For you to understand how Ethereum works you do not need to be technology savvy. If you understand some basic things about the blockchain technology, then it is very easy to understand the workings of Ethereum.
What is the Ethereum Blockchain?
Ethereum is an open blockchain-based software platform that enables developers to build decentralized applications. The Ethereum website describes it as a decentralized platform that runs and manages smart contracts. It is very different from the Bitcoin although they are both based on the blockchain technology. There are so many differences between Ethereum and Bitcoin.Â
Those who mine in the ‘Ethereum Blockchain’ normally mine for Ether. This is achieved by being rewarded by Ether after solving very complex mathematical equations. Ether is therefore considered as the token fuelling the Ethereum network. Ether can be tradable and can be used to pay for transactions. Although most of the time people associate it with the Bitcoin, they are two different currencies.Â
Comparison between Bitcoin and Ethereum
Bitcoin is digital money. It has existed for about eight years and is used as a mean of transferring money between people. It acts as a decentralized currency used to store value. Ethereum, on the other hand, allows for smart contracts in the form of a highly programmable digital money. For instance, Ethereum can enable the transfer of money from one person to another only after meeting a certain set of conditions. Most of the decentralized systems used today might be built on Ethereum. These include numerous applications such as eBay, Airbnb, and Uber. The use of decentralized systems has eliminated single points of control and failure.
Smart Contracts
Ethereum is mostly associated with smart contracts. It is simply a piece of code used to facilitate the exchange of shares, property, content, and money. Smart contracts are self-operating programs when operated on the blockchain. It does not allow any room for downtime, fraud or censorship. Since they operate just as programmed, there is no possibility of interference from a third-party. Ethereum does not limit anyone in its operation. Thousands of applications are therefore build on the blockchain in this modern times.
Identity
Many websites such as LinkedIn, Facebook and Twitter allow people to create digital identities. In the end, this information can be hard to manage. Using Ethereum one can use decentralized identity management systems that give you full control. This ensures that no centralized server has access to your information. A centralized server can be hacked, shutdown or have your information edited. Ethereum has applications like support which allows you more control over your identity, reputation, and data.
Computer Power/Storage
There is a lot of computing storage and processing power that someone might not be using on their computer. This free power and storage can be availed to someone else who needs it more. Since Ethereum uses a decentralized system, there is no room for censorship. Many projects have come up to allow people to rent the extra computing power and storage using Ethereum. This has led to increased internet speeds.
