Thousands of digital currencies are running around the virtual world, but if Bitcoin is the future of money, what is Ethereum?
For those unfamiliar with the field of cryptocurrencies, that’s a logical question. Perhaps given that Ethereum and its native Ethereum (ETH) cryptocurrencies appear next to Bitcoin on exchanges and throughout the news.
However, because Ethereum has many goals, features, and even technologies, it is not fair to think that it is in direct competition with Bitcoin.
CoinTelegraph defines Ethereum as a decentralized blockchain network using Ether tokens. This allows users to execute transactions, take an interest in their holdings through staking, use and store non-fungible tokens (NFTs), trade cryptocurrencies, play games and use social media.
Coin Telegraph explains: “Many people consider Ethereum to be the next step in the Internet. If a centralized platform like Apple’s AppStore represents Web 2.0, then a decentralized user-powered network like Ethereum is Web 3.0. . ”
This “next generation web” supports, for example, decentralized applications (DApps), decentralized finance (DeFi), and decentralized exchanges (DEX).
How does Ethereum work?
CoinTelegraph explains that, like Bitcoin, the Ethereum network exists on thousands of computers around the world, thanks to users who participate as “nodes” rather than centralized servers.
This decentralizes the network, making it less susceptible to attacks and, as a result, essentially incapable of going down. If one computer goes down, it’s okay because thousands of other computers maintain the network.
Ethereum is essentially a single distributed system running a computer called the Ethereum Virtual Machine (EVM). Each node keeps a copy of its computer. That is, you need to validate all dialogues so that all users can update the copy.
Otherwise, network interactions are considered “transactions” and are stored within blocks on the Ethereum blockchain.
The miner validates these blocks before committing them to the network and acting as a transaction history or digital ledger.
Mining for validating transactions is known as the Proof of Work (PoW) consensus method. Each block has a unique 64-digit code that identifies it.
Miners use their computer’s ability to find that code and prove it is unique. Their computer power is the “evidence” of their work, and miners are rewarded with ETH for their efforts.
Also, like Bitcoin, all Ethereum transactions are fully public. The miner broadcasts the completed block to the rest of the network, sees the changes, and adds the block to every copy of the ledger.
Each transaction comes with a fee called “gas”, which is paid by the user initiating the transaction. Gas basically acts as a limit, limiting the number of actions a user can perform per transaction. This is also done to prevent network spam.
Since ETH is a utility token rather than a token of value, its supply is endless and, in theory, Ether is always in demand. In other words, inflation does not devalu the value of an asset to the point where it is not used.
However, Ethereum gas prices can be very high based on network activity. This is because the amount of gas that a block can hold is very large and depends on the type and amount of transaction. As a result, miners choose the transaction with the highest gas rates. That is, users are competing to validate the transaction first. This competition is getting more and more expensive and crowds the network during busy hours.
To interact with Ethereum, you need the cryptocurrency stored in your wallet. The wallet connects to the DApp and acts as a passport for the Ethereum ecosystem.
From there, everyone provides personal information, so you can buy items, play games, lend money, and do all sorts of activities, just as you would on the traditional Internet, which is free for users.
Cryptocurrencies are an alternative to data here. In other words, users are anonymous and free to browse and interact.
Ethereum v Bitcoin
Bitcoin is the most mainstream cryptocurrency, but the Ethereum community has the ambition to expand its projects.
The former is intended to be digital money, which serves its purpose fairly well. However, Bitcoin has its limits.
Meanwhile, Ethereum is trying to overtake the current Internet infrastructure. We plan to automate many processes that still require an intermediary, such as using the app store.
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How to buy Ethereum
You cannot buy cryptocurrencies from banks or online brokerage firms such as Vanguard or Fidelity. Instead, you should use a cryptocurrency trading platform. Numerous cryptocurrency exchanges are available, from simple dashboards for advanced traders to complex dashboards.
Different platforms have different pricing, security measures, and other features, so it’s a good idea to research before signing up.
For more information on Ethereum, please visit the Coin Telegraph website.
WARNING: The content of this article should not be read or understood as financial and / or investment advice. Readers should seek their own financial advice from an appropriately qualified independent financial adviser before making an investment decision.
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