Is Ethereum a blockchain?

You probably heard about the blockchain technology on which Bitcoin was created. But nowadays, aside from Bitcoin, there are so many other cryptocurrencies, such as Ether or ETH. So, is Ethereum a blockchain, and how does this platform work? Keep reading and find out all there is to know about Ethereum.

Ethereum is a decentralized blockchain platform that uses tokens called Ether or ETH to pay for any work that is done on the blockchain. The blockchain that powers Ethereum enables secure digital records that can be publicly maintained and created.

Ethereum golden coin

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Still, even though they are based on the same technology, there are so many differences between BTC and ETH, as each coin and network is suitable for different purposes. Find out more about ETH here.  

Is Ethereum a Blockchain? And How Does It Work?

As we mentioned, Ethereum is a platform or network that is based on blockchain technology. So how does this work? Blockchain is exactly that – a chain of blocks where each newly created block contains information from the previous block. In order for the creation of a new block to be validated by network programs or algorithms, there needs to be a consensus. On the Ethereum network, this consensus is made by proof of work protocol, meaning each block needs to be validated by mining. And once the block is mined, the miner gets the reward in ETH.

Ethereum is often compared to Bitcoin. Still, these two cryptos have many differences. For example, the Ethereum blockchain is programmable, meaning it can be used for many applications, while Bitcoin can only be used for BTC.

Ethereum Enables Smart Contracts, NFTs, and Decentralized Applications

The Ethereum programming language that runs on blockchain enables developers to build their own applications. And one of the biggest differences and advantages of Ethereum is the deployment of smart contracts. That is an application code with a specific address on the blockchain known as a contract address. A smart contract is an essential tool that enables people to make different kinds of decentralized applications (dApps,) such as decentralized finance (DeFi) and many others.

Smart contracts enable people and investors to have digital assets aside from crypto that are validated, controlled, and safe from fraud. Here are Ethereum-based products:

  • Decentralized Finance or DeFi – Probably one of the biggest uses of the Ethereum network and smart contracts is the creation of DeFi, a financial application built on a blockchain that operates without a central authority. It is open and programmable, enabling programmers to develop new ways for payments, investing, and trading. By using smart contracts, every transaction is safe and protected.
  • Non-Fungible Token or NFTs– These are digital tokens that can not be divided, and they are used as proof of origin of rare assets, both digital and physical. For example, an artist can turn their work into NFT and sell it to the highest bidder. The ownership information is recorded on a blockchain network.

What is the Usage of Eher?

Ether is a native token of the Ethereum network, and the main purpose of the coin is to facilitate the operations of smart contracts and the dApp platform. However, the popularity of ETH has risen, and now you can trade ETH on exchanges like BTC. ETH is a second cryptocurrency by value, right after BTC. Each transaction on Ethereum is paid with ETH. That is called a gas fee.

Bitcoin VS Ether – What is the Difference?

Even though there were some attempts for cryptocurrency to be created in the past, there is no doubt that Bitcoin is the first and most successful coin created so far. And there are many differences between ETH and BTC. For starters, BTC was created as an alternative to traditional currencies meaning its purpose is to be exchanged for other currencies, while ETH is programmable and can have many purposes. Here are the main differences between the two coins.

UsageCurrencyCurrency, smart contracts, applications
Total coin supply21 millionUnlimited
BlockchainProof of workProof of work
MiningASIC minersASIC miners, CPU, GPU

The Future of Ethereum

The biggest change announced on Ethereum 2 platform is switching from proof of work to proof of stake protocol, which will enable users to validate transactions and mint new ETH based on their ETH holdings. The upgrade will allow the network to run itself with much less energy consumption and is also expected to bring improvements to the speed and scalability of Ethereum.

Also, Decentralized Autonomous Organizations (DAOs) are being created as well. The purpose of DAOs is to create a decentralized method for decision-making. The usage of DAO will be to collect votes from different parties across the distributive network, and votes will be based on smart contracts so no overlapping can happen. This can be used for deploying funds in some organizations, and funds will automatically go where they are supposed to according to a majority of votes without third-party involvement.

There are so many ways the Ethereum network can be used in the future, and with a new release of Eth2, the transactions will be faster and cheaper, meaning more people will decide to use ETH. Right now, Bitcoin is the biggest crypto, and its value is expected to grow. But Ethereum is a completely different technology, and the Ethereum blockchain potential is yet to be seen. So if you decide to invest in ETH, now is the right opportunity before a new version is released.