Ethereum is an open source, public blockchain that was created to address the vulnerability of personal data stored on the internet. The principal of Ethereum’s blockchain is to decentralize information stored on the web, competing against internet-based data warehouse companies, to protect internet-based data from theft.
Ethereum is best known for its smart contracts, these being coded contracts uploaded onto the Ethereum blockchain. The information held on the Ethereum blockchain is, not only protected from hackers but also secure from manipulation.
Unlike Bitcoin, Ethereum was not created to provide an alternative to fiat money, while Ethereum’s smart contract offering has made it the chosen payment source in initial coin offerings.
Ether tokens (Ethereum cryptocurrency) are created to fund the Ethereum blockchain development and expansion.
The idea of Ethereum was conceived by Russian – Canadian Programmer Vitalik Buterin and co-founded by Mihai Alisie, Anthony Di Lorio, and Charles Hoskinson.
Ethereum was released on 30th July 2015, after Vitalik Buterin initially released a white paper in 2013.
The total number of Ether tokens issued at the pre-sale was 60 million, with 0.2 per coin sold in the crowdsale, therefore, 72 million ether coins were issued at Genesis.
12 million off the 60 million ether tokens created in the presale were mostly distributed to early contributors and developers, with the remaining being held by the Ethereum Foundation.
Founder Buterin was said to hold just 630,000 Ether tokens and factoring a reported sale, is said to own less than half a percent of total Ether tokens in circulation.
The creation of each individual Ether token comes from mining, which is rewarded to miners in the blockchain verification process.
The Ethereum blockchain requires thousands of users, called nodes, running Ethereum virtual machines that are able to execute smart contracts. Smart contracts describe software and apps developed over the Ethereum platform.
Ether Tokens not only act as a fuel for the decentralized apps or software in the Ethereum network but are also used to cover transaction fees stemming from any change requests made for existing apps.
The transaction fees are calculated based on how much ‘gas’ an action demands, which is equivalent to the amount of computing power and time to make the required change.
Some distinct characteristics of Ethereum include:
- There are no physical Ether tokens, only virtual.
- There are only a finite number of Ether Tokens.
- While the creation of Ethereum blockchain and Ether tokens was not meant for an alternative to fiat currency, certain merchants and companies are willing to accept Ether tokens as a means of payment for goods and services.