What is Ethereum? all the information about the cryptocurrency with the most hype

It is clear that Ethereum grew out of the will to apply the concepts of Bitcoin and blockchain to other areas than just money. As a result, Ethereum provides an open source platform for developers looking to create decentralized applications. This appeals to developers looking for an easy introduction to blockchain projects.

While Bitcoin is a disruptive technology that challenges PayPal and banks, Ethereum aims to use a blockchain to replace services provided by third parties (those that store data, transfer mortgages, and are accompanied by complex financial instruments). This technology is much more than a currency, it is a platform for application development with the decentralized network.

Index of contents

What is Ethereum?

Ethereum is more than an electronic currency as it enables decentralized transaction verification for any viable Full Turing application.

Basically, Ethereum is an innovative project with the challenge of being a "world computer" that is going to decentralize the client-server model.

An easy example to understand is an online document service, such as Evernote or Google Docs. According to future plans, with Ethereum the owner will once again have full control over his data in this type of service.

The idea is that an entity has no more control over your notes and nobody can suddenly ban the application, temporarily deleting all your notes. Only the user can make changes, no other person can do it.

In theory, it combines the control that people had over information in the past with the ease of accessing information that we are used to in the digital age. Every time you save, edit, add, or delete notes, each node on the network is updated.

A number of innovative features define Ethereum. As a result of its extended capabilities, Ethereum comes with two types of accounts. EOAs, or "Externally Owned Accounts, " which provide functions similar to Bitcoin, such as providing a balance protected by private keys. And "Contract Accounts", which provide the "Full Turing" language for application development that makes the protocol so desirable.

What is a blockchain network

A blockchain network consists of several connected computers, capable of generating, manipulating, and storing information in a decentralized way, where any action between two users has to be verified by other users on the network before it has any validity.

But in 2013 a 21-year-old named Vitalik Buterin found that the technology behind the blockchain network could be used in a smarter way, and then he began to develop what we know today as Ethereum.

Ethereum, as well as Bitcoin, is a decentralized network based on blockchain technology, with open source, operated and controlled by the users themselves.

But if Ethereum works basically like Bitcoin, why has it been so prominent since its launch in 2014, about to receive millions of investments from companies like Microsoft and IBM?

The answer is simple: even though Ethereum can also be used as an electronic currency, its applicability goes far beyond that.

The Ethereum platform allows developers anywhere in the world to create and distribute Smart Contracts, which work like computer programs programmed to execute functions under certain circumstances, such as transferring a certain amount of money every time a task has been accomplished, send a specific file when requested by a user, and much more.

All this, of course, happening in a totally decentralized, secure and immutable network.

Imagine that you want to invest your money safely, in a company located in Sweden, without having to get involved with banks or government institutions.

With Ethereum, it is possible for a user (in this case, you) to create a direct Smart Contract with the Swedish company, specifying that they want to receive 15% of the benefits when the company's gross income reaches USD 200, 000.

The trend is that in the very near future, the blockchain will be as big a revolution as the internet has been and one of the projects that is later in relation to the blockchain is Ethereum.

Differences between Ethereum and Bitcoin

With Ethereum, Vitalik Buterin, the creator of Ethereum, has developed the first universal application of the underlying principles of Bitcoin. Rather than using the blockchain as a way of establishing / providing value, Ethereum offers the possibility of using this technology in a “Complete Turing” environment.

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Where Bitcoin implements blockchain technology in combination with "Proof of Work" to form a coin, the value of Ethereum is derived from the ability to create universal applications.

We also see differences between the way Ethereum and Bitcoin have implemented their decentralized currencies. Most notably, the BTC supply has a universal limit, while the ETH (ether) supply is limited annually at 18 million ETH, but there is no set limit.

Two types of Ethereum: Common and Classic

Ethereum and Classic Ethereum are different versions of the same blockchain. The fork served as damage control to the problem caused by the hackers' invasion of DAO in 2016, and was fueled by ideological differences among the initial Ethereum workers.

Since the DAO racked up $ 150 million on Ethereum, but almost $ 50 million on Ethereum Classic has been hacked, nearly 80% of miners decided to hard fork the blockchain.

The other miners stuck with the startup blockchain, which we now call Classic Ethereum. That is why there are now two Ethereum based currencies that can be used to trade.

Ethereum wallet

Ethereum has a standard wallet, called Mist, which is used as a gateway for developers to use dapps. Ethereum wallets act like BTC wallets. You can use the tools of the system or use the comfort of other wallets that have the software in an easier way to use.

In addition to Mist Wallet, you can also use Ethereum with online wallets like MyEtherWallet.com, EthereumWallet.com, and EthAddress.

CLI (Command Line Interface) wallets, like Geth, provide advanced user functions. An Ethereum hardware wallet is also a good option, like Ledger Nano S.

Ether is the currency of Ethereum

Ether is the currency that circulates in the Ethereum network and is used as a form of payment for using the resources of this network, and also through the transactions that take place on the platform.

How to buy Ethereum cryptocurrency

Buying Ethereum works exactly the same as if you were buying any other electronic currency.

You can do this through exchange houses by GUI or by API. You can even send and receive Ethereum directly, which means that you can work with the currency in particular with clients or friends without having to pay an additional fee for trading.

After all, the act of buying Ethereum is simply exchanging Ethereum for another currency. It is up to you whether or not to use an exchange office.

However, the easiest way to buy Ethereum is with an online exchange office. Although Ethereum is the second most prominent blockchain platform, it is much more difficult to find trusted local trading possibilities, such as those provided by the localbitcoins.com site in the case of Bitcoin.

But if you are looking for a reputable exchange house that operates on Ethereum, you will have few options.

Good places to start are Poloniex, Bitfinex, Kraken and GDAX. These exchange houses, to a large extent, perform the same function. By comparing rates and payment methods, you can find the exchange office that is the best for you.

The recommended website for the Ether wallet to be created is My Ether Wallet. However, before starting your transactions, do a study on this new platform to know the correct steps for creation and how to proceed.

After creating the wallet, you can change your Bitcoins, and for this you will have to find the exchange houses that work with cryptocurrencies and make the transaction.

How to make money with Ethereum

Ethereum is a decentralized peer-to-peer network as well as torrent. In other words, you need interconnected computers to keep the network running and active.

To do this, network taxpayers must keep their computers connected. As a form of thanks and compensation from the network, he then distributes the encrypted coins called Ether.

In addition to Microsoft, the world's banks and even governments are showing interest in the adoption of this network, which will increase the price of Ether.

Ethereum and its similarity to stocks

The term shares is commonly researched in relation to Ethereum. But the truth is that Ethereum is not a type of action.

However, as a value is represented based on a free market demand and supply structure, Ethereum, as well as other cryptocurrency blockchain implementations, effectively acts in the same way as traditional stocks we know of.

There is, however, one important difference to be highlighted. Unlike stocks, Ethereum's decentralized nature makes it less malleable because of specific market fluctuations, making it more of a diversified asset.

Even if Ethereum's core team disappeared from the face of the Earth, Ethereum tokens should, in principle, keep their value (at least until the lack of updates leave them out of date). Stocks, on the other hand, live and breathe for the value of the company.

As a result, stock exchanges worldwide are introducing Ethereum in their trading options.

What is Ethereum mining and how does it work?

Now that Ethereum has taken over the position of the second most dominant electronic currency on the market, you can find out how Ethereum mining works.

Ether mining is the accumulation of Ethereum through the validation of network transactions. More specifically, mining is engaging in validating transactions that are done to confirm all activities on the Ethereum blockchain.

This can be done on all platforms, which means it is available for home computers as well as custom platforms. It's easier to start with Unix machines than Windows, especially when it comes to Ethereum.

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The challenge of mining is to generate more money by collecting ETH than what is spent on electricity consumed to do this.

As a beginner, the best opportunity to generate some money through mining is by participating in a mining pool. Otherwise, even the most expensive gaming board will be easily outmatched by professionals.

There are several mining clients that can assist a company in Ether mining. From a miner provided by software and other CLI tools to powerful GUI applications that allow fine tuning and a clear view of all mining activities.

Hardware needed to do Ethereum mining

Since the implementation of the Casper Proof of Stake algorithm in Ethereum, the ASIC hardware, which is known to be particularly effective for mining BTC and other cryptocurrencies based on the "Proof of Work System", can no longer be used for Ethereum.

As a result, Ether mining is mainly limited to Graphics Processing Units (GPUs). This excludes the use of Bitcoin ASICs that significantly restrict rewards for entry-level miners who do it as a hobby.

This also makes Ethereum interestingly favorable to the domestic consumer in relation to large investors. In any case, a similar field of action emerged, where capitalism still manifests itself in the form of miners who bet higher, simply buying much better equipment than the domestic consumer.

Therefore, you will need the following to assemble your Ethereum mining equipment:

• Motherboard: To allow the parties to communicate. Graphics card: To process the proof of stake algorithm. Storage (HDD / SSD): To store the blockchain and recently reviewed transactions. Memory (RAM): To provide working memory for the mining program. You should be generous with your investment in RAM, since the DAG file is always growing in size. Power Supply (PSU): To provide power to parts. Ethernet: To receive recently validated transactions to be stored on the blockchain.

Keep in mind that the graphics card plays the most important role in determining how profitable your platform will be.

Ethereum mining pools

Ethereum mining pools significantly increase your chance of acquiring Ether. This occurs because the probability of Ether allocation, as with other cryptocurrencies, is proportional to relative productivity across the network.

The income received by the pool is divided among the participants and the distribution agreements vary from pool to pool.

The payment types of a pool vary from Pay Per Share (PPS) and proportional payments (PROP) to obscure algorithms, such as the Single Geometric Method (DGM).

In addition to a mining pool, you will also need Ethereum mining software and an Ethereum wallet to receive your payments.

Ethereum cloud mining

Cloud mining involves the management of mining facilities by a service provider. This is perfect for beginners who want to take the first step.

There are various types of cloud mining services for Ethereum. Typically, users acquire specific tokens from a website, which represent the rights to a certain amount of hash power. This hash power acts as the mining power that the service will use to perform the user's Ether mining.

However, there are also other types of cloud mining services:

• Hosted mining: The service provides machines that are leased to customers. Hosted Virtual Mining - General-purpose virtual server providers that lease processing power and memory to general-purpose clients, which can be used for Ethereum mining. Hash power rented: The provider rents the hashing power for the customer to collect the benefits.

Various messages can be found advising against the use of cloud mining services, arguing that ultimately it would be more productive to buy ETH directly from an exchange office. This should make you wonder why someone would offer an opportunity to earn Ether at a lower rate than the resulting Ether would be worth.

However, there is a wide range of cloud mining services that should be considered at least when looking for a more convenient Ether mining solution.

Profitability of Ethereum mining

The profitability of Ethereum mining depends on two key factors: hardware and electricity. The benefits of mining can vary greatly. As the value of the coin can decrease, the same can happen with the cost of electrical energy and the hardware used.

The volatile nature of cryptocurrency exchange rates expands for all types of cryptocurrency mining. However, with adequate hardware and power supply, you can create a considerable income.

It can be argued that Ethereum, due to its lack of mining ASIC hardware, is relatively more accessible to anyone who has mining as a hobby. However, as time goes on, Ethereum seems to be following the same direction as Bitcoin in terms of saturation of the mining market.

You can help determine projected benefits by using Ethereum mining profitability tools online, as mining profitability is directly related to investment in hardware and energy.

Ethereum mining algorithm

Ethereum uses the Casper Proof of Stake algorithm instead of the traditional Proof of Work used in Bitcoin.

Proof of Stake (PoS) spends much less computational power to achieve the same end as PoW (Proof of Work), which implies that it should be a better alternative to the PoW algorithm used by Bitcoin.

Casper Proof of Stake is part of the forefront of PoS and prioritizes availability, or speed, over consistency, which means reliability, and resulting in faster validations with properties similar to those of a Proof of Work blockchain.

Where the Proof of Work makes use of hardware to provide computational value, Proof of Stake requires an approach that frees the network of high energy requirements.

Instead of receiving rewards for mining, Ethereum miners earn rewards proportional to the transaction they are validating. Note that this has been the case since 2016, as Ethereum was also running a Proof of Work system prior to that.

Is it worth investing in Ethereum?

Generally speaking, there are many types of Ethereum mining. From cloud to hardware, but you can always find a better solution.

It's hard to predict if your situation will lead to a profitable opportunity, but with enough information on hardware and energy spending, you're on your way to knowing what your situation is.

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