Ethereum and ether are two concepts from the digital world that are often confused, just like their properties in relation to blockchain technology in general. Ethereum is an open-source, blockchain-based platform that can execute smart contracts. Ether is a cryptocurrency generated by Ethereum.

The shortest answer to the question of what ethereum signifies is that it is a certain type of decentralized global computer. This is actually the vision of its creator, who did not anticipate to impose any restrictions on what could be sited on the network.

The programming language used to develop ethereum smart contracts Solidity is Turing-complete, which means that it can carry out mathematical operations such as recursion, as well as allow developers to build applications in which blockchain transactions can dictate and systematize outcomes. This method of connection is called the formation of smart contracts. 

What are smart contracts

Smart contracts are computer programs, decentralized and autonomous, that comprehend a set of rules and instructions. In this particular way of performing transactions, there is a “problem” that arises while performing smart contracts, which cannot be changed later.

The instructions given by smart contracts are tentatively executed, and contract writing is enabled by Solidity. When such contracts are implemented, there is no way that could disrupt their functioning, which means that developers cannot correct mistakes, nor can they make mistakes in the existing contract.

This is the reason why smart contracts should be carefully considered and reviewed before implementing. Smart contracts written in the Solidity programming language respect these characteristics, but there are limitations in their execution, primarily because the commands cost money as they avoid downtime between nodes in the event of a programming error.

Ethereum and ether

Ethereum is an open-source program, a programmable blockchain launched in 2015, which has its own source cryptocurrency – ether. It is a decentralized digital currency, denoted by ETH.

Similar to bitcoin, ether is not controlled by any organization or government and can be used as a custodian, a means of payment, and to secure collateral.

Solidity is also a fairly simple language to understand and use, as its similarities to C++ or JavaScript make it easy for developers to use these languages. In essence, it is very easy to apply.

When people generally refer to ethereum, it is most often ether, since the ethereum blockchain has literally become synonymous with its token.

The digital currency ether, which was launched on this network six years ago by the Russian-Canadian programmer Vitalik Buterin, in just two years has grown into the second most popular cryptocurrency, in terms of market capitalization, and is still in that position today.

Bitcoin is actually the only one ahead of it, while there are expectations that ether could catch up with it in the foreseeable future, even though it is a long-term prospect.

Ethereum’s blockchain

Ethereum’s blockchain is much more powerful thanks to the built-in programmability, which means that developers can use the platform to build decentralized applications, ie. dApps.

The creator of ethereum found instantaneous inspiration in blockchain, however, unlike that platform, ethereum provides additional opportunities for developers to make agreements and DApps with new transaction formats, different ownership criteria, additional steps and public transfer procedures.

As to what can be seen in the example of blockchain and bitcoin, it is a common database consisting of a wide-ranging history of transactions, with each node connected to the network having a copy of it.

In addition to this form of transaction, nodes also store information about the current state of each smart contract, while the entire network monitors the status of each smart contract or ethereum application, including the condition of each user.

When a transaction is made on the ethereum blockchain, the platform further follows the model of bank accounts in such a way that they appear in one wallet and are easily relocated to another.

The purpose of ethereum

Most of our digital data at this stage of the financial-technological development, including financial data and personal identification data, such as passwords, is stored on third-party servers owned by technology giants such as Google, Apple, Microsoft and many others.

This form of centralization of unprecedented data loading gives organizations and governments the ability to control citizens. In this sense, the key goals are to replace network banking with a decentralized currency such as ether, but also independent service providers with privately-owned servers that use blockchain technology.

In other words, it is a “new type” of the Internet in which everything is combined, from data storage and payments to financial systems and service applications. Today, thousands of developers around the world are creating digital tools and applications with the assistance of ethereum.

Ethereum virtual machine

There are many ways to set up a system in the computer world, and every technical choice must be made based on a large number of parameters. The history of computer systems shows that they work best when they are composed of specialized modules.

When such simple, specific and efficient systems perform all functions, then it is possible to assemble them. Ethereum’s virtual machine, also known as Ethereum Virtual Machine – EVM, performs most of Ethereum’s functions in an extremely transparent way, increasing the degree of efficiency, which is the point of creating ethereum.

In order to prevent attacks on network security, EVM implements a widespread separation of the system based on which it is possible to manage access to technological resources and restrict activities in a controlled environment or a virtual machine. EVM also facilitates the development and updating of applications and features available for decentralized applications.

EVM enables the project and implementation of smart contracts, while Solidity is “in charge” of creating these smart contracts that are very easy to manage. Although EVM, as such, does not have the ability to directly execute commands in this language, it does so by using a technique using a compilation of instructions.

Decentralized networks

Most of the power of digital currencies, primarily bitcoin, comes from what could be considered gaps, as online transactions are applied gradually.

The distribution system between each node is outdated and will become dismissed, because each node will transmit information to all nodes around it, even when they already have it, which means that more nodes can become broken-down, and the need for “trust” ceases when conducting information.

In this sense, bitcoin is still more efficient in handling the generated data. The ethereum blockchain includes several bitcoin principles, including “mining”.

However, the key difference is in the deflationary nature that triggers the creation of bitcoin money. This means that there is no limit to the money supply of ethereum, but even in this case, the network is configured so that mining difficulties are continuously adjusted to the computing power of the mining community.

Therefore, the “rule” applies that bitcoin should be viewed as a digital value of storage, or as a kind of equivalent of digital gold, while ether is viewed as Web 3.0.

This is also the reason why the number of active developers working on ethereum has many times exceeded the number of bitcoin developers. Consequently, the significance of ethereum is expected to be meaningfully higher in the future, especially since the ethereum to bitcoin ratio has reached a point where the level of mutual exposure has indicated the appearance of a new trend.

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