Anyone can use Ethereum’s decentralized finance system, and developers could take advantage of the platform’s blockchain technology for creating and deploying applications securely.
In this definition...
How it works
People can sign up and register an account with Ethereum. All they need is a cryptocurrency wallet, downloaded and signed up separately, to start making transactions.
Ethereum is designed as a decentralized and non-hierarchical network of nodes or computers that form a series or chain of blocks, also called a blockchain. Each block has unique transactions separate from other blocks in the chain and has a storage value maintained separately.
The cryptocurrency that Ethereum generates is called Ether, and it has a currency code of ETH listed on exchanges.
To acquire ETH, users can either work to keep the chain growing as miners, who are rewarded with ETH, or they can buy ETH with standard currency through a cryptocurrency trading platform.
With ETH in their wallets, users can now transact business with any seller who accepts Ether. To secure its blockchain and improve scalability, Ethereum uses Merkle trees, allowing storage savings and client synchronization. It also leverages Merkle proofs to ensure membership proofs.
Some key features
With blockchain and cryptocurrency as the main thrusts of Ethereum, some other features include:
- Decentralized finance (DeFi). Ethereum democratizes financial services with its conventional banking alternative, reaching out to more people with internet connections and mobile devices. It provides a platform for users from across borders to send, receive, earn interest, borrow, trade, and stream cryptocurrency that they can then exchange for actual dollars.
- Non-fungible tokens (NFTs). Ethereum allows users to trade digital assets as NFTs. They can tokenize their artworks or photographs and sell the items as unique and secure digital property.
- Open Internet. Users have control over how their cryptocurrency is used. No personal information is necessary, just a cryptocurrency wallet.
- Open-source development. People can create and share codes or reuse the functionality of existing apps that others have built. Anyone can deploy applications on Ethereum, where users can interact.
Difference between Ethereum and Bitcoin
Ethereum provides a space for building and running decentralized apps, and its Ether can be both a digital currency and store of value. Aside from being the pioneer of decentralized finance, Bitcoin is primarily a digital currency with a fixed supply of coins. However, both Ether and Bitcoin can be earned through mining or buying from cryptocurrency exchanges.
Advantages of Ethereum
Ethereum’s blockchain and cryptocurrency platform offer some advantages:
- Decentralized structure: Data coordination is easier and more secure, which makes managing private blockchain networks simpler.
- Enhanced security: Granular data privacy and encryption make it impossible to access without permission. A hacker must alter each block in the chain to successfully steal information.
- Secure, canonical transactions: When transferring funds, the record of transactions is canonical, using transaction ID as the standard means of lexically sorting transactions instead of appearing in a random order, and tamperproof to ensure finality.
Alternatives to Ethereum
- Bitcoin—the first cryptocurrency and a leading player in the decentralized digital currency industry
- Hyperledger Fabric—an open-source blockchain framework by The Linux Foundation
- IBM Blockchain—a cloud service for building secure blockchain networks
- Other platforms include Oracle Blockchain Cloud Service, Microsoft Azure Blockchain, Quorum Blockchain, and Ripple.