So here we go five things everyone should know about a Ethereum. First of all, what you need to understand is that a Ethereum is more than just a blockchain and cryptocurrency. It is a whole ecosystem of applications, services and businesses and I guess economies as well.
To keep it simple though, you can think of a Ethereum as made up of five key things. The Ethereum blockchain, the Ethereum virtual machine, the cryptocurrency Ether, smart contracts and dapps and of course, the digital tokens.
Stay with me as I give you a brief explanation of all five in less than five minutes.
Number one, the Ethereum blockchain is more advanced than Bitcoin, much like Bitcoin Ethereum uses a proof of work blockchain to power the network. Everything that happens on Ethereum is recorded on this blockchain.
It is the backbone of the Ethereum network. However, unlike Bitcoin, the Ethereum blockchain also includes snippets of code as well as transactional data. This makes it more advanced than Bitcoin and allows for it to interact with things like smart contracts and decentralized applications (dapps).
Doing so enables the blockchain to interact with data on the other backbone of Ethereum, which is the Ethereum virtual machine also known as the EVM. Number two, the Ethereum virtual machine aka “The World Computer”.
The EVM is kind of like a massive global computer run by all the nodes on the Ethereum network, it allows Ethereum to run entire applications, just like you would find on your computer, smartphone or on the internet.
These applications by nature a decentralized and therefore known as dapps decentralized applications. Ethereum is able to do this, because its programming language, called Solidity is Turing complete. This means that Ethereum can add an extra layer of functionality, that something like Bitcoin, cannot.
This has earnt Ethereum the reputation of being like a decentralized internet or a world computer. The next thing to understand is what people are talking about when they talk about the price of Ethereum. But when they do, what they are actually talking about is the price of the cryptocurrency named Ether, also known by its ticker price, ETH.
Ether is the native cryptocurrency of the Ethereum network and is used in most operations on Ethereum. Its goal is to regulate the activity on the network. On one side, it incentivizes miners and node operators with rewards for running and securing the network. Much like how Bitcoin rewards miners with new Bitcoin.
Well, on the other side, users and developers are charged Ether for actually using the network sort of like a toll on a highway or like putting gas into your car. That means Ether is spent every time someone uses the Ethereum network.
When it is used like this, it is referred to as gas. This is quite appropriate given that it is like the fuel necessary to use the network like the fuel in the car. So that means whether you know it or not, each time you send ether to a new address or make a transaction with it, you’re paying a small fraction of that in gas fees.
This gas then goes to the miners which is another incentive for them to keep running the network. Number four, another major component of Ethereum is smart contracts these little just like a sound, computer code that is essentially a series of if x then y.
However, they are smart because they can self-execute, and once deployed, they cannot be stopped and will continue to function without human interference. Ethereum was the first blockchain to introduce smart contracts and set an industry standard in doing so. Ethereum smart contracts have since been used by the world’s leading governments, banks and corporations to make business more efficient. How’s that for adoption?
So number five tokens are a multi billion dollar industry. So finally, one of the most famous components of Ethereum is tokenization. Ethereum introduced the concept of cryptocurrency tokens, which is like adding a digital currency on top of the network. Tokenization allows anyone to create a new digital currency known as a token using the Ethereum blockchain.
Tokens are created for any number of reasons. Often they are used in conjunction with dapps as a sort of currency specific to that application. Sometimes they’re used as a mechanism for fundraising new blockchain projects via initial coin offerings, you know, commonly known as ICOs. And other times they are just created, just because.
When it boils down to it tokens are essentially an easy way of bootstrapping a new blockchain project. In fact, in 2017, the cryptocurrency bull market was largely due to the Ethereum token sales. Research publication coindesk estimates that nearly five and a half billion US dollars were raised thanks to token sales in 2017.
This caused the market to elevate the price of bitcoin to $20,000 USD and ether to nearly 1500 dollars. In fact, if you’re in made token so popular that at the time of recording of the top 100 coins on the website coin market cap 40 of those are tokens as opposed to coins with unique blockchains.
So there are five key features of Ethereum that everyone should know. And no matter how many new blockchains or “Ethereum Killers” are released, the innovations introduced by Ethereum, and its impact on the blockchain ecosystem can never be understated.
It has been one of the truly transformational pieces of technology in our lifetime, and I hope this video helped you understand that a little bit better. If you’d like to learn more about Ethereum, head over to Finder, and read out comprehensive guides which cover the wide expanse of the Ethereum ecosystem. They also include important guides on things like exchanges and wallets, which will help you get the most out of your cryptocurrency and might even help you save some money while trading.
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