Many people are looking to get more involved in the world of cryptocurrency, and two of the most popular coins include Bitcoin (BTC) and the Ethereum network, which trades ether (ETH). If BTC is the most popular cryptocurrency, then ether is not very far behind. At the same time, it would not be right to look at BTC and ether as being in competition with one another. They are very different technologies, and they do different things. So, what is ethereum, and what should you know if you want to get involved in digital currency for the first time?
Ethereum Is a Decentralized Blockchain, With Ether as the Token
First, it is important to understand what we are talking about when we discuss Ethereum and ether. With Bitcoin, the network and the currency have the same name. There is a Bitcoin Network, and the individual coins are called bitcoins. Ethereum has a similar setup. Ethereum is the name of the network, and ether is the individual token on the network.
Similar to Bitcoin, Ethereum is a decentralized blockchain network. People can use ether tokens to earn interest on their holdings, play games, make transactions, and even purchase NFTs.
Many people look at this network and they see it as the next step in the growth of the internet. Because it is decentralized, it is possible for people to set up decentralized exchanges, decentralized financial entities, and decentralized applications. Because ether has become so popular so quickly, it is critical to take a closer look at how it works.
How Ethereum Functions
So, how exactly does ether work? Similar to BTC, the Ethereum network is located on thousands of computers across the globe. Then, individual users participate as nodes. This creates a decentralized network that is virtually immune to digital attacks. Therefore, it is very difficult to take down the network. If one computer goes offline, it doesn’t matter all that much, because every other computer is able to pick up the slack.
The computers on the network run a program called Ethereum Virtual Machine, or EVM. Each node on this machine has a copy of that specific computer. Any interactions need to be verified by the other nodes so that their copies can be updated.
Similar to the Bitcoin network, transactions and interactions that take place on the ETH network are stored as blocks on the blockchain that makes up the network. It is also critical for individual miners to verify the blocks before they can be added to the network. The network functions using the proof-of-work consensus method. Miners use their computer power to locate the code, prove that it is unique, prove they have done the work, and get rewarded for their efforts in ETH. Similar to Bitcoin, the record is public.
How To Use ETH
So, what is ethereum used for? There are a few ways these ether tokens can be used. One of the most popular applications of these tokens is to purchase NFTs. NFTs are digital pieces of art. Many of them are completely unique, and some of them even act as an entry into specific events. In a lot of cases, these NFTs are put up for sale via auction. Then, if someone decides to purchase one of them, they use ETH tokens.
The network can also be used to create decentralized applications and decentralized financial organizations. Text to the success of decentralized applications, the network has become significantly more popular during the past few years. This has also led to an increase in the popularity of NFTs, decentralized exchanges, and decentralized financial institutions.
Comparing ETH and BTC
If Bitcoin was already successful, what is the point in creating Ethereum? What is the difference between ethereum and bitcoin? There are a few important points to keep in mind. Bitcoin is the mainstream cryptocurrency, but lots of people want to expand beyond it. That is where ETH was created.
Even though BTC is designed to create digital money, it has its limitations. The network is struggling to scale, and a lot of people believe that it is meant to store value, similar to gold, instead of being used as a medium of exchange for goods and services.
That is what makes ETH different. The goal of ETH is to change the way the digital world operates. ETH can be used to interact with the network instead of just to exchange money. The applications of ETH are expected to expand in the future.
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