Ethereum is a public, open source blockchain-based platform and smart contract operating system that supports a modified version of the cryptocurrency consensus of Bitcoin creator Satoshi Nakamoto. The platform generates the cryptocurrency Ether (abbreviated ETH), however, it is common to use both names (Etherum and Ether) to describe the digital asset created by Vitalik Buterin and presented to the world in July 2015. As such, Ether is certainly not the oldest asset in the vast crypto ecosystem, but in terms of total market value (capitalization), it ranks second only to Bitcoin among the largest digital assets. In November 2019, the total capitalization was over $16 billion (for comparison, Bitcoin’s capitalization was $129 billion).
Ethereum and Ether are not the same – what is the difference between blockchain and cryptocurrency?
Although cryptocurrency users use the name Ethereum to describe the cryptocurrency ETH, this is technically quite a simplification. As mentioned in the introduction, Ethereum is an open source platform that uses blockchain technology to build decentralized applications. Like Bitcoin, it uses block network technology, but unlike the oldest cryptocurrency, it does not offer a single application, but allows you to create an unlimited number of them. Thanks to operating on the basis of free licenses, anyone can create their own application based on the Ethereum platform.
In addition to creating blockchain applications, Ethereum enables smart contracts, and the whole thing is formed by user-owned nodes called Ethereum Virtual Machine (EVM for short). Ether is the main means of payment of the network and, like Bitcoin, in the process of its development it was split (hard fork) in 2016 due to a disagreement between the users co-creating the network. This led to the separation of two independent environments – Ethereum and Ethereum Classic.
As for the cryptographic token itself, which is Ether, it has not reached such high valuations as Bitcoin in its history, but at a similar time it reached historical highs. The highest prices were seen in January 2018, when one ETH cost over $1400. In the same year (in December 2018), the price fell to historical lows below the $100 level.
EVM, smart contracts, and ERC20 – key Ethereum concepts
Once you know what Ethereum and Ether are, it is also worth familiarizing yourself with other terms directly related to the competing blockchain network, which may raise confusion among cryptocurrency beginners.
EVM – The article mentions the Etherum Virtual Machine (EVM), which is a node environment that is used to create smart contracts. The same set of instructions is implemented on each node, and the virtual machine processes a number of the most popular programming languages. Being separated from the rest of the computer equipment, it is supposed to ensure the security of the network and the operations carried out in it.
Smart contracts – are a specific form of digital contracts, applications and scripts that are recorded in the form of a blockchain on the Ethereum network. They operate on the basis of a very simple principle of successive actions: “If event A occurred, do B”. As a result, they can be used not only in the cryptocurrency market, but also in a number of other industries, including banking, where they are used for data analysis.
ERC-20 – As mentioned several times, Ethereum is a platform that allows you to create your own applications, and through the use of smart contracts, also your own digital tokens. These tokens have an implementation standard called Ethereum Request for Comments (ERC-20 for short). At the moment, it is one of the most popular standards for creating digital assets, as a result of which there are over 200 thousand ERC-20 tokens operating within the Ethereum blockchain.