Ethereum Explained

Ethereum Explained


Understanding Ethereum And Whats Behind It

In the crypto world, Bitcoin and Ethereum are like the sun and the moon. You can’t have one without the other, and each has its place in the sky. However, while Bitcoin is fairly simple to understand (since it’s just digital currency), Ethereum is a bit more complex.

What many are unaware of is that Ethereum is not only digital currency, it’s also an entire blockchain platform that is akin to a cloud computer (much like Amazon’s AWS or Google Cloud). Since that one-liner is unlikely to clear up the project’s essence for you, the following sections go on to explain Ethereum in a few easy steps.

Ethereum Is a World Computer

Just as the title says, Ethereum is what is called a world computer. Sounds a bit daunting, right? In actuality, it’s not too complicated. A world computer is, basically, a cloud-based computer that is far more powerful and has tons more capacity than any home computer could ever dream of. 

Imagine if your laptop was powerful enough to run not just applications for you, but also for (potentially) the whole world. That’s what Ethereum aspires to do, and so far, it’s succeeding.

Now, that’s not the only difference between Ethereum and a normal laptop or cloud-based system. Besides being incredibly powerful, Ethereum is also decentralized. Traditional cloud computers like Amazon AWS and Google Cloud are housed and run by centralized infrastructure. That makes them prone to attack and puts users in the position of having to trust the companies that run them. 

Ethereum, in contrast, is entirely decentralized. That means there’s no CEO, no headquarters, and no server farm housing the network’s infrastructure. Instead, a globally distributed network of nodes participate in providing the network with both computing resources and security.

The obvious benefit here is that since no one actually controls Ethereum, no one can shut it down, edit it, or censor any of its content. As a public computer, Ethereum is purpose-built to host and run any application imaginable without the possibility of that application ever being removed or otherwise tampered with by a third-party.

Ethereum Is a Decentralized Finance Ecosystem

One of Ethereum’s main applications is decentralized finance (DeFi). Blockchains are incredibly well suited to financial purposes as evidenced by Bitcoin’s immense popularity. As such, developers far and wide have focused on creating additional financial decentralized applications (DApps) which run on Ethereum.

DApps for decentralized lending, digital asset trading, asset tokenization, and more have struck a chord with not only retail investors, but wall street veterans as well. Ethereum-based DApps like AirSwap, Augur, Golem, and OmiseGo have found support from the likes of Goldman Sachs, Polychain Capital, and MUFG.

ETH Is the Network’s Fuel

There’s Ethereum, and then there’s Ether, the network’s currency. Yes, you can send ETH around like money, as you would BTC. But, that’s not all ETH does – in fact, its main function is as fuel to power the network. 

Every event that takes place on the Ethereum blockchain requires a gas fee to be paid in ETH for that event to take place. That’s why investors have flocked toward ETH and pushed its value right up against Bitcoin’s. As the network becomes more widely adopted, the necessity for ETH also grows in kind. 

In other words, if you believe the Ethereum network has the potential to keep growing, then buying ETH at current prices should pay handsomely down the road.

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