With Ether and Bitcoin reaching ATHs, now is an opportune time for AscendEX readers to review some of the key concepts behind the Ethereum blockchain and its digital asset, Ether.
Ethereum is a decentralized, open-source blockchain built with smart contract functionality. Ether (ETH) is the native cryptocurrency of the platform. It is the second-largest cryptocurrency by market capitalization, after Bitcoin. Ethereum is also the most actively used blockchain.
Ethereum, and other cryptocurrencies, allow you to transfer digital assets. However, Ethereum can do much more; users can deploy their code and interact with applications created by other users. Because it is so flexible, Ethereum can host a variety of sophisticated programs on its network. A growing number of successful crypto projects including Augur, Metamask, Gnosis and Storj to name a few, utilize the Ethereum blockchain to power the operation of their products and tokens.
Ethereum’s network replaces typical servers with a network of computers called nodes. These nodes store and maintain a shared database on a blockchain. Thousands of nodes in the network support the blockchain. The more nodes there are to verify transactions, the safer the network and its data are. The data is not stored on a single computer or a central server. It is stored across the entire network of many nodes.
The information and transactions occurring on the blockchain are verified by ‘consensus.’ This means that more than half of the nodes must agree that the transaction information is correct before it is allowed onto the blockchain. Ether is digital fuel or ‘gas’ for the automated smart contracts of the Ethereum network.
A smart contract is a self-executing contract with the terms of the agreement between buyer and seller directly written into lines of code. The design of the Ethereum blockchain is such that transactions only execute when certain conditions are met. The rules determining these conditions are called ‘smart contracts.’ Once one of these contracts is written and added to the blockchain, the author cannot change it.
Decentralized applications or ‘dApps’ are applications that do not run on a traditional central server. Instead, they run decentralized on the Ethereum blockchain. dApps and their growing ecosystem are core to Ethereum’s design and belief.
Ether’s creation is facilitated by a process called ‘mining.’ Nodes on a blockchain must verify new transactions; the nodes receive Ether as a reward. Verifying these transactions on the blockchain is a process known as ‘proof-of-work mining. This process is called PoW (Proof-of-Work) because the node must prove that it has done the ‘work’ and verified the transactions in order to receive its Ether reward.
The Future of Ethereum
Ethereum has recently started implementing a series of upgrades called Ethereum 2.0, which includes a significant transition to proof of stake and increased transaction throughput using sharding. Many of the crypto projects using the Ethereum Blockchain are now preparing for the upcoming upgrades.
Now that readers are familiar with Ethereum and Ether, they can start trading Ether HERE.