Like any other cryptocurrency, Ethereum has its Blockchain or digital ledger, where it houses all transactions through data mining.
The logic is similar to that of Bitcoin:
Miners are responsible for verifying transactions to form blocks and encode them by solving complex algorithms. Processing time is around 14 seconds. The new blocks are intertwined with the previous block, and the miner receives a reward. Currently, they are approximately five ether.
How does the Ethereum blockchain work?
The Ethereum blockchain works similarly to Bitcoin, but it allows developers to program software with which transactions with smart contracts are managed and automated.
It ensures that it is met as soon as all the conditions of the same are met. An example of this would be that you decide to send a certain amount of ethers on a predetermined date. In this way, once the date is reached, the ethers of your wallet will be sent to that of the other counterparty.
Their potential is unlimited since it will respond to the programmers’ indications in each smart contract.
The main characteristics of these are:
Cut out the middlemen. They are logged, encrypted and duplicated on the public Blockchain, where all users can see the market activity. Eliminate the time and effort required in manual processes
Although it is a novel and attractive process, there are still many aspects of being polished. Any mistake in the programming code can spoil the final result.
Ethereum, being a decentralized system, is autonomous and not controlled by anyone at all. It does not have a central point of failure, as it is running from the computers of thousands of volunteers worldwide, which means that it can never be disconnected. In addition, users’ personal information remains on their computers, while content, such as applications, videos, etc., remains in complete control of its creators without obeying the rules imposed by hosting services such as App Store and Youtube.
Second, it is essential to understand that Ethereum and Bitcoin are two completely different projects with entirely different goals, although constantly compared to each other. Bitcoin is the first cryptocurrency and money transfer system built and supported by Blockchain’s distributed public ledger technology.
Ethereum vs Bitcoin
Ethereum took the technology behind Bitcoin and substantially expanded its capabilities. It is a complete network, with its Internet browser, coding language and payment system. Most importantly, it allows users to create decentralized applications on the Ethereum Blockchain.
These applications can be either completely new ideas or decentralized reworkings of existing concepts. This essentially eliminates the middleman and all the expenses associated with involving a third party. For example, the only benefit from users “liking” and “sharing” the messages of their favourite musicians on Facebook is generated from an ad placed on your page and goes directly to Facebook. In an Ethereum version of such a social network, both artists and the public would receive positive communication and support awards. Similarly, in a decentralized version of Kickstarter, you will not receive just an artefact for your contribution to the company, but you will receive a share of the future profits of the company. Lastly, Ethereum-based applications will eliminate all types of third-party payments to fascinate any service.
As mentioned above, Ethereum is a decentralized system, which means that it uses a peer-to-peer approach. Each of the interactions occurs between the users who participate in it, without the intervention of any control authority.
The entire Ethereum system is supported by a global system of so-called “nodes”. The nodes are volunteers who download the entire Ethereum blockchain to their desktops and fully enforce all the consensus rules of the system, keeping the network honest and receiving rewards in return.
Those consensus rules and many other aspects of the network are dictated by “smart contracts.” These are designed to perform transactions automatically and other specific network actions with parties you do not necessarily trust. The terms that both parties must adhere to are pre-programmed in the contract.