Cryptocurrency Etherium: more than money today
Many people know that there are many other cryptocurrencies besides bitcoin. At the moment there are about 1300 altcoins, the most popular among them is Ethereum or Etherium.
Who invented Etherium?
The Ethereum platform was created in 2013 by Vitalik Buterin, a twenty-year-old Canadian programmer of Russian descent, in collaboration with Gavin Wood. Interestingly, Vitalik is really his full name, which in English is spelled Vitalik.
В 2011 году Бутерина заинтересовал биткоин. В этом же году он стал сооснователем первого крупного печатного издания на эту тему – журнала Bitcoin Magazine.
To create the Etherium platform, an ICO was held in August 2013, which generated $18 million, and it began full operation in July 2015.
In 2017, Vitalik Buterin is in the top 10 of Fortune magazine's "40 Most Influential Young People Under 40."
The official website of Etherium: https://www.ethereum.org
What is the difference between Etherium and Bitcoin?
To the uninitiated, the difference between bitcoin and etherium lies in their name and price. In fact, despite the fact that both cryptocurrencies are built on blockchain technology, they do not have much in common.
As you already know, bitcoin's main purpose is to make decentralized and anonymous transactions that are open to all participants in the network. In the Bitcoin system, blockchain is used exclusively to record information about all previous transactions as well as ownership rights.
In the Etherium network, blockchain has more widespread use - it is used to record information about program codes and ensures the operation of all decentralized applications developed within the Ethereum platform.
On that basis, The main goal of the Etherium network is to provide a decentralized platform for application developers.
Simply put:
- The Bitcoin network is an electronic money transmission system between individuals that allows online payments to be made using bitcoins.
- The Etherium network is an open software platform based on blockchain technology that allows developers to create and deploy decentralized applications.
Another distinguishing feature of Etherium is the use of smart contracts. They are also used in the Bitcoin network, but their capabilities are greatly simplified there, unlike in the Ethereum network.
Ethereum network capabilities
As with all blockchain-based systems, applications in the Etherium system are fully autonomous and free of interference - all participants in the network must agree to make changes to the blockchain. All transactions or actions are final and cannot be reversed.
Working on a pure blockchain is fraught with certain difficulties, which was taken into account when developing the cryptocurrency. As a result, any systems and applications can be decentralized using the Ethereum platform. This can be, for example, a credit issuance procedure, intermediary services, voting process, etc.
Once an action is considered completed, it cannot be changed, including by the creators of the app itself. The use of such decentralized applications eliminates all fraud and corruption.
Read more about smart contracts
Smart contract or smart contract - is a computer code used in the exchange of money, property or some other value. Within the blockchain system, a smart contract is a program that executes a set code when specified conditions arise.
In principle, any blockchain can process such a smart contract, but most such systems have limited capabilities. The Ethereum platform, on the contrary, expands these capabilities. Instead of a limited set of operations, an Ethereum user can create any operations he needs on his own.
Simply put, a smart contract works automatically and implements enforcement, management, execution, and payment. Such a kind of enforcement of honesty.
Cryptocurrency Ether
Ether is the exchange unit of the Ethereum platform and has the designation ETH.
1 ether can be divided into smaller parts:
- 1/1000 - finney;
- 1/106 - szabo;
- 1/1018 - wei.
In 2017, Etherium became the second largest cryptocurrency after Bitcoin.
At the moment, the cryptocurrency Ether is part of the so-called "standard package" of cryptocurrency purchases.
In addition, unlike bitcoins, which have a limited number of 21 million coins, ether is not limited in any way.
Ethereum mining
Like all other cryptocurrencies, Etherium is created by mining. However, unlike bitcoin miningwhich uses the sha256 hashing algorithm, for ether mining uses the algorithm ethash.
If ASICs are used to mine bitcoins, the optimal choice for ether mining is to use GPUs. Ether can also be mined on a regular CPU, but compared to GPUs, its efficiency will be many times lower.
The ethash algorithm uses a special code called nonce. In cryptography, a nonce code is a number written in binary code that is the unique correct key for a hash function.
In the Etherium network, the goal of mining is to find the nonce code that will match the hash function value set when each new block appears.
In this case, due to the peculiarities of hashing, the probability of random guessing the correct code tends to zero. The only method to find the correct code for a hash function is to check all possible code variants. Only in this case, finding the correct nonce code is a confirmation that the miner ran the ethash algorithm on his computer's computing power, and that he should be paid for his work.
The reward for finding the correct nonce code is five ether coins. As soon as the system registers the correct nonce code for a block, a new block is created and then the hashing continues. The code search cycle for one block is 12 seconds.
Etherium and Etherium Classic
In 2016, a startup created on the Etherium platform, working on The DAO project, was hacked. An unknown hacker stole $50 million worth of ether (at the time). Despite the fact that the vulnerability was not in the platform, but in the software of The DAO project, the developers decided to intervene in their own project to save a third-party.
After hours of deliberation, the community decided by vote to change the programming code, or hardfork, which would allow the recovery of the stolen funds. As a result, the owners were able to recover the money, but this decision had far-reaching consequences, causing a split in the Ethereum network.
As we said above, the blockchain principle implies irreversibility of each transaction and also eliminates the possibility of making any changes to them. The hardforwarding contradicts the very essence of blockchain - if you rewrite the code every time a large amount of money is involved, the blockchain will lose its unique qualities: security, anonymity, protection from censorship, and immutability.
The creators of Etherium justify this decision by saying that if the stolen money was not returned, it would undermine any confidence in the platform, after which the project could be put an end.
Naturally, many people disagreed with this decision, leading to a split of the network into two parallel blockchains. Opponents of the hardforward refer to the Etherium Classic network, while supporters refer to the Etherium network.
Technically, both cryptocurrencies are exactly the same until the specific block on which the hardforward was implemented. Nevertheless, this separation led to the existence of two cryptocurrencies: Ethereum (ETH) and Ethereum Classic (ETC).
In terms of popularity, Etherium Classic falls short of its "competitor".
The future of Etherium
Despite the problems with the hacking of The DAO and the split of the network, the creators of the Ethereum platform expect a bright future. Vitalik Buterin noted in an interview that "Until recently, China, like many other countries, was only focused on bitcoin, but now everything has changed. Now people are interested in Etherium not only for buying/selling cryptocurrency, but also for creating applications based on the platform..
The Ethereum platform offers its users truly revolutionary solutions in the creation and use of decentralized systems and applications. Therefore, ether cryptocurrency will definitely be popular for a long time to come.