What is Ethereum?
Ethereum is a decentralized network based on blockchain technology. So the reason, why this platform sets itself apart from classic cryptos is the smart contract. These are programs that someone wrote directly on the blockchain. So you can manage information and perform specified functions.
They have a public address. So everyone can see this address. A smart contract can also receive and store Ether. So it is even possible to create several smart contracts that communicate with each other. Thus, they can also exchange information or Ether depending on the event.
So you could use them to manage monthly subscriptions. Therefore a user can send a monthly fee due directly. It checks the validity of the payment. As result, the address of the transmitter is stored and noted as unlocked.
The difference between Ethereum and Bitcoin
Ethereum is a decentralized platform for digital contracts. So this includes an open peer-to-peer network using the blockchain technology. While Bitcoin can transfer money, Ethereum has way more use cases. It provides an infrastructure to operate decentralized applications and therefore allows us to create all types of Apps.
How does Ethereum work?
So with Ethereum, it is possible to develop decentralized applications. They are based on smart contracts. So the programming defines the functions written on a blockchain. Thus, it makes them accessible over the network. So interacting with a smart contract can initiate a specific function. The EVM executes the code on each network node. As a result the blockchain documents the transactions.
What is an Ethereum Virtual Machine (EVM)?
Like any program, smart contracts also require a runtime environment. So for our platform, we use the Ethereum Virtual Machine (short: EVM). It can run on every node in the network and ensures the execution of the code.
So all nodes always execute the same instructions. But there is an ongoing consensus across the blockchain. As a result, this makes the whole system slow-going compared to normal PCs. But it creates a high level of security for the network.
How does an Ethereum Account works?
So if you want to use Ethereum you need a wallet account. It has both a public address and a private key. So you can use the public address to send Ether to your friends without worry. The private key is used to sign transactions. Thus, it is like your private signature and you should not publish it.
How does Ethereum mining work?
Building blocks involve a lot of effort. So in Ethereum, a miner creates a new block every 10-15 seconds. Transactions related to smart contracts are written as transfers to the blockchain. If you want to execute a function, you also have to pay a small fee. Thus, just the readout of data from a smart contract is not considered as a transaction. That is because nobody changes data.
What is Ether?
Ether is the cryptocurrency on the Ethereum blockchain. It allows you to transfer money or pay transaction costs. So in order to pay these small transactions, the costs of ether are divided into smaller units. Wei is the smallest unit with 0.000000000000000001 Ether. So this amount is well below the value of one cent. As a result, the costs are at near zero cost.
“Ethereum explained simply” – Summarize:
- Ethereum is not a cryptocurrency.
- So it includes an open peer-to-peer network using the blockchain technology.
- It is a platform for Smart Contracts.
- The cryptocurreny is called Ether.
- Smart contracts determine the logic of a decentralized applications.
- Blockchain documents all performed transactions.
- The EVM executes codes on each network node.