Ethereum is a Blockchain that was created to run third party smart contract applications. It has its own blockchain protocol that other cryptos can use and it runs on what is called ERC20 protocol which is the technical standard.
This blockchain technology is way more advanced then Bitcoin’s simple
blockchain. The Apps that run on
this protocol are all ERC20 tokens. OmesiGO
(OMG), 0x (ZRX) coin are all examples of ERC20 Tokens running
on this network.
An easy way to understand the Ethereum technology is to think of an operating system on your smart phone and the apps that run on this Operating system. Ethereum Blockchain is the operating system, while coins such as OMG and ZRX are the apps running on the OS.
Ethereum blocks use digital contracts that are self executed as opposed to Bitcoin whose blocks contain transactions.
These blocks give
the ability for a platform that streams movies to take the money from a user
and distribute to specific wallets of say the producer, the director and even
actors. iTunes from Apple would take 30%
off the top, whereas an application running on Ethereum wouldn’t have overhead and could save costs for the buyer and the creator.
Ethereum uses its
own programming language called Solidity and the miners are paid in Ether which
fuels the transactions. Apps that use
Ethereum pay in Ether for this. Ether is
also needed to buy or sell the Ethereum coins.
The main problem with Ethereum is its scalability. It can only perform 15 transactions per
second and that is for all the apps that run on it. This is like trying to funnel city
traffic through a back road instead of a 5 lane highway, which means enterprise
systems cannot function on this platform.
Unfortunately it is also expensive to use, having to pay for every
action on the network would be user prohibitive at best. It is still the second most trusted Crypto and is very popular with developers for this reason.
Ethereum knows they
have this problem but they will have to change their whole blockchain which is
very difficult because it is already built with apps running on it. Their
attempt at redesigning their blockchain for scalability is called Casper.
Ethereum is trying to move from Proof of Work (high energy intensive mining) to
Proof of Stake.
There are other
Blockchains that have developed their blockchain without the scalability
problems. Ethereum is still the second largest Crypto by marketcap and has the benefit of time and acceptance.
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