Ethereum is currently the #2 cryptocurrency in terms of market cap, right behind Bitcoin. After conducting an ICO in 2014 that raised over 25k Bitcoin, Ethereum has soared from $.30 to over $400. You may be wondering what the main differences between Bitcoin and Ethereum are. Bitcoin is often called digital gold, while Ethereum is often referred to as digital oil.
Why is Ethereum called digital oil?
Well, think of how many different machines need oil to carry out their functions. Ethereum is a decentralized application (dApp) and smart contract platform, allowing for innovative new projects to use its infrastructure.
Ethereum reduces the barrier to entry of creating decentralized applications by providing tools to developers.
You may have heard the word token when talking about cryptocurrency. Ethereum was one of the first blockchains to support the creation and use of tokens. The most popular Ethereum token standard is ERC-20. A token created on the ERC-20 protocol follows a certain set of rules. Tokens on the protocol can use Ethereums blockchain allowing them to get off the ground much faster.
This is extremely convenient because instead of creating their own blockchain, they can record the project’s data on top of Ethereum. In order to carry out functions and issue smart contracts, the tokens pay fees in Ethereum.
How to Mine Ethereum
Ethereum currently uses proof of work to secure its network. This means that users can contribute their devices computing power to earn Ethereum. While almost any device can mine Ethereum, you most likely want to mine for a profit. One of the most important factors in mining profitability is hashing power. Hashing power has a direct correlation to the mining hardware used.
A common strategy in cryptocurrency mining is the use of pools. Mining pools reduce the variance involved with mining, by combining your hashing power with others. After the group collectively mines a block, the reward is split out proportionally to your contributed hashing power. Ethpool and Ethermine are two of the most popular Ethereum mining pools, with around 25% of the total networks hash rate.
How to Store Ethereum
Ethereum can be stored in a variety of cryptocurrency wallets. Cryptocurrency wallets are software on computers or devices that use cryptography to secure your coins. These wallets also have interfaces making it easy to send and receive currency. Because Ethereum is a platform for tokens, many wallets that support Ethereum also support its tokens.
What are some of the most popular decentralized applications?
So far, most decentralized applications are still being built and don’t have too much use. The most popular ones are IDEX and Cryptokitties.
IDEX is a decentralized exchange that lists hundreds of ERC-20 tokens. The exchange features its own coin Aurora, that runs on the Ethereum blockchain. One use case of Aurora is that it can be staked, allowing for users to earn a percentage of the exchanges fees proportional to the amount they own.
Cryptokitties is a decentralized application where users can buy, sell and trade digital kitties. While this sounds silly, the rarest of kittens have been sold for almost $115,000.
We have just seen the surface of what decentralized applications have to offer and as more and more development goes into these applications, we will start to see an increased amount of dApps.
What is the difference between Ethereum and Ethereum Classic?
Several years ago, these coins were one. After a hack on the Decentralized Autonomous Organization, 3.6 million Ether were stolen, and a hard fork was introduced to put the funds back into the hands of the original owners. This left the community divided, as this went against the main ideologies of a blockchain: reversibility.
The Ethereum we know today is the chain that hard-forked, while Ethereum Classic is the version of the Ethereum where the hacker still has the stolen coins.