The Ethereum network has been making a lot of waves recently. One of the latest developments is the fact that Microsoft, one of the project’s backers, has recently added Ethereum’s Solidity programming language to its Visual Studio platform. This move will allow future developers to create their own decentralized apps or dapps, taking advantage of the Ethereum network’s distributed system.
Right now, Ether, Ethereum’s signature cryptocurrency, is now second only to Bitcoin. At a price of around $10, it may seem dwarfish compared to Bitcoin’s gigantic $400 price point. It is all a matter of perspective, though, as the alternatives to Bitcoin are often priced around $1 to $2. The factor that makes Ether’s price so impressive is the fact that it has been less than year since Ethereum’s full release.
The roots and driving factors behind Ethereum
Cryptocurrency enthusiasts seeking to fully understand Ethereum should begin with its background. The Ethereum network is based around the idea of a public blockchain platform that allows for the execution of smart contracts. Smart contracts are programs that automatically execute the performance of contracts. This can range from property transfers to security deals. The network runs these apps like giant computer shared by everyone on the network, with the resources being paid for in the network’s cryptocurrency, Ether.
This idea is quite impressive and is actually the result of years of work. Vitalik Buterin conceived of the Ethereum network back in 2013 in a white paper. Many people became interested and events quickly spiraled until the announcement in 2014 of a public funding sale for the network. That managed to garner around $18 million in funding. Development of the network started immediately and progress was consistent. By mid-2015, Ethereum’s genesis blockchain was released and the network’s swift progress has been the focus of interest.
Ethereum’s key features
Although many call Ethereum ‘Bitcoin 2.0,’ this is a gross oversimplification. The two share the basic idea behind them, but Buterin wanted to go beyond what Satoshi Nakamoto’s Bitcoin protocol was capable of. This is why the underlying protocol behind the network was created from scratch.
This has given rise to interesting features. First, there is the fact that Ethereum has very fast transaction speeds. With Ethereum’s focus on being a virtual machine, speed is a premium. This results in blocks being processed in 12 seconds. Compared to Bitcoin’s ten-minute processing time for its blocks, this is greased lightning. This allows for many transactions being processed immediately.
Secondly, Ethereum’s transactions have varying costs. Compare to Bitcoin’s simple transaction costs, Ethereum takes into account bandwidth, complexity, and storage when calculating transaction expenses. This is done to limit node usage, ensuring that the network cannot be spammed without it becoming expensive for the spammer. It also limits programs from hogging all the resources in the network.
Finally, Ethereum has taken a lesson from the development of Bitcoin’s centralized mining and implemented the Ghost (Greedy Heaviest Observed Subtree) protocol. This ensures that there are fewer stale blocks and that the blocks are always easy to process, avoiding the need for stronger processing power that resulted in Bitcoin mining’s centralization.
Many people think Ethereum and Bitcoin are in direct competition. The truth is both can function in the same environment. Ethereum is aimed at creating a distributed network, while Bitcoin is focused on acting as a currency. Cryptocurrency enthusiasts should welcome the differences between them and see where it can lead in the future.