A Deep Dive into Ethereum
Beside Bitcoin, Ethereum is probably the best-known digital currency on the market.
Since the digital currency boom at the end of 2017, Ethereum has defended its spot as the number two cryptocurrency in market value.
And it's done a lot more than just knock out blockchain rivals.
Over the last year, the Ethereum network has attracted interest from dozens of multimillion-dollar institutions. Today, Ethereum is now the darling of over 200 corporations that have banded together to form the Enterprise Ethereum Alliance (EEA).
Considering the incredible amount of corporate and investor interest in Ethereum, the team at Token Authority decided to spotlight the token in one of our educational features.
To truly understand Ethereum, you have to understand the underlying network and its native digital currency, ether.
Only then will you be able to understand why Ethereum has so much potential and why it's dramatically different from its peer, Bitcoin.
What Exactly is the Ethereum Network?
To really understand Ethereum, you have to understand the Ethereum network.
Put simply, Ethereum is a decentralized platform that permits developers to build something called decentralized applications (DApps).
A DApp built on the Ethereum network doesn't need a middleman to operate.
The blockchain does the work by cutting resources and reducing costs.
At this point, it's worth noting that people can also build things on the Bitcoin blockchain. That being said, the Ethereum blockchain has one key advantage that gives it a leg up on the competition.
The Ethereum platform is capable of executing something called a “smart contract.”
A smart contract is a set of parameters in the code.
For an action to take place, these parameters need to be met. It also makes sure a transaction can be secure for both parties because money will only move if the parameters are met.
Basically, if one person doesn’t fulfill their end of the deal, the money remains in the smart contract. It can then be returned to the original sender without issue.
Let's look at a simple example.
Say you want to send money to a friend who's traveling internationally, but you only want to send that money if the amount in their bank account dips below a certain number.
If a smart contract is placed in the code to dictate those parameters, you would only send your friend money if the amount in their bank account dips below the amount you set.
This makes smart contracts an invaluable tool to dozens of industries, ranging from finance to health care. Finance companies, like Bank of America, could use this kind of technology to ensure that mortgage payments and other loans are paid.
Real estate could use this technology for title transfers, making sure a house title only transfers hands if the demands of both parties are met.
Smart contracts can be used in a wide range of applications, some of which we see in the booming digital currency market.
The Ethereum platform allows for the things built on it to be programmed without the chance of fraud, censorship, and third-party interference.
But what about the Ethereum network's native digital currency, ether?
Well, the Ethereum platform uses ether as gas for the transactions that take place on the network.
You don't really have to worry about the names because Ethereum and ether are used interchangeably by most media outlets.
That said, let's take a look at how ether is used in the Ethereum network.
Ether's Role in the Ethereum Network
As we mentioned above, ether is the digital currency native to the Ethereum network.
At the time of writing, an ether transaction can take place in two minutes.
Ether was meant to serve as "fuel" to the DApps built on the Ethereum network.
This may be mind-blowing for some people, primarily those unfamiliar with the ways in which digital assets function within designated frameworks.
Basically, you can think of it like this: Every action that takes place on the network requires ether to facilitate the transaction. Ether fees are calculated based on how much ether an action demands.
This is why ether coins, unlike bitcoins, are not finite. While there can only ever be 21 million bitcoins in existence, there is no limit on how much ether can exist.
This makes ether less like a store of value, or "digital gold" — a phrase commonly applied to Bitcoin.
It's both a currency and a fuel for advanced DApps...
This is why decentralized applications that run on the Ethereum network like OmiseGo, Storj, and Golem are such a big deal.
It could mean big business for ether, and that's good news for anyone interested in this groundbreaking technology.
Which brings us to the final thing we want to talk about in this educational feature: Ethereum's vast network of corporate support.
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Ethereum Has Attracted the Attention of Giants
Regardless of what critics have to say about Ethereum, there is no denying that the decentralized network has attracted the attention of giants.
In March 2017, the Enterprise Ethereum Alliance (EEA) formed to advance the Ethereum blockchain. This alliance is continually growing, with more and more companies applying for membership. Today there are over 200 members in the alliance. Those members include:
- Cisco Systems
- Intel Corporation
- Microsoft Corporation
- Thomson Reuters Corporation
- The Indian government
- Toyota Research Institute (TRI)
- National Bank of Canada
- Samsung SDS
When it comes to development, multiple blockchain-based companies are working with the Ethereum network.
Some of the more notable digital currency projects on the market that are using the network include Gnosis, Populous, Storj, Bancor, and Golem.
In the coming year, Ethereum is poised for many changes that could have an impact on its function and assist with its widespread adoption in the corporate space.
One of those changes is the network's attempted jump over to proof of stake, which is a new mining validation that could change the way ether transactions are validated forever.
Proof of Stake has the potential to make Ethereum far more environmentally friendly and could really shake up the game.
If you'd like to learn more details about proof of stake and the Ethereum network, you can find our full-length educational feature here.