All you need to know about Ethereum

Review of one of the most popular open-source blockchain-based platforms
19 July 2017   2616

In a nutshell: What is Ethereum?

Ethereum

Is an open-source blockchain-based distributed computing platform featuring smart contract functionality, which facilitates online contractual agreements 

Ethereum is a platform for creation of decentralized applications running on a blockchain through the use of smart contracts. It also provides a cryptocurrency token called "ether", which can be transferred between accounts and used to compensate participant nodes for computations performed.

Ethereum logo
Ethereum logo

A brief history

Bitcoin

Is the first decentralized peer-to-peer payment network that is powered by its users with no central authority or middlemen

Ethereum was created by Vitalik Buterin and officially released in 2015. As the legend goes, a young programmer was told about Bitcoin by his father and decided to create a platform for smart contracts (which bitcoin was not designed to), starting working on Ethereum after he dropped out of college.

Since its launch, Ethereum has been steadily gaining popularity. Starting from late January 2016, it has experienced a surge. In March 2016, within less than a year of its existence, that growth culminated in Ethereum achieving a record-breaking market capitalization of over $1B. Since then, the passions have subsided and Ethereum has declined a bit. However, the coin is now second only to Bitcoin on the cryptocurrency market capitalization list and even fake news about Vitalik Buterin reported dead couldn't dethrone Ethereum (despite the short-term Ethereum crash).

Ethereum chartEthereum price chart

The "World computer"

Blockchain

Distributed database that is used to maintain a continuously growing list of records, called blocks

Ethereum aims to be a 'World Computer' that would decentralize and democratize the existing client-server model. Thus, with ethereum, servers and clouds are to be replaced by thousands of "nodes" run by volunteers from across the globe.

The problem of our modern world is that all our apps rely on the company (or another third-party service) to store our credit card information, purchasing history and other personal data – somewhere, generally in servers controlled by third-parties. The idea of the "world computer" is that one entity will no longer have control over users' stuff and that no one could suddenly make some changes to the programm, or an app, or whatever. Only the user can do, not any other entity.

Ethereum plans to would return control of the data in these types of services to its owner and the creative rights to its author. Each time you save edits, or add or delete notes, every node on the network makes the change.

Ethereum vs Bitcoin

To get a better understanding of what Ethereum is, let's compare it with another crypto giant - Bitcoin.

Like Bitcoin, the Ethereum network and Ether tokens are not controlled or issued by any bank or government. Instead, it is an open network which is managed by its users.

However, whereas Bitcoin allows you to take part in a global financial network, with the help of Ethereum you can participate in a global computational network. This is done by means of Ethereum smart contracts, which are scripts of code that can be deployed in the Ethereum blockchain.

On top of that, as it has been already mentioned above, while Bitcoin aims to disrupt PayPal and online banking, Ethereum has the goal of using a blockchain to replace internet third parties — those that store data, transfer mortgages and keep track of complex financial instruments.

Ethereum vs Ethereum Classic

Ethereum Classic

Is a continuation of the original Ethereum blockchain - the classic version preserving untampered history; free from external interference and subjective tampering of transactions

Two different things with one root in the name: Ethereum and Ethereum Classic. What happened? Well, what started as an attempt to rescue investor funds in a high-profile project has resulted in a schism that has effectively split the community on the second-largest public blockchain. The split was not only psychological, but also technical, with competing visions manifesting in two very real blockchains, or versions of the project’s transaction history. 

Ethereum vs Ethereum Classic Image credit: BitConnect

It all satrted with The DAO, the most notable Ethereum project, raised $150m in ether during a public crowdsale. Unfortunately, The DAO was hacked. Hacker(s) used a valid action in the code to withdraw the funds to another DAO they controlled. Thus, the Ethereum community eventually held a vote, with the majority of participants agreeing that they wanted to change ethereum’s code to get the funds back to investors – and away from the attacker. 

Those who were opposed to the hard fork decided to stick with the original chain calling it “Ethereum Classic.” As of writing Ethereum Classic stands at $15.90 per coin:

Ethereum Classic price chart Ethereum Classic price chart

Which one is better? It's a hard question to ask. Both are present for their own reasons. While the forked Ethereum holds the higher price so looks like the more promising investment at present, there are many factors which should be considered, and due to the volatile nature of such a market, never invest what you cannot afford to lose and the situation is liable to change with little notice. 

The Wallets

No matter what choice between Ethereum and Ethereum Classic you make, here's a list of best wallets for them.

For Ethereum:

  • Mist - the official Ethereum wallet
  • MyEtherWallet

For Ethereum Classic:

  • Light Wallet
  • Classic Ether Wallet 

For both of them:

  • Ledger Nano S (harware wallet)
  • Jaxx (mobile wallet) 

The future of Ethereum

What does the future have in stock for Ethereum is quite a controversial topic to discuss.

On the one hand, nowadays Ethereum’s trading volumes have reached a new all-time high of $3.2 billion, more than double Bitcoin’s current trading volumes of $1.5 billion, in an historic first. The currency jumped some $70, up more than $130 dollars in the past two days. In effect doubling from its recent bottom to reach a brief high of $260, now settling at around $230 at the time of writing. Ethereum's node numbers are some 5 times higher than Bitcoin’s:

Ethereum's nodes Ethereum's nodes

On the other hand, the Ethereum Ice Age is coming. It means that the mining difficulty will be increasing, while it’s will be impossible for miners to keep up. That would raise block time and would make the blockchain freeze. 

Ethereum mining difficulty chart Ethereum mining difficulty chart

Most Crypto-Optimists Live in Norway, Bitflyer Study

According to bitFlyer's poll on future of crypto, europeans believes cryptocurrency has future
24 April 2019   101

Most Europeans believe that in ten years digital currencies will continue to be in demand, but they do not have the same confidence about Bitcoin. This is reported by Cryptonews, citing a study of the bitFlyer.

10 thousand people from ten European countries took part in the online survey. Of these, 63% believe in a “bright future” cryptocurrency. However, not all Europeans are confident in the future of Bitcoin - only 55% believe that the first cryptocurrency will exist in ten years.

It is also noteworthy that, despite the fall in prices of most cryptocurrencies that lasted for almost a year, the majority of respondents positively assessed the prospects for the development of the market.

Most of the “crypto-optimists” turned out to live in Norway - 73% of the inhabitants of this Scandinavian country are convinced that a decade later, digital currencies will still be in society. This is followed by Italy (68%), the Netherlands and Poland close the top four (67% each).

The percentage of consumers who believe cryptocurrencies will still exist in 10 years’ time
The percentage of consumers who believe cryptocurrencies will still exist in 10 years’ time

But the exact form of cryptocurrency will exist, almost no one knows. Only 8% believe that they will become money, and 7% - a tool for investment or a means of preserving value.

The fact that Bitcoin is not generating as much support as other cryptocurrencies is in part a symptom of the market’s volatility, but is also a direct impact of the constant media attention that is associated to its volatility.
 

Andy Bryant

COO, bitFlyer Europe

He also added that the study demonstrated how much remains to be done to increase public awareness of the benefits and opportunities of cryptocurrencies.