Know Your Crypto — Ethereum (ETH) Edition

Even if you casually stumble upon Twitter hashtags, you might be aware of the Ethereum merge. But Ethereum is unlike any other crypto. Read on to learn why.

Ethereum and Bitcoin have nearly become household jargons. And the transition of Ethereum from PoW to a PoS protocol has made it more popular. However, while they’re often mentioned in tandem, they’re far from the same. While Bitcoin was introduced as a digital currency in the first place, the core principles of Ethereum are unique from all other crypto. To create a software platform that not only develops and supports cryptocurrencies, but any kind of decentralized app that can run without the need of a third party, thus giving people more control over their data.

Quick Introduction To Ethereum Blockchain

The easiest way to think of the Ethereum network is as a secure database that’s accessible to anyone. When new “blocks” of data get added, they’re cryptographically “chained” to a parent block, making an uneditable record of the previous changes. But what makes Ethereum so exciting to users and enthusiasts is the network’s potential to do more than just handle financial transactions. Ethereum takes the Bitcoin blockchain further by allowing devs to run programs (known as smart contracts) that can host any kind of decentralized application (also known as Dapps).

People have already created and launched a variety of Dapps on Ethereum, including games, marketplaces for digital art, and DeFi apps. Ethereum relies on node operators to process transactions on the network. These operators collect a fee for running the hardware and software necessary to facilitate these transactions. The fees are called gas fees because they keep the network running. Additionally, developers can create and run Dapps on the network. The Dapps connect to the Ethereum with smart contracts, which are more like computer programs than contracts.

So, what are smart contracts? I am glad you asked. Smart contracts are small programs stored on the Ethereum blockchain that can self-execute when certain conditions are met. One good way to think about it is that the DApp is the front-end of the program, and the smart contract is the backend of the program. Also, Dapps rely on the decentralized and open-source Ethereum network and can’t be controlled by a single entity. In fact, once a DApp is added to the platform, it can’t be taken down — even if the original creator wants to remove it or disbands entirely.

Ether vs Ethereum — Let’s Clear The Confusion

Ethereum is the blockchain network where Ether is held and exchanged. As mentioned above, this network offers a variety of other functions outside of ETH. These can be simple movements of funds, but they may also be complex transactions that do anything from exchanging assets to acquiring a piece of digital art. The Ethereum network can also be used to store data and run decentralized applications. Rather than hosting software on a server owned and operated by Google, where one single company controls the data, people can host applications on the blockchain.

Further Reading: Ethereum 2.0 Is Already Here — Keep Reading

Ethereum has also changed since it was first launched — notably with the latest Ethereum 2.0 update which we are excited about. When blockchain technology changes, a fork can occur — just like a fork in the road. When it happens, it can be a soft fork or hard fork. In general, there are what’s known as soft forks and hard forks in the Ethereum blockchain. Soft forks can be minor changes that are backward compatible. Node operators can stay connected to the blockchain, but they’re incentives to upgrade to the latest version if they are willing to continue earning Ether.

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On the other hand, hard forks are major upgrades that can significantly affect the blockchain and aren’t backward compatible. Node operators need to switch to the latest version to keep it going. Or if there’s any disagreement, a split could result in two competing blockchains. Often, changes are proposed and discussed in an attempt to form consensus before making a change. For example, there’s a multiple-step upgrade to Ethereum 2.0. The update will make significant changes to how Ethereum works, and may help make it more scalable and ecologically sustainable.

Ethereum vs Bitcoin — The Decade-Long Debate

Ether and Bitcoin are both popular cryptocurrencies that rely on blockchain, but they are quite far from identical. Ethereum is also a technology platform that enables smart contracts — which is very different from Bitcoin, which is essentially just a store of value. This aspect of smart contracts on Ethereum unlocks a lot of potential use cases that you can’t do with Bitcoin. The primary use of Bitcoin is as a virtual currency and store of value. Ether also works as a virtual currency and store of value. But the Ethereum network also makes it possible to create and run applications.

Further Reading: Know Your Crypto — Bitcoin (BTC) Ethereum

Just like it supports smart contracts and other transactions on the network. Bitcoin does not offer these functions. Ethereum also processes transactions more quickly. New blocks are validated on the Bitcoin network once every 10 minutes while new blocks are validated on the Ethereum network once every 12 seconds. And future developments could speed up Ethereum transactions, even more, he notes. Last, there is no limit on the number of potential Ether tokens, while Bitcoin will release no more than 21 million coins. Currently, Bitcoin has 19 million coins in circulation.

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Ether is becoming more widely available and there’s a lot of noise in the news about its rising value — but it’s always important not to get sucked into the speculation too much. It may serve some purpose in a portfolio, but it should be a very small amount and be viewed as highly speculative. It’s also important to note that it’s still very early — so while the technology is promising, it’s unknown which technology may win in the long run. Regardless of everything, what sets Ethereum apart from any other crypto is its ability to build Dapps and smart contracts on its blockchain.

Wrapping Up

Ethereum uses blockchain technology to create a decentralized platform. The ether cryptocurrency is the “fuel” that powers the network, and you can invest in the Ethereum network by buying its native token — Ether. As with any cryptocurrency, buying Ether is a speculative investment. Always do your research before investing into any digital currency, and don’t risk more than you are willing to lose.” If you’re interested in cryptocurrencies more broadly, you could also look for ways to invest in companies that participate in the space rather than buying a single crypto.

Non-Financial Advice: The data, resources, and statistics in this article have been consolidated from multiple sources and neither the author nor the site is responsible for any financial profit/loss incurred from the data and opinions present in this article. Readers understand that all risks associated with cryptocurrency are taken on by themselves.