You have probably heard about Ethereum and Bitcoin already, but you might not be sure how to define them, how they work and what they do. As both of these are not just cryptocurrencies, there is a specific technology behind them. Before getting further and into the technicals, let’s first start with a quick introduction of what these are so we can better understand more complex parameters later.
Bitcoin was the first decentralized cryptocurrency ever created. It is also the name of the software used to create Bitcoin based on a protocol which compensates people for processing transactions on a Proof of Work basis. The software was launched in 2009 by an unknown person under the pseudonym of Satoshi Nakamoto.
It is most likely the first cryptocurrency you ever heard of and for a good reason since it is the one with highest value for one Bitcoin (it reached $20 000 at the end of 2017). Its aim is to replace traditional banking systems by cutting out the middleman thanks to blockchain technology. Blockchain guarantees the integrity of information as data recorded on the blockchain cannot be tampered with, thus removing the need for a middleman to guarantee the trustworthiness of a transaction.
Ethereum is a decentralized exchange protocol allowing users to create smart contracts. If you are not sure of what a smart contract is, here’s a post explaining it. The Ethereum project was presented in 2013 by Russian-Canadian developer Vitalik Buterin who explained in his White Paper how his platform would allow people to create decentralized applications.
Initially, Ethereum was set up to only be a platform but a matching cryptocurrency Ether was soon added to the project. Ether is a counting unit used as a method of payment for a transaction on the Ethereum blockchain. The project was eventually launched in 2015. The software for Ethereum is constantly evolving and the first version called Frontier was later replaced by Homestead and future versions will be called Metropolisand Serenity. In another article we will get more into the details of the two technologies to better understand how they work.
Did you find this explanatory introduction helpful?