¿Qué es Ethereum?

While Bitcoin aims to be a new monetary system in which currency units are verified through cryptography and transactions are distributed via blockchain technology, Ethereum, often incorrectly considered Bitcoin’s “main competitor,” is actually an approach that seeks to decentralize content and applications.

Nowadays, Internet users can request information stored on servers around the world. While this is very convenient, it is based on trust between a user and the server provider in question. At best, the information is stored confidentially, while at worst, hackers, or fraudulent entities, can use this data for malicious purposes.

Ethereum Technology

Ethereum is a new technology, or rather a platform, that uses blockchain technology to replace ‘third-party’ internet providers that store data or track complex financial instruments.

While servers and clouds handle the more complex requests that users create over the Internet, Ethereum offers the possibility of decentralizing, and possibly democratizing, these services.

On the Ethereum network, thousands of servers and clouds are replaced by ‘nodes’ (computing power offered by committed volunteers) that come together to form a decentralized ‘world computer’. The goal of the Ethereum platform is to provide users around the world with control over their own data through a distributed computing platform on which new projects can build services on top of the platform itself.

What is Ethereum used for?

Essentially, Ethereum replaces the need for a single server as a reference point (for which a server provider can charge) and instead provides a network of decentralized computers around the world through which information and requests can be processed. If a user wants to use this network, requests are not paid for with a traditional currency, but are instead issued in Ether.

If Bitcoin is gold, Ethereum is silver

Ether is therefore a digital bearer asset similar to Bitcoin, but unlike Bitcoin, Ether serves as a token to pay for the computing resources needed to process an application or program created on the Ethereum platform. Ether is rightly sometimes called ‘digital oil’, as opposed to Bitcoin’s ‘digital gold’.

The price of Ether is determined by the amount of computing power required for a transaction and the time it will take to execute. Transactions made on the Ethereum blockchain require ‘gas’, which is subsequently paid for in Ether.

How does Ethereum work?

When using a program on the Ethereum platform, the instruction is processed by thousands of computers instead of a single server. Since its design is based on the Bitcoin blockchain, the Ethereum blockchain offers a means for developers to create and execute not only applications, but also other agreements with additional steps, ownership rules, or specific transfer options using so-called “smart contracts.” Smart contracts are therefore basically programs that run exactly as their creators create them.

Mining Ethereum

Similar to bitcoin mining where computer users around the world verify transactions through cryptography and receive new bitcoins as a reward for doing so, Ethereum uses so-called ‘proof of work’ to determine that transactions are valid and have not been tampered with by malicious entities. As with Bitcoin, miners are essential and ensure the integrity of the Ethereum blockchain.

Ethereum Wallets

As with Bitcoin, Ethereum users can store mined or purchased Ether in wallets, either on desktop or mobile devices. Users can then exchange the Ether for fiat currency or another cryptocurrency, or they can join (or even create) a smart contract or decentralized application of their choice.

Given the newfound popularity of the Ethereum platform, users have not only been quick to use Ether as a mechanism for new smart contracts or applications, but have also sustained the rise in the price of the cryptocurrency as it is frequently used for new services and platforms running on the Ethereum network.