Catalogue - Key Takeaways Show
If you are new to the crypto space, one cryptocurrency you might see paired with Bitcoin everywhere, from crypto exchanges to news, would be Ethereum. Considering if Bitcoin is the future of money and the solution to all problems, you might be wondering what’s Ethereum and why it’s there.
It is a very logical question to ask and something that needs your attention. While Ethereum and Bitcoin are both cryptocurrencies, they serve very different functions and aren’t a direct competitor to each other. Each of them has a different technology, use case, goals, features, and underlying blockchain. However, a concept that they both foster is decentralization and how they play an important part in it.
In today’s article, we will be diving deep into what Ethereum is, how it works, and how to buy it. So, without further ado, let’s start.
What Is Ethereum?
Ethereum is an open-source, decentralized blockchain platform that enables developers to build decentralized applications, or dApps, using its blockchain. The project was started back in 2015 by Vitalik Buterin. Originally, Vitalik envisioned it to become a global centralized supercomputer that could be used to help build and deploy anyone’s code in return for a fee.
However, soon after the project’s inception, he realized that he couldn’t turn his vision into reality, which is why he pivoted towards creating a platform for creating and deploying smart contracts and dApps.
Ethereum has become one of the most popular blockchain platforms for building decentralized applications, due to its flexibility and the large developer community that has grown around it. It has been used to create a wide range of dApps, including decentralized finance (DeFi) platforms, non-fungible token (NFT) marketplaces, and decentralized social networks.
What is the Difference Between Ether and Ethereum?
Another name that you will commonly hear with Ethereum is the world “Ether”, which is why most people think that the two are the same thing. However, that’s not the case. As discussed above, Ethereum is the decentralized blockchain platform where developers build and deploy their applications.
Conversely, Ether is the native cryptocurrency of the Ethereum blockchain that powers the Ethereum network and is commonly traded on different cryptocurrency exchanges. It is used to pay transaction fees and incentivize network participants to perform tasks, such as validating transactions or executing smart contracts.
Now, let’s discuss the Ethereum blockchain in detail.
What is the Ethereum Blockchain?
The Ethereum blockchain, just like the Bitcoin blockchain, is a decentralized and distributed ledger. However, that is where the similarities between Ethereum and Bitcoin end. The Ethereum blockchain is somewhat of an enhancement to the Bitcoin blockchain as it allows users to record and verify transactions while allowing developers to create and deploy decentralized applications on top of it.
The Ethereum blockchain is managed and maintained by a network of computers which are called nodes. The job of these nodes is to work together and validate all the transactions happening through the blockchain. After validating these transactions, each node saves a copy of the updated ledger for transparency purposes and to make sure that even if one copy of the ledger is compromised, the rest are safe.
Overall, the Ethereum blockchain is a powerful platform that provides a range of benefits, including decentralized application development, execution of smart contracts, and a secure, transparent ledger for recording and verifying transactions.
Let’s jump over to smart contracts and decentralized applications built through the Ethereum blockchain to discover the true power of Ethereum.
What Is an Ethereum Smart Contract?
As a basic concept, a contract is an agreement that outlines terms and conditions for any action or activity for a specific monetary consideration. Similarly, an Ethereum smart contract is an automatic, self-executing computer program that uses the Ethereum blockchain to enforce the terms and conditions of an agreement between two or more parties.
So, basically, an Ethereum smart contract is nothing but a set of code that runs on the Ethereum Virtual Machine (EVM). All these smart contracts are written in the Solidity programming language and are public and immutable, which makes a case for transparency and security.
Despite being public, the nature of how the Ethereum blockchain works makes it so that these contracts can’t be modified after they have been uploaded to the network. If someone breaks the law or does not fulfill the conditions of a contract, some legal actions can be taken against them. Since smart contracts are different than legal contracts. They also differ in functionality.
One can use smart contracts to send and receive anything that has a store of value. You can exchange money, property, data, and even stocks through a smart contract. Ethereum smart contract plays a bridging role between the two parties. Transaction fees are charged, and the desired parties complete the transactions as they want to. Smart contracts store data in an indirect way.
They eliminate the need for intermediaries and can reduce transaction costs and processing times, while also providing increased transparency and security.
How to Build on the Ethereum Network – Ethereum Decentralized Applications (dApps)
A decentralized application (dApp) is an application that runs on a decentralized network or blockchain, rather than on a centralized server. This means that the application operates on a peer-to-peer network, with no central authority controlling the system.
Decentralized applications are typically open-source, meaning that the code is publicly available and can be audited by anyone. They are also usually self-executing, with smart contracts being used to automate various aspects of the application.
Similarly, a decentralized application (dApp) built on the Ethereum network utilizes the Ethereum blockchain and the peer-to-peer nature of the network to provide a transparent and secure platform to developers.
DApps are decentralized applications that can be developed as open source and are free from central authority’s investigations. DApps enjoy some features such as user privacy, no censorship, and a flexible development environment.
A slight drawback associated with DApps on Ethereum is its inability to scale as well as develop a user interface (UI). Moreover, it is difficult to do some coding amendments as well as modifications.
How Do Ethereum DApps Work?
Since other applications such as ride booking, and social media applications are all controlled by the organizations themselves. This gives the organization authority over its functioning and processes. And as the backend is in the hands of the organization, they can exercise their authority to pause or terminate the operations at any time.
Whereas DApps run on a peer-to-peer network. Currently, popular applications such as BitTorrent and Tor work the same way. Since all the participants are equally contributing and consuming the content, a decentralized autonomous setup is created. With shared resources and a combined consensus mechanism, blockchain-based applications are now seen as the future.
As any developer can create any application on the Ethereum network and makes it accessible to use. Thus, as a result, if someone uses that platform, no one can take ownership of their digital identity on such platform. Not even the developer can take away that digital signature or footprint. This further elongates the creation of decentralized autonomous organizations and social community creation.
Hence, as a developer, if you are aware of the scripting languages used by Ethereum such as Solidity and Vyper, you can deploy decentralized applications. However, due to a recent upgrade of Ethereum to Ethereum 2.0, now developers can create more DApps using any other scripting language.
What Is an Ethereum Transaction?
An Ethereum transaction is a signed data message sent through a set and series of instructions. One Ethereum account sends to another account with the help of smart contracts.
Components of an Ethereum Transaction
An Ethereum transaction holds the following information.
- Sender: This is the Ethereum address of the sender who is initiating the transaction. It is used to identify the account that is initiating the transaction.
- Recipient: An address that will access Ethereum and receive can do so in the following ways. There are two types of accounts. Externally Owned Accounts (EOA) and Contract Accounts (CA). In EOA accounts transactions will involve the transfer of value. In contract accounts, the transaction will result in a contract and its code in execution.
- Signature: For Ethereum payments to work, there are signatures that work. The signature is created and generated to ask the sender to sign with their private key.
- Value: The quantity and value of ETH to be sent will be transferred between the sender and the buyer.
- Data: For additional data, one can add an optional field for bytecode to add in the smart contract.
- Gas Limit and Gas fees: This is the maximum amount of gas that can be used to process the transaction. Gas is a measure of computational effort required to execute the transaction. The gas limit is set by the sender and determines the maximum amount of gas that can be consumed during the execution of the transaction.
- Maximum fee per Gas: The maximum amount of gas fee that a user is ready to pay for his transaction to be processed. To own cryptocurrency, a user must pay a cost for completing a transaction.
How to Buy Ethereum?
Ethereum is one of the most popular cryptocurrencies in the crypto space. With all the development that’s being done on the platform and how Ethereum becomes the go-to solution for most real-life applications, there has been a huge increase in demand, which has led to an increase in price.
If you want to buy Ethereum, the best and most common method to do so is through a cryptocurrency exchange. You can use the Bitflex cryptocurrency exchange to buy Ethereum or trade Ethereum on our perpetual swap platform.
Bitflex
Bitflex is a cryptocurrency exchange platform that offers traders a secure, easy-to-use, and convenient way to buy, sell, and trade cryptocurrencies. Our platform has been designed with investors of all levels in mind, whether they are just starting out or experienced traders. We offer various features and tools to help users make the best trading decisions possible, including advanced charting and analytics, real-time market data, and various customizable trading interfaces. At Bitflex, we are dedicated to empowering our users and helping them reach their financial goals.
Stay in the loop about our launches, trading pair announcements, contests, and more by following us on Discord, Telegram, and Twitter.
