurrency after Bitcoin. It was created in 2015 by Vitalik Buterin, Ethereum is actually much more than just a cryptocurrency.
Ethereum is a blockchain-based platform ready for developers to develop decentralized applications and smart contracts. Ether is the native cryptocurrency used for all of the transactions that take place on Ethereum's blockchain. So, if you have an idea for an application that uses blockchain technology, you don't necessarily need to create your own blockchain, just use Ethereum.
Ethereum's version of the internet is where all things that were stored on servers and in the cloud is now stored in these things called "nodes", the nodes store and maintain a shared database, the blockchain.
ETHEREUM EXPLAINED FOR DUMMIES - Blockchain 2.0 and Its Uses
Sometimes called "Blockchain 2.0", the Ethereum platform uses similar technology to Bitcoin, but way more advanced in two ways.
- Smart Contracts - The way the Ethereum blockchain is designed, it's supposed to make transactions take place only when certain conditions are met, AKA Smart Contracts. Similar to getting something in a vending machine, you either have the money to get it or you don't. Once one of these contracts are written and set, it cannot be changed, hence the name "trustless" transactions, because you don't need individuals on the network - the conditions are either met or not met.
- Decentralized Applications - Decentralized Applications or as they call it "dApps" are just applications that do not run on a traditional central server, instead, it uses blockchain technology on a decentralized server. dApps are the core of Ethereum, the founders want users to learn Ethereum and build on it. Ethereum comes with its own coding language called "solidity" which is used to build these Decentralized Applications. Some people believe these decentralized applications will be replacing traditional applications real soon, there are endless possibilities with building with solidity.
But what is Ether? How does Ethereum Work?
Ether is the currency of Ethereum, don't get the two confused. Ethereum is a blockchain platform and Ether is the currency for that platform. If you need to get anything done on Ethereum you will need Ether because Ether fuels the Ethereum platform, Ether is the gas for Ethereum.
Let's dive into the Pros and Cons of Ethereum
- It is the most popular platform for building smart contracts, something which is considered the next big thing in the cryptocurrency universe.
- Ethereum provides a great platform for launching the Initial Coin Offerings (ICOs) for other blockchain projects. The majority of the $5.6 billion worth of ICOs in 2017 was launched on Ethereum.
- Ethereum has a transaction speed of a few seconds against the 10 minutes or more of Bitcoin.
- Like Bitcoin, Ethereum is also facing serious issues regarding scalability. It still uses an obsolete mechanism (Proof-of-Work) to verify the transactions which are leading to network congestion.
- Ethereum only supports one coding language — Solidity. Since developers need to learn a new language, it acts as an entry barrier for them.
- Ethereum is facing stiff competition in the market from coins like NEO and Cardano which are offering similar platforms but with improved technology.
Where to buy Ethereum?
- Brokerages are coin exchanges like Coinmama which buy and sell Ether for a fee. They are simple to use but also quite expensive. You can use them to buy Ether with your fiat currency (USD, EUR, etc.) using a credit/debit card or with a bank transfer.
- Trading platforms like Bitfinex connect the buyer and the seller in exchange by using a middleman (Bitfinex). This is what traders use to trade one cryptocurrency for another. E.g. buying Ether with Bitcoin, or selling NEO for Litecoin.
- Peer-to-peer platforms like LocalEthereum allow buyers and sellers to contact each other directly to negotiate prices. This option is riskier than the other two as you are trading directly with someone you don’t know. There is no middleman, so you don’t pay any fees, and you can pay using cash too.
Ethereum if offering much more than just digital currency, it's building a powerhouse where in the future users can come and build their decentralized applications and smart contracts for a smoother and error-free world.