Ethereum: how it works, benefits and predictions

Ethereum is a digital currency built on decentralized blockchain (blockchain) technology, where absolutely all transactions are recorded.

How Ethereum appeared

The Ethereum cryptocurrency was developed by Canadian-Russian programmer Vitalik Buterin in 2015, when the developer was barely 21 years old.

It all started when Buterin became seriously interested in Bitcoin and blockchain technology in 2011, which led to the creation of the cryptocurrency print publication “Bitcoin Magazine”. A few years later, he created technical documentation for a new product, whose name is Ethereum.

How Ethereum works

The Ethereum blockchain consists of a chain of interconnected structures called blocks, which are made up of grouped transactions. It is important to note that once entered into the database, none of the blocks can be adjusted. The Ethereum blockchain is backed by miners. Users provide the computing power of their own equipment to perform mining operations and transaction validation. For these actions, miners receive a reward – Ethereum ETH coins, which motivates participants for further work on the network.

Ethereum basic principles:

• Availability. It represents the ability to easily use the Ethereum network by participants at any time of the day.
• Protection. The blockchain is securely protected by the most complex mathematical laws, which eliminates the possibility of hacking.
• Recording transactions. The digital mechanism implies a singleton record of transactions. All this is due to the adoption of a canonical algorithm for performing transactions, determined by the number of calculations performed.

Ethereum smart contracts

The Ethereum blockchain is based on Smart contracts.

Smart contracts are a specific computer algorithm that generates, controls and provides ownership information.

Ethereum smart contracts are an automatic and completely autonomous program that completely eliminates outside interference. Smart contracts are an ideal system that bases contractual relationships among Ethereum users.

Features of the Ethereum cryptocurrency

At the moment, Ethereum is a stable platform that facilitates miners in organizing decentralized specialized schemes called DApps. Thanks to the development of the Ethereum blockchain, both parties can act as a seller while eliminating unnecessary intermediaries.

Advantages of Ethereum:

• Simple model and interface. The project developers have created the Ethereum platform as clear and simple as possible for cryptocurrency users. When difficulties arise in the work, the task is automatically transferred to the “middle layers” of Ethereum, as a result of which confirmation is expected from all users, while remaining hidden from the final participant.
• Freedom in protocols. This implies absolute freedom in the protocols of Ethereum, which is why auxiliary transactions and other types of protocol are preferred. In Ethereum, unlike Bitcoin, there is no limit on OP-RETURN up to 40 bytes, this allows you to further increase the network, but subject to one rule: users need to cover their own costs (the so-called “ping tax”).
• Information security. This advantage helps not only in cases of conclusion of outside contracts, but also in cases of contracts from the external environment.
• Security level. A transaction account has distinctive security criteria. The contract provides the ability to send incoming messages to a completely foreign address on custom terms.
• Contract management. Cryptocurrency users can openly manage actual contracts, or those that are subject to interaction from several participants. It is also possible to always open a contract and wait until the other party joins it.

Ethereum VS Bitcoin

Technically, Bitcoin and Ethereum are significantly different from each other.

Ethereum has incorporated the best: the basic concept of the Bitcoin blockchain and Litecoin's desire for higher transaction speeds. Ethereum transactions contain executable code, and Bitcoin data is intended only for taking notes.

The main differences between Ethereum and Bitcoin:

• Block times for transactions with Ethereum are confirmed, on average, in 14.68 seconds, and Bitcoin – in 11.35 minutes.
• Ethereum uses the Ethash algorithm, Bitcoin uses SHA-256.
• The Bitcoin cryptocurrency was created as an alternative to fiat money and national currencies, which makes Bitcoin a medium of exchange with the preservation of value. Ethereum was specifically designed to facilitate immutable software contracts through its personal currency. Thus, the goal of Ethereum is to create the simplest possible platform for monetizing smart contracts and decentralizing the platform.

Ethereum Prospects and Forecasts

At the moment, the capitalization of Ethereum exceeds Litecoin, Ripple and other cryptocurrencies, but, at the same time, it is still significantly inferior to Bitcoin, since it cannot boast of such a large amount of investment money. However, Ethereum is rapidly setting high goals for itself, by the way, the growth rate of ETH is already significantly higher than Bitcoin.

At the moment, you can buy Ethereum for more than $ 2,300, and just a year ago, the cost of this cryptocurrency barely exceeded $ 200. Today, there are forecasts that by 2023 the price of Ethereum will reach a minimum amount of 150 thousand dollars. Other analysts estimate that Ethereum, with a high degree of probability, can, if not overtake Bitcoin, then at least equalize in value in the near future.