Ethereum Cryptocurrency — What is it?
Ethereum is an open-source, public, blockchain-based distributed computing platform and operating system (OS) with smart scripting functionality. The system is decentralised, i.e. not controlled by a single governing entity. It also means that as well as being autonomous with a peer-to-peer approach, there’s no central point of potential failure.
First proposed by cryptocurrency programmer and researcher Vitalik Buterin in 2013, the system went live a couple of years later with 72 million ‘pre-mined’ coins accounting for some 68% of 2019’s total circulating supply.
The exploitation of a software flaw in 2016 resulted in the theft of $50m of ether. This was reversed and Ether was divided into two blockchains, a new version called Ethereum plus the original, which continued as Ethereum Classic.
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Not the same as Bitcoin
It’s constantly compared to, but should not be confused with, Bitcoin – it’s completely separate and has different goals. Ethereum expanded Bitcoin’s capabilities and is a complete network with its own web browser, payment system and coding language.
Ethereum Cryptocurrency is a multi-purpose platform of which Ether, its digital currency, is just one part. And while Bitcoin has an upper limit of 21 million Bitcoins, potentially Ether has an endless supply.
What are Etherum’s Cryptocurrency’s key characteristics?
- Users can create and deploy decentralised applications on Ethereum’s blockchain. These can be new ideas or reworkings of existing ones. Apps which have been created on Ethereum include Ethlance, a way for freelancers to trade work for Ether instead of traditional currencies.
- A global system of ‘nodes’ supports the whole system. These are volunteers who have downloaded the blockchain and enforce all the consensus rules of the system. These are dictated by ‘smart contracts’ providing superior security to traditional legal contracts more cheaply while engendering trust.
- Its decentralised virtual machine, the Ethereum Virtual Machine (EVM) executes scripts with a global network of public nodes. Unlike the Bitcoin script, this is ‘Turing-complete’, meaning it can decide or recognise other data-manipulation rule sets.
- Ethereum serves as a decentralised internet and app store, so it needs its own currency – the Ether token. Ethereum generates the blockchain for this. Ether can be transferred from one account to another and can compensate participant mining nodes for computations completed.
- Its 12-second block mining time means speedy confirmations.
- Any centralised solutions can be decentralised via the Ethereum platform.
- Ethereum can also be used to build Decentralised Autonomous Organisations (DAOs) which are transparent, independent and have no single leader.
What are the key advantages of Ethereum Cryptocurrency?
For creators using the platform to build apps, the only limit is their creativity. Its blockchain can bring the platform’s core principles of trust, efficiency, transparency and security into any sector, industry or business.
The platform is immune to any third-party interventions. And, because the blockchain is formed around a principle of consensus, all nodes must agree on all changes. This eliminates the potential for corruption or fraud and makes the network watertight.
Are there any downsides?
Smart contracts are aimed at making the network fault-proof, but there’s always room for human error. Any coding errors could be exploited. If that happened, only rewriting the underlying code would prevent a hacker attack or exploitation.
It’s been around for a few years now, but Ethereum Cryptocurrency is just starting to gain mainstream attention. Many experts agree its disruptive technology could revolutionise not just the internet but also some incredibly well-established services and industries.
Overall, views of industry experts are broadly positive, and there are certain predictions that Ethereum will still be around in five or 10 years’ time. However, perhaps inevitably, that hasn’t stopped other predicting its imminent downfall.
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