What actually is Ethereum and how does it work? In this video we explain Ethereum and the associated second largest cryptocurrency, Ether. You will find out what Ethereum is, how it works and why and how it could change the world. We will also show you the advantages and disadvantages as well as the differences between Ether and Bitcoin. At the end of the video, we'll tell you where you can buy Ether with no fees. So stay tuned until the end! Hello and welcome to GeldRat. If you like the video, we would be very happy to receive a like from you.
Ethereum or the associated cryptocurrency ether is now almost as well known as Bitcoin. This is primarily due to the similar rate increases as with the largest digital currency. Before we explain to you what Ethereum is, we have to briefly come back to Bitcoin and the blockchain, because this was the basis for the creation of Ethereum. 1. Bitcoin and the blockchain Depending on how much you have already dealt with Bitcoin and other cryptocurrencies, you may already know that Bitcoin is a decentralized currency. Before Bitcoin existed, an intermediary was always necessary to transfer money digitally.
As a rule, the bank or even a provider like Paypal or TransferWise. The issue was also tied to a single institution, in the case of the euro, the European Central Bank. With Bitcoin, that has changed due to decentralization. You can transfer cryptocurrency directly to someone else without an intermediary. Every transaction is checked and confirmed by the entire Bitcoin network of thousands of servers, the so-called blockchain. In this way, it can practically not be switched off, manipulated or controlled. The blockchain is a by-product of Bitcoin and can also be used for other purposes. There are many applications that are currently centralized, but could also be organized in a decentralized manner in the future. For example elections. A central office is currently required that counts and confirms all votes. Or if you buy a piece of land , your property will be registered at a central point, the land registry. With a decentralized system like the blockchain, this information would be stored encrypted and checked on thousands of servers.
However, the programming language of the Bitcoin system is very limited; in principle , it can only depict how many Bitcoins have been transferred from whom to whom. In order to be able to transfer the advantages of the blockchain to other areas, you need a more complex system and another network of computers – a new blockchain. And with that we come to Ethereum. 2. What is Ethereum? Ethereum itself is not a cryptocurrency, but a do-it-yourself platform c, the so-called Dapps, or decentralized apps. Ethereum was announced in late 2013 and launched in 2014 by Vitalik Buterin and Gavin Wood. It was officially released in July 2015. Since it is an open system, basically anyone who wants to create a decentralized program that no one can control alone can do so with Ethereum.
He has to learn the Ethereum programming language Solidity and can start programming. The Ethereum platform, like Bitcoin, has a network of thousands of independent computers without a fixed server structure. As soon as a program is added to the network, computers make it run. The Ethereum blockchain forms the common database. The aim of Ethereum is to largely decentralize the Internet. Users can connect directly for various things without a third centralized instance . To make the whole thing easier to understand, here is an example.
For example, P2P loans would be possible without the need for a company as an intermediary. In this case, the lender and borrower are connected directly via a network of computers. As with Bitcoin, all transactions are entered in the blockchain and the smart contracts, we'll come to that in a moment, monitor compliance with the specified conditions. 3. How does Ethereum work – the smart contracts After we have clarified what Ethereum does, we will now show you HOW it does it. So-called smart contracts are written using the Solidity programming language. They form the basis of the Dapps, the decentralized apps. Contracts basically consist of conditions that can be broken down to "if – then functions". To bring it back to the example of P2P lending. IF, for example, person X lends you money, THEN you repay this amount monthly over an agreed period plus an agreed interest rate.
Ethereum developers write the terms for their program and the Ethereum network then executes them. They are called smart contracts because they take every aspect into account, execution according to the agreed rules, management and payment. There are possibilities in the most diverse areas of application: Insurance Real estate Elections Internet of Things 4. Ether With Ethereum comes Ether, the digital currency that is very similar to Bitcoin. It can be used for payments within the Ethereum network or as an investment. In the meantime, the Ethereom Blockchain is also the basis for other crypto currencies from startups, which use it to collect capital from investors via so-called Initial Coin Offerings, or ICOs for short. ICOs are similar to an IPO, a classic IPO, but the investor does not receive shares, but coins or tokens, i.e. units of the cryptocurrency that the company issues. Ethereum itself also emerged from such an ICO and raised around 18 million dollars for the development in 2014 . Well-known and successful examples of ICOs that have used the Ethereum platform and its smart contracts to finance their projects are, for example, the Chinese blockchain platform and crypto currency NEO as well as the Binance Coin from the well-known Chinese crypto exchange Binance.
Do you like the video so far? Then leave us a like. We would be very happy! 5. Mining of Ether The mining of new coins is a characteristic that Ether has in common with many simple cryptocurrencies. As with Bitcoin, all transactions in Ethereum mining are validated by miners who receive a reward in the form of newly generated ethers. The generation also takes place mainly through the computing power with the proof of work principle. What was initially feasible and profitable with gaming graphics cards is now only possible with professional mining rigs with multiple graphics cards and requires a very low electricity price. By switching from the proof-of-work algorithm to the proof of stake algorithm, the generation of new blocks should be more energy-efficient in the future. 6. Risks and potential with Ethereum Let's first come to the risks. Ethereum is one of the most complex crypto projects ever. However, it is important for sustainable success that the Ethereum apps arrive in people's everyday lives .
Applications in the field of finance, such as insurance, financial investments, loans and also purchase contracts, require trust in the security and reliability of smart contracts. It takes a bigger successful dApp to spread. On the other hand, Ethereum is also one of the most interesting crypto projects and therefore Ether is also a crypto currency with great potential. One of the advantages of Ethereum is that, unlike simple cryptocurrencies such as Bitcoin, it not only provides a means of payment, but can also bring about other exciting projects with which processes can be simplified, automated and processed more cost-effectively. If apps that appeal to a broad masses come and are used by them, this offers enormous price potential for the ether. Is it worth investing in Ethereum? As already said, ether has a very great potential. If interesting projects are implemented with Ethereum that are used by many people , this can drive the course of Ether extremely. In principle, however, a high level of volatility is to be expected, as is common with other crypto currencies. This can lead to both high profits and high losses.
An investment can make sense, but you have to be aware of the risks. At best, you should invest money that you don't absolutely need. How and where can you buy ether? With all the hype, many are wondering where to buy Ethereum. The correct question is, where can you buy ether? You can both buy and sell ether quickly and easily on crypto exchanges . We recommend, for example, Binance, the largest crypto exchange in the world, on which you can also trade more than 150 other crypto currencies.
The fees are very low at binance, with only 0.1% of sales. At the bottom of the description you will also find a link with which you will receive a 10% discount on the fees for life. What are the costs of buying ether? The fees for buying Ether vary greatly. They are between 0.1% and 2%. Storing ether Ether is stored in so-called wallets. Your wallet can be with the crypto exchange of your choice, on your computer as wallet software, a wallet app on your smartphone, with an online wallet provider or on an external data carrier.
A distinction is made between hot storage and cold storage. With hot storage, your ether is stored in wallets at the crypto exchange. An online wallet or stored in a wallet on a computer that is connected to the Internet. With cold storage, on the other hand, storage takes place on devices or data carriers that are offline. For example USB sticks or external hard drives. Offered such a cold storage as of Ledger. You can find a link in the description. In any case, you have to keep the access data safe, because if you lose it you will not have access to your ether or other crypto holdings. Cold storage is a safer way to protect against hackers ; of course, you also have to take care of the hardware here. Are you interested in videos on other cryptocurrencies? Write us in the comments which ones we should introduce. Thank you for watching and see you soon..