What is Ethereum?

It is a new cryptocurrency which is decentralized (not centralized to a region), open for any developer, and an emerging computing platform based on blockchain technology. It is also sometimes referred to as bitcoin 2.0. The currency used by Ethereum is called ether, which can be used to compensate participating nodes (developers as mentioned above) for their contributions.

The design and quality of this platform depends upon the protocol running behind it, which has been growing since its inception.

How Ethereum emerged?

Vitalik Buterin, co-founder at bitcoin magazine, came up with a method of expanding the use of technology behind bitcoin. It lead to the birth of Ethereum project. Hence Ethereum is considered as a bitcoin gone through evolutionary phase. Of course there are some pros and cons, some places where bitcoin might be more suitable as we shall see further; it all depends upon your requirements.

We shall see some terminologies to get handy with them before proceeding to deeper discussion on Ethereum. Some of these terminologies are:


To pay for computational services and other fees (for example, transaction fees), Ether is used as a cryptocurrency. Ether is similar to the money we spend buying groceries or food, but it doesn’t have a physical existence. The value of Ether may vary similar to bitcoin. For example, the value of Ether dropped significantly when its Decentralized Autonomous Organization (DAO) was hacked.

Smart Contracts

Smart contracts are contracts which are smart; yes it couldn’t get more precise. The reason is that smart contracts enable sharing of property, money, shares, or anything valuable without the need of a middleman making the payments secure and convenient. Ethereum makes use of protocols (sets of rules) defined for performance of contracts.

Since smart contracts are handled all through the code behind them without involvement of a human being or a 3rd party, it makes the payments highly secure. For example, if I want to buy a home from you, as soon as I pay the specified amount, I’ll get the key to my new house; it’s that simple – because bots do what they are programmed to. And yes, the applications running these smart contracts are validated leaving no room for someone to be committing a fraud.

Smart contracts working with Ethereum are demonstrated in the following video

Decentralized Applications

Decentralized applications do not have a central point of controlling; they are available for everyone. No single entity instructs another, rather all users are authoritative.

How Ethereum Works?

Ethereum gives a shared record of entire transaction history to all its nodes (users). It acts like a true software company where developers are contributing as it provides full programmability. Ethereum allows you to write a piece of code having a set of rules for your new application; this piece of code is called contract. Such contracts can be uploaded to the block chain. Now the blockchain can have your contract (now a smart contract) as an account. So there are 2 types of accounts, one is human controlled while other is controlled by a piece of code or smart contract.

Ethereum works on smart contracts. These are called digital codes; they can be called digital triggers which you can implement online to execute certain tasks. For example a condition is set that if 5 people register their votes into this escrow, that escrow will automatically open up and send 5 people receive this many crypto currency

Moving an Ether to the account controlled by code results into that ether in complete influence of the code – not a single person has its control but the protocol (set of rules) itself. All nodes (end devices) run all of the contracts and have knowledge of all the transactions. No contract can write to other contracts’ storage databases, however a contract can talk to other contracts.

Ethereum Uses Proof of Stake Mechanism

Bitcoin makes use of proof of work where you are rewarded on solving the puzzles fast. The fastest one wins the reward in the form of bitcoins. Ethereum is different; it uses proof of stake mechanism, which says that more ether you own greater are your chances of getting rewarded. It allows you to earn more by creating more and master nodes; more master nodes give more chances of winning Ethereum.

It is a very good news for miners who have some Ethers in their wallets. They need not to do hard work to protect the network, instead the miners will now become stakeholders.

How To Make Money With Ethereum?

Making money with Ethereum is quite simple, sometimes similar to a simple buying and selling business. While we have seen the value of Ethereum and the use of the platform for developers, it can benefit you even if you are not a developer. How? Through buying and selling.

Where to Buy and Sell Ethereum?

To Buy Ether

To use the distributed platform Ethereum, Ethers are required. The question arises about buying and selling of Ethers. Well it is not an issue anymore. There are a number of dealers who sell Ethereum (Ethers instead).
If you want to buy Ethers, you are not limited to a single option. An Ether can be bought by paying

  • In Dollars
  • From Credit Card
  • Through bitcoins

Selling Ether

To sell Ether, you need to have Ethers (ETH) in your wallet. You can send them to anyone having an Ether Wallet in exchange of money or equivalent value. There are hundreds of dealers on the web selling Ethers, anyone can join the clan with just an account.

Pros and Cons

Although Ethereum seems to be the future and offers many advantages over bitcoin and other crypto currencies with added security and automation, it is also bears the burden of disadvantages.


  • Compared to bitcoin which was partially programmable, Ethereum is completely programmable
  • Moving from proof of work to proof of stake will remove the extra effort required to protect the network
  • There is a founding and regulating body, unlike bitcoin, which looks over the events occurring in Ethereum world
  • Ethereum uses more widespread language Java script contrary to bitcoin which uses C++. This one might serve as an disadvantage for few while an advantage for others


Because the smart contracts’ codes are written by humans, they are vulnerable to bugs, errors. If a mistake in the code gets exploited, there’s no way of preventing it except rewriting the code by obtaining a network consensus. It goes against the essence of blockchain itself.


So there are a number of advantages with Ethereum since it is an improved version of bitcoin’s protocols. These advantages might serve in making Ethereum achieve value higher than bitcoin but bitcoin remains the pioneer. And lots of bitcoins are currently being used by people worldwide. Ethereum, on the other hand, looks towards a major change by introducing proof of stake; which appears to b the most exciting thing for people especially miners.