What is Ethereum?
Cryptocurrencies are at the height of popularity. They are increasingly being discussed, used and developed all over the world. There is a lot of money pouring into cryptocurrencies and it seems it is only the beginning.
Millions of people have heard about Bitcoin cryptocurrency and its resounding success. Unfortunately, other cryptocurrencies are less known. Among them is Ethereum, created in 2013 by Russian-Canadian Vitalik Buterin. Ethereum is not just another name of virtual currency, it is one of the newest and most promising blockchain based project. Therefore, Ethereum is the second most valuable cryptocurrency on the market.
Why is Ethereum necessary?
Our personal data and financial information are all largely stored on servers owned by companies like Amazon, Facebook or Google. On the one hand, this state of affairs is quite convenient, as such companies’ specialists help store and secure our data. On the other hand, it is not secure.
We have to trust companies to keep your data secure from both hackers and government spies but, unfortunately, complete safety is impossible. It is no secret, that important information, like our names, addresses, phone and credit card numbers, can be stolen and used on Internet, even without our knowledge!
Blockchain technology, which is a new type of distributed database, was invented to solve this problem. Both Bitcoin and Ethereum are the result of blockchain-based technologies, but they have different goals.
What are the special features of Ethereum?
The difference between Ethereum and Bitcoin is the fact that Bitcoin is nothing more than a currency, whereas Ethereum is a decentralized platform for applications that run without any third-party interference. In short, ethereum wants to be a World Computer that would democratize the existing client-server model.
How does it work?
The New York Times gives the explanation of how Ethereum works on the example of two companies, conducting a complicated financial transaction. “Neither company trusts the other company to conduct the transaction on its computers,” the Times wrote. “Both companies could hire a third party, like a stock exchange, to conduct the transaction, which is what they generally do today. But that forces them to trust that third company and to pay that company fees. With Ethereum, they can conduct the transaction on a shared computer that allows them both to check the records, ideally saving on fees.”
Ethereum has its own digital currency, Ether. Unlike Bitcoin, Ether cannot be used to buy goods and services. Ether is needed to submit new contracts to the blockchain. Many specialists compare Ether with “crypto-fuel”, used as payment to other computers on the network for completing tasks.
Ethereum aims to return control of the data to its owner and the creative rights to its author, while keeping easy access to information. However, it is still just an idea. Unfortunately, it is still unclear which blockchain applications will prove useful and if they will ever be as convenient to use as the apps we use today. Nevertheless, the value of Ether has risen significantly since the time of publish and its value continues to increase.