What is Ethereum? Why is it the second-biggest crypto in the cryptocurrency market? And how is it different from Bitcoin? We will answer these questions in three minutes! Ethereum is the name of another type of blockchain that has its own cryptocurrency called “Ether”. And Bitcoin Blockchain is different from Ethereum Blockchain Ethereum was proposed in late 2013 by Vitalik Buterin, a Russian-Canadian programmer. He saw the potential of crypto and blockchain more than just a form of digital currency. Ethereum can be thought of a general purpose blockchain that can do everything any other blockchain can and more such as smart contracts and financial agreements between two parties. So, how Is Ethereum Different From Bitcoin? For those who do not understand what Bitcoin is, please check out bitcoin video by following the link on the top right hand corner. Ethereum differs from Bitcoin that it is not just a digital currency where users can exchange. It is an open-source blockchain platform that allows users to build and develop various applications that run on the Ethereum platform. Therefore, this allows Ethereum to have more use cases than Bitcoin.
Ethereum platform is similar to the platform of iOS or Android that allows developers to build applications on top of the platform. Why do developers choose to build applications on Ethereum platform? Because the applications created on the Ethereum blockchain are not being processed by any centralized server. Instead it will be executed and processed by computers in the network. Therefore, application that runs on the Ethereum blockchain are called Decentralized Application or DApp. One advantage of DApp is that, instead of relying on one company or server to keep our apps running, DApp is processed and run by multiple nodes (computers) in the Ethereum network. So, as long as there are computers that run on the Ethereum network, our applications will always be working. What about the digital currency of Ethereum known as “Ether”? What is Ether used for? Let’s start by comparing with a normal application. When we build application on someone else’s server, we need to pay them for using their computers to process and run our application. Meanwhile if we build application on the Ethereum network, we have to pay for processing our application as well.
Just that we pay to the people who help processing our application. These people are called validator (similar to miners in bitcoin). So every time we run our application on the Ethereum network, there will be “gas fee”. The simplest is to think that the application is a car and gas is petrol. For a car to work, it needs to be filled with petrol. How much petrol is needed depends on the type, specification and distance etc. Faster cars, in general, burn more petrol. Similarly, applications that require higher computational power will require more gas The amount of gas required is based on the amount of computational resources used to run the application. In addition, we can set the gas price to be high or low. It's basically the same with petrol. Our cars will have better performance if we use high quality and expensive petrol. Similarly, our application will be processed and run faster if we set high gas price. To calculate the total gas price: Multiply the amount of gas used by the gas price that we set and this will be the total gas price that we have to pay.
And the total gas price is in Ether (ETH) unit. But another important factor that makes Ethereum different from Bitcoin is the use of “Smart Contracts” So how do Ethereum Smart Contracts work? Please stay tuned for the next episode! We will post a video about Cryptocurrency every Friday on Bitkub’s social media channels (link in the description box)..