Bitcoin became a revolutionary technology, but the story did not end there. The booming interest in the blockchain and the ability to remake cryptocurrencies for themselves led to the emergence of a whole cryptocurrency industry. By and large, there are more scammers in it than really useful coins, but among the heap of any garbage there are really unique coins with new technological solutions. One of these cryptocurrencies is Ethereum, which we will deal with in this article.
Ethereum Platform Mission
Undoubtedly, Block cool technology and the world will be grateful for its invention by Satoshi Nakamoto for a long time, but Bitcoin has significant drawbacks. The main one is that it is a fairly limited system, because it uses the minimum blockchain capabilities. In essence, this is only cryptocurrency and nothing more. It was the shortcomings of Bitcoin that pushed developers to look for new applications for the blockchain and, as a result of this search, Ethereum was born.
The blockchain became the basis of the Ether, but on it the developers heaped up a lot of different chips that make the system multifunctional. This is not just a crypto, like Bitok, but a system that allows you to carry out not only money transactions, but also any transactions according to the “if ...., then ....” template. In real life, the execution of any transactions occurs with the involvement of a third party - for example, we cannot buy an apartment without a notary, as we cannot trust a seller we don’t know. Without an intermediary, there is no guarantee that both parties will fulfill their obligations.
In business, the key to the honesty of the parties is a contract. If a party violates the agreement, then this will entail undesirable consequences for it. Everything seems to be perfect - there is a contract, there are guarantees. But let's not forget that we live in a world where the human factor plays a big role. Therefore, it is not always the intermediary who acts as a guarantor who honestly carries out its function. Blockchain is a technology that eliminates the human factor from any system, and the founders of the Ethereum platform went much further and developed a universal technology - smart contracts.
What is the difference between a smart contract and a conventional one, written on a piece of paper? Absolutely everyone - it does not require 50 lawyers, is protected by mathematics, and no one can violate it.
Smart contracts in simple language
The fictional character Nikolai will help us to delve into all the intricacies of smart contracts. Once Kolya decides to visit a foreign city to see all the sights and for this he needs to rent an apartment in which he can change over for a couple of days. Since the city is unfamiliar, Kohl decided to find himself temporary housing on the Internet. He came across an ad in which a certain Katya rents her apartment for 5000 rubles. per day. Both Kolya and Katya cannot trust each other, since they do not know each other - Katya is afraid that Nikolai will throw her off with money, and Kolya cannot know that the apartment really belongs to this madam, and indeed there are no guarantees that madam - this is Katya, not some Tajik swindler.
How does a safe deal happen in this case? Katya and Kolya conclude a contract in which they prescribe a bunch of points, one side pays a deposit, the other pledges to provide the apartment in the proper form. The intermediary in the form of a notary or agent who takes a good percentage of the services guarantees the fulfillment of all obligations of the parties.
Now back to our smart contracts. If Katya and Kolya took advantage of the advantages that the Ethereum platform provides, they could write all the conditions in the code and mathematical logic would protect both sides. All the prescribed conditions are fulfilled thanks to the blockchain - in this case no intermediary is needed, the guarantor is a genuine algorithm.
Due to their nature, smart contracts have a very universal application. They can be implemented anywhere where there are two sides between which there can be no trust. A physically smart contract looks like a code, but its content and logic depend on what the programmer wrote. In fact, there is no magic in smart contracts, but a number of conditions apply:
- When fulfilling the contract, a commission is charged, but it is scanty.
- The smart contract has its own wallet in the Ethereum network, and access to it is carried out in the form of transactions.
- A smart contract remains on the blockchain forever. Under certain conditions, its operation may stop, but the data will never be erased.
- Its creator cannot change the terms of the contract, but if he leaves himself such an opportunity, then everyone can view the code and see it. A smart contract is a completely transparent system and you cannot hide anything in it or somehow deceive participants.
Ethereum blockchain and ETN mining
So, technically, a smart contract is the same wallet as any user, and accessing it is a transaction, like sending coins. To avoid confusion, it is customary to call such transactions messages, although they look exactly like sending coins. The Ethereum blockchain, like the Bitcoin blockchain, are blocks, but they also have their own chip. If you read our article on the great and terrible blockchain, then you already know that blocks contain hashes of previous blocks, but in the Ethereum blockchain, blocks contain hashes of entire storages. Due to this, blocks are generated in the system every 15 seconds, which ensures relatively fast transactions.
But do not think that it greatly simplifies mining and mining of ETH. A feature of Ethereum mining is that to create blocks it is not enough just to iterate over hashes. In order to execute the code of a smart contract, you need to do a full calculation - that’s why you can’t get Ether on asics like Bitcoin. Since these machines have good computing power, but do not have memory or other stuffing, they cannot perform such operations. If someone decides to build a super-duper ASIC for Ethereum mining, then it will be almost the CPU of the computer. Therefore, video cards are more suitable for mining blocks on the Ethereum network, it is from them that whole mining farms are built that allow actively minting ETH coins.
Competition between Ethereum and Bitcoin
The network constantly says that Ether is the main competitor of Bitka and that soon it will move the main cryptocurrency. Yes, Ethereum has cool, more advanced technologies, and it provides a ton of possibilities for practical use. But it makes no sense to compare these two inventions - they are different and their goals are also different. Bitcoin is such a gold in the cryptocurrency world. In real life, it does not have much value, but as soon as everyone recognized that it was a means of payment and there was a demand for it, the price went up sharply. Ethereum is something more valuable in practice, such as oil. Its use is carried out in different areas of human life, at the same time, in oil, you can make calculations or change it to something else.
Oil and gold does not occur to anyone to compare and make assumptions that oil will soon take over the world and no one will need gold. Exactly the same situation in the world of cryptocurrencies - Bitcoin has its value and application, and Efirium created for completely different tasks.