What is Ethereum? How is Ethereum Different From Bitcoin? 

Coding compiler – What is Ethereum? Ethereum is on everyone’s tongue and after Bitcoin not only the most famous cryptocurrency but also the cryptocurrency with the second largest market capitalization. But Ethereum is more than just a cryptocurrency – the technology behind Ethereum lays the foundation for Smart Contracts and dApps.

What is Ethereum? And how is Ethereum different from Bitcoin? 

What is Ethereum – To understand Ethereum, it first requires an understanding of the centralization of the Internet. Personal and financial data, as well as passwords, are mostly stored in the cloud, which is a flowery description for server farms of big companies like Facebook, Google or Amazon. 

This centralized structure of the Internet is by no means only bad. Especially the centralized hosting services make it possible for many people and small businesses to stable host websites in good quality.

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But the downside of centralization is the vulnerability. There are countless examples of unauthorized access to data. At the same time, users often have to give hosting service providers more of their own data than they would like. Finally, it is also questionable whether the classic client-server model represents a meaningful architecture in times of the Internet of Things.

The head behind the Apache web server, Brian Behlendorf, has therefore found drastic words: According to him, the centralization of the Internet on huge server farms, the original sin of the Internet. The Internet, according to Behlendorf, was decentralized from the beginning. Using various tools, such as blockchain, this goal of decentralization is now to be achieved again.

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At this point, Ethereum comes into play. While Bitcoin is shaking up the financial system, Ethereum uses blockchain technology to eliminate middlemen on the Internet. With Ethereum, both the hosting of data and the monitoring of contract fulfillment should no longer be centralized by a few, few Internet giants.

Ethereum – With Smart Contracts to the decentralized computer

Ethereum wants to become a kind of decentralized computer, with which the currently existing client-server model should be decentralized.

Many blockchains, such as the Bitcoin Blockchain or the Ethereum Blockchain, are replacing servers and clouds with thousands of so-called nodes set up by volunteers. 

These nodes play an important role in maintaining the payment network: they check and store every block in the blockchain and also check the individual transactions handled by Ethereum’s own digital currency, Ether. In the world of Ethereum, people talk less about a digital currency than about gas or fuel needed to maintain the network.

The distinctive feature of Ethereum, however, are the Smart Contracts, which make the Ethereum network a decentralized computer. Smart Contracts, as the name implies, are intelligent contracts or small programs running on the Ethereum network, for example, to govern Ethereum transaction conditions. Unlike the Bitcoin network, the nodes in the Ethereum network are responsible for the processing of these contracts in addition to the tasks mentioned above.

These smart contracts enable the development of so-called dApps. dApps are decentralized applications that are not just open source but can be checked for correct operation during runtime. With these dApps, the vision behind Ethereum can be explained as follows: since everyone can ultimately operate a node, everyone has the same functionality and can offer services that are based on the infrastructure.

Ethereum – The dApp store of the future

There are tons of apps in today’s app stores. Users can buy countless programs from A like action games to Z like time management systems. These applications rely on the App Store for payment management and put it in the hands of third parties.

Ultimately, app developers are dependent on app store appeal, as exemplified by remote apps from the Apple Store. Accordingly, the choice of the end customer depends on the influence of third parties such as Google or Apple. Finally, especially in the case of web apps such as Google Docs or Evernote, this means that the content generated by them is in the hands of third parties.

With dApps based on Ethereum, the data would be back in their own hands. Developers of dApps could offer these independently of an App Store Provider free, the preselection of an App Store would be omitted.

The idea is simple: there is no entity that has control over notes or other documents – neither by law nor by code. As a result, the control over one’s own data, which used to be normal, would be compatible with the simple, global manageability of the Internet age.

Ethereum can also make a valuable contribution to the Internet of Things. The Internet of Things requires meaningful communication between the individual devices. With the help of smart contracts via Ethereum, this machine-to-machine communication is very easy to implement. 

Whether dApps actually one day run out in the App Stores of Google or Apple, is today not serious to predict. Nevertheless, it is worth paying close attention to the developments of Ethereum-based Smart Contracts and dApps.


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