What is Ethereum? The Smart Contract Platform

Ethereum Overview

Ethereum has maintained its position as the second largest cryptocurrency for long enough that it appears firmly established as a stable entity in the cryptocurrency space. In addition to its popularity and significant market capitalization, it is also targeting a slightly different use-case than Bitcoin, meaning it has the potential to forge its own identity, separate from Bitcoin and other contenders.


Ethereum was designed from the start as a platform to develop “smart contracts”. Essentially, a smart contract is a way for two people to record any kind of exchange, and with a blockchain being an immutable record, that record can be referenced and verified by anyone. Currency is merely one form of contract, and the main currency on the Ethereum blockchain is their native token, called Ether. While other forms of contract besides currency are theoretically possible, by far the most popular use of this blockchain has been to create new alternate currencies. These additional currencies on the blockchain are referred to as ERC20 tokens. ERC stands for “Ethereum Request for Comments”, and 20 is a number designation for when the standard was created that allowed for new token creation. By using this blockchain, new coins are able to leverage the established trust of Ethereum, which could be seen as an advantage over other coins that start from scratch.

Ethereum is currently the go-to standard for smart contracts and token creation. However, since its creation, there are many new blockchains which aspire to capture the smart contract market, in whole or by focusing on niche applications. Ethereum has a considerable head start, but things can change surprisingly fast in the world of cryptocurrencies.


Ethereum can be mined on Graphics Processing Units, or GPUs, which are a type of computer chip that has long been available for people to purchase for their computers to improve the visual experience of games, media, and other uses. By making Ethereum available to mine on widely available hardware, it takes advantage of an existing broad base of computing power. However, one disadvantage to using GPUs instead of a dedicated computer chip is that computations are slower and energy consumption is higher, and subsequently it is relatively a more expensive process.

Ethereum encrypts all transactions with a hashing algorithm called Kekkak-256, which provides a similar level of security to the SHA-256 algorithm favored by Bitcoin. Also, like Bitcoin, all transactions are pseudo-anonymous, meaning that users of the system are not named in any way on the system, but the numbered transactions themselves can be viewed publicly on a blockchain explorer. (https://etherscan.io/ for example)


As of May 2018, Ethereum has a market capitalization of roughly 79 billion US, which is less than half of Bitcoin, but more than double the next coin down the list — Ripple, at roughly 3.5 billion. As one goes down the list of coins, the volatility increases exponentially, but Ethereum, near the top, has so far mostly been on the rise for over a year and a half. It is, however, notable that the initial surge in investment in Ethereum coincides with the beginning of the highly fractious scaling debate within the Bitcoin community. While this may simply turn out to be the catalyst that helped launch Ethereum into its own future, it may also indicate that its success may still be contingent on the fortunes of its predecessor, Bitcoin.

Image courtesy of Carty Sewill, http://cartyisme.com/

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