If Bitcoin is the king of the cryptocurrency space, then Ethereum for many is the queen.
Given the lofty position that Ethereum occupies in the cryptocurrency space, there are some market analysts who predict an even larger role for Ethereum. A few have predicted that Ethereum will rise to reach parity with Bitcoin in the next year or two. So what is Ethereum and how does it differ from Bitcoin? This article hopes to give an overview of this major cryptocurrency and how its technology is used not only for transactions but also application building.
Ethereum was created by a Canadian programmer, Vitalik Buterin, and released in 2015. Like Bitcoin, it uses a blockchain as a ledger to record transactions. Ethereum itself is a open-source platform and this platform provides a cryptocurrency called Ether.
Ethereum’s blockchain also has the added benefit of creating smart contracts. Smart contracts are self-executing (based on a preset condition) digital contracts on the blockchain. The theory behind smart contracts have been around close to two decades, but its practical use in business, real estate and labor disputes has risen recently.
Ethereum blockchain has a number of similarities to Bitcoin’s blockchain. Our guide to Bitcoin can be found here. There are some noticeable architectural differences. The Ethereum blockchain keeps a copy of the list of transactions and the current state of the blockchain, unlike Bitcoin.
Ethereum also allows for distributed applications to be built on top of its technology. From financial services software to building virtual worlds to crowdfunding, the rate of application releases is expected to grow tremendously once more developers get on board. There are three types of applications built on top of Ethereum.
The first is financial which can include sub-currencies, derivatives, wills, wallets and employment contracts.
The second is the semi-financial category. These aren’t fully financial apps in that their uses and implications do not necessarily lean heavily on finance services. An example would be bounties for solutions to complex computational problems.
The third are non-financial applications. This category can include voting, non-centralized organizational governance, and content distribution.