The blockchain is a technology that connects all existing financial transactions with a verifiable record that can’t be altered.
It was originally designed for bitcoin, but it has since been adopted for other cryptocurrencies and applications. The most popular one is Ethereum, a decentralized application platform that enables developers to build and run applications across a blockchain network. What is Ethereum blockchain? Let’s find out.
Ethereum And Ether
The ethereum blockchain is the underlying technology that powers cryptocurrency and applications built on top of the Coinbase platform. For those that don’t know, ether is the cryptocurrency built on top of the ethereum blockchain. The name “ether” originates from the original Whitepaper published by Satoshi Nakamoto in 2008. (The name “bitcoin” is commonly associated with the first cryptocurrency ever created, but it was also the name of the protocol that powers the Ethereum blockchain. It is worth noting that the Ethereum blockchain is different from Bitcoin’s blockchain in that it enables smart contracts and decentralized applications).
Ethereum Blockchain Background
The ethereum blockchain was originally built for the cryptocurrency that is named after it, Ethereum. Launched in 2013, Ethereum is one of the earliest and most popular cryptocurrencies. It is also one of the biggest cryptocurrencies by market capitalization. Unlike Bitcoin, which is only transactional, Ethereum has added features such as smart contracts and decentralized applications. These innovative features make Ethereum the perfect platform for launching your Initial Coin Offering (ICO). Not enough about Ethereum? Here are some more interesting tidbits:
- Ethereum is the 6th largest cryptocurrency in the world by market cap.
- In early 2019, the price of an Ether (ETH) token rose by more than 4000% in the course of a year, from around $0.45 in mid-2018 to $21.82 in early-2019.
- As of January 30th, 2019, there were 13.4 million ether tokens in circulation.
- On September 17th, 2018, Vitalik Buterin, co-founder of Ethereum, announced the “Big Four” stages of crypto adoption: 1. Hybrid cryptocurrency 2. Decentralized exchange (DEX) 3. Security token 4. Hybrid blockchain.
- According to PricewaterhouseCoopers (PwC), global blockchain revenues are expected to hit $16.9 billion by 2025.
- Even Microsoft, Amazon, and Google get in on the action with their own distinct cryptocurrencies.
The Role Of The Blockchain
The blockchain is a technology that connects all existing financial transactions with a verifiable record that can’t be altered. Once a transaction is made on the blockchain, it is practically irreversible. This is because once your transaction hits the blockchain, it is “locked in” and neither you nor the recipient can change it. Once a transaction is processed on the blockchain, it is difficult if not impossible to take back what was done.
This property of the blockchain makes it ideal for a number of use cases. One of the most popular ones is the ability to transparently track the provenance of physical goods. For example, coffee farmers can use the blockchain to register the details of their beans with the coffee buyer so that both parties can verify the transaction between them. The blockchain can serve as a trusted third party in a trade. This is particularly useful for companies that need to verify the origin of their products. You can also use it to track the supply chain of a product, from the growing of the natural resources to the manufacture of a product.
Because the process of making a transaction on the blockchain is so labor intensive, it is highly unlikely that a single person will undertake it on their own. For instance, when you send bitcoin to someone, the process is automated and doesn’t require any special knowledge or action on your part. However, once the transaction is confirmed, it is practically irreversible. When you use Ethereum, the process is a bit more complicated. You have to set up an Ethereum account and download the Ethereum client. Once you have done that, you can start using the Ethereum wallet to generate or receive ether. The process of sending or receiving Ether depends on whether you are using a public or private network. We will discuss this more in the next section.
Private Or Public Ethereum Networks
Just like any other cryptocurrency, the Ethereum network comes in two flavors: public and private. The difference between the two is how others can interact with your account. If someone wants to send you ether while you are using a private network, they will have to obtain your private key before they can send you the funds. Your private key is a string of alphanumeric characters that only you know the password to. Without this key, your ether would be just as safe and secure as a bitcoin wallet.
The opposite is true when it comes to public networks. While everyone can access the blockchain and see your transactions, they can’t interact with your account. Otherwise, they would have to obtain your public key, which is a short string of letters and numbers that act like a digital fingerprint for your account. Because everyone knows the public key and the public blockchain, it is easier to accept payments and negotiate trades when using a public network. The most popular and well-known public networks are Ethereum and Bitcoin SV. (Bitcoin SV is the original Bitcoin protocol, and it is the only officially recognized fork of Bitcoin. It was forked off of Bitcoin in mid-2018. The name “Bitcoin SV” is short for “Satoshi’s Vision”. Essentially, Bitcoin SV is a more privacy-focused version of Bitcoin. Many people prefer to use it because of its enhanced privacy features. You should do the same if you want to remain anonymous when transacting on the Ethereum network)
We hope that this article helped you understand what is Ethereum blockchain and how it works. If you found this article valuable, check out How to buy Bitcoin and Ethereum guides which provide in-depth price analysis and technical information to help you make the right choices. Also, if you’re looking for an easy to use platform to play with Ethereum, try out Coinbase to securely store and invest in digital currency. The world of cryptocurrencies is constantly evolving, and this article will soon be out of date. For the latest news and developments, check out the Ethereum blog or the Twitter accounts of @Ethereum_News and @eth_blockchain.