Ethereum is an exciting blockchain working as a platform for decentralized applications that use smart contracts. This distinguishes Ethereum from Bitcoin as Ethereum goes beyond payments by creating the next stage of the internet, Web 3.0.
What is Ethereum?
Ethereum is a global, distributed, open-source blockchain, acting as a platform for decentralized applications (Dapps) that use smart contracts. You can think of Ethereum as a world computer that allows anyone to build, deploy and use applications for whatever purpose, creating the next stage of the internet, or what many refer to as Web 3.0.
What is a decentralized application?
Decentralized applications are applications or programs that run on a blockchain. That means there is no single authority that controls or operates them.
This is different from standard applications on our phones or computers. For example, when we use social media, check our emails or order food, the app we use is controlled by a single organization. This organization controls and manages the activity on the platform. In some cases, that can result in restricting users from accessing some or all the services.
Decentralized applications can't restrict services to anyone. Code is law. As long as the criteria is met within a smart contract, it will execute. For example, anyone can create a wallet without entering any personal information. You can then take out a loan if you meet the collateral requirements. Then you can use that money for whatever purpose. Quick and easy!
But if you tried all this in the traditional banking system, you would face many barriers.
To open an account, you need to submit personal information, like your age, gender, where you live (if you live somewhere), and some form of government identification. This already excludes many people from opening an account. The very same personal details you submitted may impact your ability to apply for a loan. If you live in an area with high crime, you can get rejected -- despite never missing a payment in the past! Ultimately, there is a single authority that decides what you can and can't do.
Ethereum fixes this.
How is Ethereum different from Bitcoin?
Although the Bitcoin and Ethereum networks are both blockchains, they have their differences.
Bitcoin (BTC) is peer-to-peer cash. It uses the Bitcoin network to allow users to send, receive and spend without using intermediaries.
Whereas the Ethereum network is a platform for decentralized applications. These applications get powered by Ether (ETH), the native currency on Ethereum. That distinguishes Ethereum from Bitcoin as there’s a rich ecosystem of applications operating on the Ethereum network. At the same time, Ethereum is also peer-to-peer cash.
Benefits of the Ethereum Blockchain
Ethereum builds on the innovation of Bitcoin while adding some additional benefits, they are:
- Peer-to-peer: Like Bitcoin, you can use Ethereum for direct peer-to-peer payments. All without needing an intermediary like a bank.
- Programmable: Smart contracts self-execute once their terms get met doing what’s programmed.
- Transparent: All the activity on Ethereum is viewable for anyone to see.
- Permissionless: Anyone, anywhere, can use the Ethereum ecosystem.
Ethereum use cases
Ethereum is creating new and exciting use cases. As the ecosystem develops, so will these possibilities.
A few examples are:
- Decentralized finance (DeFi): An open financial system giving you control over your money.
- Non-fungible tokens (NFTs): Digital assets secured by the Ethereum blockchain. They’re creating new opportunities for creators and unlocking new revenue streams.
- Decentralized autonomous organizations (DAOs): A new form of organization that's democratic and transparent. It gives all the participants the ability to shape decisions.
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