Ethereum (ETH) is the second most popular cryptocurrency after Bitcoin. Founded by Vitalik Buterin and Gavin Wood in 2015, today Ethereum’s market capitalization represents approximately 20% of the $1.1 trillion global crypto market.
There are some distinct differences between Ethereum and the original crypto. Unlike Bitcoin (BTC), Ethereum is intended to be much more than just a medium of exchange or a store of value. Instead, Ethereum is a decentralized computing network built on blockchain technology.
What Is Ethereum?
At its core, Ethereum is a decentralized global software platform powered by blockchain technology. It is most commonly known for its native cryptocurrency, ether (ETH).
Ethereum can be used by anyone to create any secured digital technology. It has a token designed to pay for work done supporting the blockchain, but participants can also use it to pay for tangible goods and services if accepted.
Ethereum is designed to be scalable, programmable, secure, and decentralized. It is the blockchain of choice for developers and enterprises creating technology based upon it to change how many industries operate and how we go about our daily lives.
It natively supports smart contracts, an essential tool behind decentralized applications.
Many decentralized finance (DeFi) and other applications use smart contracts in conjunction with blockchain technology.
Learn more about Ethereum, its token ETH, and how they are an integral part of non-fungible tokens, decentralized finance, decentralized autonomous organizations, and the metaverse.
Ether and Ethereum: What’s the Difference?
You can use Ether as a digital currency in financial transactions, as an investment or as a store of value. Ethereum is the blockchain network where Ether is held and exchanged. As mentioned above, this network offers a variety of other functions outside of ETH.
“These can be simple movements of funds, but they may also be complex transactions that do anything from exchanging assets to taking out loans to acquiring a piece of digital art,” says Boaz Avital, head of product at Anchorage. The transactions are processed and stored on the Ethereum network.
The Ethereum network can also be used to store data and run decentralized applications. Rather than hosting software on a server owned and operated by Google (GOOGL) or Amazon (AMZN), where the one company controls the data, people can host applications on the Ethereum blockchain. This gives users control over their data and they have open use of the app as there’s no central authority managing everything.
One of the most intriguing use cases involving Ethereum is self-executing contracts, or so-called smart contracts. Like any other contract, two parties agree to deliver goods or services in the future. Unlike conventional contracts, lawyers aren’t necessary: The parties code the agreement on the Ethereum blockchain. Once the contract conditions are met, it self-executes and delivers Ether to the appropriate party.
Ethereum vs. Bitcoin
Bitcoin’s primary use is as a virtual currency and store of value. Ether also works as a virtual currency and store of value. But the decentralized Ethereum network also makes it possible to create and run applications, smart contracts and other transactions on the network. Bitcoin doesn’t offer these functions.
Ethereum also processes transactions more quickly.
“New blocks are validated on the Bitcoin network once every 10 minutes while new blocks are validated on the Ethereum network once every 12 seconds,” says Gary DeWaal, chair of Katten’s financial markets and regulation group. And future developments could speed up Ethereum transactions, even more, he notes.
Last, there is no limit on the number of potential Ether tokens, while Bitcoin will release no more than 21 million coins. Currently, Bitcoin has 19 million coins in circulation.