If you’ve already entered the universe of crypto-assets, it is likely that you have heard of Ethereum, the second largest crypto-asset in terms of market capitalization. Okay sure, but what is Ethereum and what is the point of having other crypto-assets since we already have Bitcoin?
In order to understand this, you must remember that crypto-assets are really nothing more than programming code. That code will dictate a certain number of rules that will define the characteristics of the asset and determine its future applications.
With Bitcoin, the simplicity of its code and the different rules created by Satoshi Nakamoto make it an excellent digital store of value and an extremely secure platform.
Ethereum, created in 2015 by Vitalik Buterin, is a platform that proposes a more malleable code that allows for the creation of advanced “smart contracts”. We can picture it as a world public computer that is secured and on which anyone can access and create programs. This allows the emergence of new types of decentralized applications called dApps.
The advantage of a dApp, again, is that it is extremely secure, transparent, and does not centralize data in the servers of a company. For example, in a decentralized messaging application one message would be distributed in a multitude of packages going through various computers before arriving to its receiver. Nobody would have access to the whole message, which increases greatly the confidentiality of communication.
Point of Parity & Point of difference
With regards to mining processes, Ethereum somewhat echoes Bitcoin’s famous Proof of Work: a distribution mechanism allocates rewards for every block mined to those that have worked to generate Ethers. The Ethers created hold value for developers that use Ether to fuel and execute decentralized applications’ code.
In contrast to the 21 Million cap of Bitcoins in circulation, Ether’s maximum value is non-caped, despite an ongoing existing debate. A fixed number of Ether is generated every 15 seconds in such a way that prevents monetary inflation.
Capitalizing on constraints associated to Bitcoin with regards to smart contracts, Ethereum offers a viable alternative that appeals to the corporate world. An alliance of firms working with Ethereum has emerged- amongst which Microsoft, Samsung, and Intel. The alliance uses and tests Ethereum technology has factored in the surge of Ethereum projects.