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What is Ethereum?

14 December 2021

Ethereum is both a cryptocurrency and a functional decentralized environment. The key to Ethereum's success is multifunctional smart contracts. They ensure the execution of a certain action only when certain conditions are met. There is a commission for each transaction, which is calculated in gas – units that indicate the amount of commission for a specific action or transaction. 

Gas has two components: the limit and the price. The limit is the maximum amount of gas that the sender is willing to pay in order to complete an action. The price is the amount that the user is willing to spend on each unit of gas.

The internal currency of the platform is Ether, abbreviation ETH. The main purpose of ether is not only transactions of digital assets but also support for the operation of the Ethereum blockchain. Ethereum blockchain executes smart contracts and records them. The blockchain is supported by miners. The platform uses a Proof-of-Work algorithm, which requires processing power to keep the network secure. Miners are rewarded for discovering a block hash. All work is carried out on the same principle as with Bitcoins. 


Briefly about the history of Ethereum


The creator and main ideological inspirer of Ethereum is a Canadian developer of Russian origin Vitalik Buterin. He became interested in cryptocurrencies in 2011 while publishing in Bitcoin Magazine. Simultaneously, he studied programming and thought about creating an improved blockchain-based platform.

It all started in 2013 with the white paper that Buterin sent to his friends, and they sent it to their friends. In 2014 fundraising of the platform development began through crowdfunding. The launch took place in July 2015. However, it did not fully work until March 2016 with the release of the Homestead protocol. 

The earliest emblem was created by Vitalik Buterin, which had an analogue of the letter sigma from the Greek alphabet Σ (two returned summation symbols). Based on this emblem, the final design was created. It is now an octahedron with four triangles around it. Ether, like any other currency, has its standard Unicode character and this is Ξ. This is required for websites and applications to display this currency.


Ethereum value


It is capable of performing all the same functions as Bitcoin, Litecoin, Dash, Ripple: payment instrument; a form of storage of assets; investment asset. However, the main value of Ethereum is not in its "cryptocurrency" properties. This platform allows the creation of decentralized blockchain projects, ranging from charitable foundations to sports betting applications or poker rooms. At the same time, the platform is open, so that everyone can get access to it. Typically, the Ethereum platform accepts any programming language, including visual programming languages. This is what makes it so versatile and flexible.


Bitcoin or Ethereum


The scope and functionality of bitcoin are more limited. It is a platform designed to conduct pseudo-anonymous transactions. While Ethereum is a complete environment for implementing decentralized applications (dApps) using smart contracts. 

The features of their internal currencies also differ. In Bitcoin, it is called "bitcoin" and performs, first of all, the function of an electronic payment method. This is a currency in the full sense of the word. Ethereum has ether, which in concept is a token used to conduct smart contracts. The smart contracts that underlie the web are universal. In Bitcoin, a smart contract guarantees only payment transactions. And in Ethereum, they can be applied in a wide variety of areas. Bitcoin is, first of all, a functional financial instrument with elements of anonymity and decentralization. Ethereum is a platform for creating decentralized programs and applications on the blockchain. Bitcoin has an established emission ceiling (21,000,000), while Ethereum does not. This platform is more susceptible to changes and upgrades.


Ethereum Classic


In June 2016, a bug was found in the code of The DAO (Decentralized Autonomous Organizations). The vulnerability of the platform for autonomous investment capital management led to a hacker attack. As a solution to the problem and to save funds in the future, the developers and founders of the platform decided to change the blockchain and return the stolen money. But not everyone agreed with this course of events. Some believed that the information chain should remain unchanged. As a result of an opinions split, the platform underwent a division, two projects were born: Ethereum Classic and Ethereum. The adherents of the classic resource continued to mine coins based on the old blockchain, while others started working on the new one made as a result of the hard fork. During the fork, the capital of each investor doubled, so many crypto investors continue to use both platforms.



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