Cryptocurrency has been the most trending topic in the last few years, and its popularity is only gaining strength with every passing year. This is because there are so many cryptocurrencies becoming multi-baggers. Cryptocurrencies have become a favorite asset among traders. The craze for cryptocurrency started with the epic rise of Bitcoin. Bitcoin’s decentralized blockchain technology has the potential to change the technological world completely going forward.
If there is another cryptocurrency you can close associate with Bitcoin is Ethereum. From a purely technical perspective, Ethereum is better than Bitcoin, and it has opened by cryptocurrency platform for developers. In this article, you will explain in detail everything you need to know about Ethereum in layman’s terms.
What Is Ethereum?
Ethereum is an open-source platform where developers can create their own cryptocurrencies and applications. In technical terms, it is a distributed platform that lets developers develop decentralized digital applications using renowned blockchain technology. In fact, Ethereum is the largest decentralized software application in the world. We need Ethereum as a decentralized platform because there are several issues associated with a centralized platform.
Most of the applications in the world currently are centralized. This means there is one single center from where operation is controlled, and data inflow and outflow take place. This leads to bottlenecking of performance, easy corruption and security issues, downtime due to failure, and whatnot. That is why the world needs Ethereum, and you can now relate why its price is continuously going up.
Ethereum and Smart Contract –
Just like Bitcoin is closely associated with Blockchain technology, Ethereum is closely associated with smart contracts. A smart contract is a computer code that sets the guidelines for a contract and ensures that the parties involved follow the guidelines. Ethereum’s blockchain technology allows the parties involved to carry out a smart contract without the need for a third-party. Besides, the parties cannot alter the terms of the contract as it is unchangeable.
Any developer can create smart contracts with Ethereum blockchain. Their smart contract can create a new digital asset which we call as a token. Users can use this token in the decentralized apps created by the developer. The smart contract will also monitor any transactions using the currency. This is a sharp contrast to the Bitcoin blockchain that allows only its native currency, Bitcoin. On the other hand, the Ethereum blockchain can have unlimited currencies. The most popular ones so far are Tether USD, ChainLink, BNB, and most importantly, the native currency Ether.
Public can buy the different digital currencies or tokens that developers have developed using Ether during the initial coin offering(ICO). Ethereum has also created a standard called ERC20 for developers to follow while creating a new token so that the blockchain can process the token communication easily in the same way for everyone. One of the reasons for the popularity of Ethereum is that it lets the developers create a tradable token.
Applications of Ethereum –
Crowdfunding – At the early stages, Ethereum has become popular as a platform to raise capital for new businesses. Startups create their own tokens on the Ethereum network, and investors can buy those tokens at ICO to invest in the business. As a matter of fact, Ethereum itself raised money for further development using its native currency, Ether.
Banking – Banks are exploring various opportunities to employ the decentralized system of Ethereum. Ethereum has the perfect protection against security issues that the current banking system is vulnerable to. No third party can gain the personal information of individuals involved in a transaction, and hence, the chances of hacking go down to the ground.
Gambling – Ethereum based platforms like Augur and Gnosis offer a prediction market for interested players to bet on upcoming events. These platforms are better than any centralized prediction market available as there is no case of fraudulent activities.
Insurance and Finance – Ethereum can be great for the insurance industry to process claims faster. This is going to help the consumers immensely in faster claim settlement and get the money in their wallets. Similarly, it is going to be great for the finance industry, where lending and borrowing transactions can be processed faster and securely. There is no requirement of agents and no deduction of commissions.
Difference Between Ethereum and Other Popular Cryptocurrencies –
Bitcoin – Bitcoin is more of a digital currency while Ethereum is a platform. Ethereum is way faster than Bitcoin in terms of average block time. It is also more scalable than Bitcoin.
Ripple – Ripple is a system rather than just another currency. It is becoming extremely popular among financial institutes because of its speed and security. However, it is not an open-source platform like Ethereum.
Litecoin – Litecoin is getting popular from a trading perspective, but it is not comparable to Ethereum by any chance. It is merely a digital currency for transactions, while Ethreum is a platform for developing dApps.
There is no doubt that Ethereum still has huge potential, and it is responsible for opening up cryptocurrency development globally. There are some drawbacks as well, such as scalability issue, slow virtual machine, expensive storage, and likewise. The team is continuously, and since it is an open-source platform, the solution is coming up thick and fast.