What Is Ethereum
Bitcoin and Ethereum are often grouped into a similar classification due to their shared blockchain roots, yet they are very different, both in their purposes and technologies. It is important for anyone who wants to learn about blockchain technology beyond Bitcoin to understand how Ethereum works. This article will provide an understanding of Ethereum, then compare and contrast the purely currency-based world of Bitcoin to all of Ethereum’s potential uses in the greater blockchain universe.
How’d Ethereum Come About
Vitalik Buterin, a 19-year-old programmer and founder of Bitcoin Magazine, was dissatisfied with the difficulties he faced when trying to build applications on the Bitcoin blockchain. He wanted to build a blockchain technology that wasn’t limited to financial applications, which led to his development of Ethereum. The purpose of Ethereum was to be the basic technological foundation upon which decentralized apps (dApps) could be built. More specifically, Ethereum was meant to run “Smart Contracts”, agreements intended to be enforced not by law, but by computer code. Ethereum went live in July of 2015, and since then, more than 100 decentralized applications have been written using Ethereum.
How Ethereum Works
Ethereum may be thought of as a programming language for blockchain applications. Suppose a programmer wants to build a decentralized app that creates a virtual baseball trading card game called BlockCards. The programmer must ensure that only a certain number of each baseball player is available for trade, because if someone makes 100 virtual copies of the Babe Ruth virtual trading card, then that card becomes devalued. Ethereum blockchain is the perfect foundation upon which this application may be written. The programmer needn’t worry about miners nor complex cryptography, both of which are handled by Ethereum.
Ethereum is founded on the Ethereum Virtual Machine (EVM), which can be thought of as a distributed computer, where everyone who uses Ethereum has a copy of the code on that computer. Similarly to Bitcoin, whenever a program is executed and that code changes, that change must be verified by everyone else on the Ethereum network. In order to run valid programs on the EVM, users must pay Ether, the currency of Ethereum.
Returning to the BlockCard example, the programmer writing that virtual baseball card program will use a programming language specifically suited for writing programs on Ethereum. The two most popular Ethereum programming languages are Solidity and Vyper. The programmer writes just as she would in any other programming language, but she specifies how much Ether each code execution will cost. The programmer might deem that running the code to transfer a Babe Ruth virtual card to the purchaser of that trading card costs 1,000 Ether. The buyer who pays that 1,000 Ether successfully executes the code that transfers the Babe Ruth card. Everyone else in Ethereum’s EVM network can verify the legitimacy of that code change, and the Babe Ruth card is consensually transferred to the buyer.
Differences Between Bitcoin and Ethereum
Bitcoin and Etherium are considered by many industry experts as the number one and two most important cryptocurrencies, yet they are incredibly different, and, to some, Ethereum may not even feel much like cryptocurrency. The three biggest differences between Bitcoin and Ethereum are their purposes, their complexities, and their transaction models.
The purpose of Bitcoin is to simply provide decentralized, trustless financial transactions, while the aim of Ethereum is to provide a much broader utility for decentralized applications of any kind. Specifically, Ethereum was meant to run Smart Contracts. Bitcoin is quite simple and robust because of its very specific role as currency, while Ethereum is more complex and feature-rich to facilitate a much broader array of decentralized applications. Finally, Bitcoin runs on the UTXO transaction model, whereas Ethereum utilizes a more familiar account-based transaction model. With the account-based model, a payor’s account is debited (reduced), and the recipient’s account is credited (increased), similarly to how current bank accounting operates.
Summary
- Ethereum was born out of the frustration blockchain programmers experienced building non-financial applications on Bitcoin.
- Ethereum presented a whole new blockchain foundation upon which all kinds of decentralized applications and Smart Contracts could be built.
- Ethereum runs on the Ethereum Virtual Machine (EVM), which is like a distributed computer where everyone has a copy of the code.
- To run a program on Ethereum, you must spend Ether cryptocurrency.
- The three main differences between Bitcoin and Ethereum are their purposes, complexities, and transaction models.
Additional Resources
90 Ethereum Apps You Can Use Right Now: https://consensys.net/blog/news/90-ethereum-apps-you-can-use-right-now/
Ethereum 101:
https://www.coindesk.com/learn/ethereum-101/what-is-ethereum
What is Ethereum:
