How Ethereum works: introduction
If you follow the crypto market, then certainly you already heard of Ethereum (ETH). Ethereum (ETH) became an important cryptocoin and it is always on the top chart of the most valued coins of the market.
Currently, a single unit of Ethereum (ETH) is priced around US$ 3.570. This high value is an attractive factor that makes Ethereum one of the most desired assets for crypto investors.
However, the value is not the only attractive feature of Ethereum. The coin has many other features that are considered important contributions to the cryptomarket.
If you got interested and want to know more about how Ethereum works, in this post we shall talk about all important features of this cryptocurrency. You’ll learn about the importance of Ethereum’s technology for the cryptomarket, how to buy Ethereum, what are its advantages in comparison to other altcoins, as well as what kind of investor should buy it.
What is Ethereum?
Ethereum appeared in the cryptomarket with the goal of adding important novelties to the Bitcoin’s blockchain. Ethereum’s platform was created by the Russian developer Vitalik Buterin by the time he was only 19 years old.
If you’re learning about the cryptomarket, the blockchain is the system that works as database for recording and storage of every information required for the production, storage and transaction of cryptocoins.
The big innovation of blockchain systems is on the fact that they don’t need any external control or regulation in order to function properly and guarantee some degree of security. The blockchain system became known for promoting an important feature of the cryptomarket: the decentralization.
To put it short, decentralization means that blockchain systems don’t need any control by the government or any third party. In case you want to understand more about blockchain and its importance for the cryptomarket, you may check in this text.
The blockchain technology is therefore essential for the cryptomarket. Based on the blockchain technology, it is possible to produce the features that are so important for the field, such as decentralization, control over the emission of the currency, among others.
The first blockchain generation came up with Bitcoin and brought many novelties that revolutionized the market and directly put cryptocoins among the most interesting assets of the modern financial market. In this text you may understand more about all transformations promoted by cryptocoins.
After the release of Bitcoin’s blockchain, developers soon realized that other new features could be implemented in order to improve the system. This automatically led to the creation of various altcoins and the modern generations of blockchain.
As a result, the Ethereum system, whose associated currency is called Ether, was created with the promise of bringing several technological innovations to the cryptocurrency industry. Among the most important, there was the proposal to overcome the financial limits imposed on Bitcoin, as well as creating other technological applications for the Ethereum system.
In order to understand more about all the novelties brought by Ethereum, let’s first talk a bit more about its technology:
Ethereum’s technology
Ethereum’s proposal on technology is to enhance not only the technical features of the cryptomarket, but the very model and structure of many devices and applications used across the internet.
We may introduce the central goals of Ethereum’s platform as follows:
- To promote the decentralization of data users in order to decrease the mutual dependence between server and user;
- To avoid any form of data monopoly;
- To promote diverse means of data protection and ownership only by their creators.
Taken together, these clauses have the potential to create a higher degree of safety not only to financial transactions carried through the internet, but also to any form of data storage and use.
Maybe you’ve already seen in some newspaper the intense debate about privacy and the adequate form of data manipulation of internet users, it is exactly within this scenario that Ethereum has the larger innovative potential.
There are three important technological advances in the Ethereum platform, namely
- Smart contracts. A smart contract is a code used to facilitate any value transaction on the internet. When used in a blockchain, the smart contracts are automatically triggered whenever specific conditions are performed. The role of smart contracts is to protect transactions against any attempt of fraud, theft or censorship.
Differently from the smart contracts used by other crypto platforms, Ethereum’s smart contracts can be used for many diverse applications, what considerably enhance the range of application of their technology.
- Ethereum Virtual Machines (EVM). Ethereum’s virtual machines are an important innovation that allows the easy creation of other resources and applications based on the blockchain system.
Improvements like this were desired by many developers as soon as they felt the limitations of Bitcoin’s blockchain, which required a lot of time and effort for implementations of this kind. Thus, Ethereum’s virtual machines are preferred due to their versatility of use by their developers.
This feature alone makes the Ethereum’s platform very attractive for developers and investors that seek assets with good technological potential and application into other areas that depend on data security and storage.
- Blockchain validation. The process of validation in Ethereum’s blockchain also has features that show a greater freedom of use, especially in relation to Ethereum’s mining and production. Do you want to learn more about the process of mining crypto? Check it in this text.
In combination, these technological features make Ethereum’s platform a very promising novelty for the cryptomarket. They guarantee important advantages for this cryptocoin. We shall talk about them in the following:
Ethereum’s central advantages
One of the biggest advantages of Ethereum’s platform is on the possibility of developing and creating applications called Dapps (which means decentralized apps). Dapps are applications developed in collaboration for applications not only in the cryptomarket, but also in other areas. Currenty, there are dapps being developed for use in medicine, robotics, and other areas.
The Ethereum platform stands out for being particularly fertile for the creation and development of new and diverse types of dapps. This feature places Ethereum’s technology among the most promising for applications in other areas than economics and the financial market.
Other important advantages of decentralizing the Ethereum platform are the following:
- Immutability, i.e., no other agent can access the data and change it;
- Tamper proof: prevents any form of censorship and tampering. Ethereum-based apps are created from the demands of the user community itself and cannot be tampered after created;
- High degree of security against any type of attack and fraud activity;
- Constant and effective processing;
- Possibility of joint and collaborative development;
- Support for a greater number of financial transactions.
As a result, these features put Ethereum on an interesting position when compared to other cryptocurrencies. We draw a brief comparison in the following:
Ethereum and other cryptocoins
The central contribution proposed by the Ethereum project was the perception that the blockchain technology could be used into other areas and still serve as the base for the development of many applications widely used through the internet.
It is true that Ethereum was not developed to be an enemy of the Bitcoin platform, but merely as an improvement. However, currently the platform has been treated as an opposite road to Bitcoin.
This occurs not only due to Ethereum’s technological innovations, but mostly from the fact that Ethereum is among the most accepted coins for purchase in stores and other domestic uses. Furthermore, Ethereum (ETH) is among the top five coins of the cryptomarket.
Another important difference of Ethereum in relation to Bitcoin is that the Ethereum project does not seek to position itself as an alternative to the current financial market, but rather to bring novelties to the sector.
It is also important to highlight that other innovations proposed by Ethereum are in constant development. Currently, there are about 3,000 dapps being entirely developed in Ethereum’s blockchain.
For many investors and crypto enthusiasts this feature alone is a strong indicative that the Ethereum platform provides a good foundation for the unification of blockchain-based technology.
Based on this, the Ethereum platform gives a significant step towards its initial goal of providing a platform with greater freedom of creation and the active participation of other users and developers.
Now, we imagine that you must be interested to start investing in Ethereum (ETH) and asking yourself: ok, what should I do to make my first investment in Ethereum?
How to buy Ethereum
To start investing in cryptocurrencies is an easy process and very similar to buying any other investment asset. Likewise, investing in Ethereum is similar to the process of investing in any other crypto. Just follow the steps below:
- Look for an exchange that mediates the purchase and sale of Ethereum (ETH) (Still don’t know what an exchange is? Exchanges are institutions responsible for mediating the purchase and sales of cryptocurrencies. Learn more about it in this text);
- Register and create your account;
- Then execute the currency purchase order and wait for completion. After that, transfer the coin to your personal wallet. (To learn more about the role of the digital wallets to the cryptomarket, visit this post.)
If you do not have any past experience with investing in cryptocurrencies and would like to understand more about what to do to invest in this market, you may start by reading this post.
Who should buy Ethereum?
As it happens with investments in the stock exchange, where the value of stocks are determined by the position of the companies within the market, the investment in crypto assets should be accompanied by a similar orientation.
If you seek to invest in assets that promise to bring technological improvements to the cryptomarket, then investing in Ethereum is an appropriate choice for you.
Ethereum gained prominence as a coin with a stable value in the market and chosen by investors with distinct investment strategies, from the more conservative to the most aggressive. (If you want to learn more about different strategies for investing in crypto, you may check it in this text)
How Ethereum works: conclusion
By now you probably have a better understanding of how Ethereum works and why it is always among the top coins of the market. Ethereum’s blockchain proposed important contributions to the cryptocurrency market with a technology that is seen as very promising for many investors.
To help you remember all the highlights of the text, we list them in the following:
- The Ethereum platform was created to solve intrinsic limitations of the blockchain developed for Bitcoin;
- Ethereum’s blockchain was developed to explore potential applications of the blockchain technology not only into the cryptocurrency market, but also in many other areas;
- Ethereum’s technology seeks to achieve three main factors: a) to promote the decentralization of data users, b) to avoid data monopoly, and c) to allow data ownership by their creators;
- Ethereum’s main technological tools are smart contracts and virtual machines;
- There are several interesting advantages of the Ethereum platform, from protection against tampering to a greater degree of security in financial transactions;
- One of the most attractive features of Ethereum is the fact that its blockchain allows the development of other decentralized tools: projects called dapps;
- Ethereum is among the most accepted currencies in habitual transactions and day-to-day use;
- It is a suitable currency for investors looking for assets with potential for technological innovation and enough versatility to be used in different investment strategies.
If you are interested in the cryptocurrency market and plan to start investing, remember to study and understand the asset before making your first purchase. Start with small amounts and gradually increase your amount of capital in that asset.
Did you like to learn more about Ethereum? Keep following our blog with easy hints for the beginning investor!
