What is ethereum?

Ethereum, founded by Vitalik Buterin in 2015, is a platform for smart contracts.

The difference with Bitcoin is that Bitcoin was designed as a currency from the start. You can look at Bitcoin as digital gold that has actual value. It’s designed to transfer wealth from person A to person B without the interference of a third party like a bank. Transferring money with bitcoin is done in a decentralised way. Because bitcoin is a blockchain technology, it’s impossible to tamper with.

 

What is ethereum?

But what is Ethereum? Ethereum is, just like bitcoin, a blockchain technology. But it’s not just a blockchain, it’s a decentralized programmable blockchain-based software platform. The official Ethereum website says: “Ethereum is a decentralized platform for applications that run exactly as programmed without any chance of fraud, censorship, or third-party interference.”

 

Why is ethereum useful? 

Ethereum is designed as a platform on which two parties can enter into a contract without the need of a third party to govern everything.Imagine in the near future that you want to rent a self driving car. This car only starts with a digital key. You enter into a contract with someone wanting to rent you a car. Both parties agree to the following terms:

-You pay the renting fee for the car every 1st of the month.

-The person renting you the car agrees to give you a new digital key every 1st of the month to start the car.

-If you don’t pay, you don’t get the key. The car then drives itself back to the person renting you the car.

-If the other person doesn’t give you the key, you don’t have to pay.

Before the first of every month, you have to make sure that you put your renting fee into the blockchain.  While the other person has to make sure he puts the new digital key into the blockchain. The blockchain will keep both assets in escrow and will execute the contract the first of the month if the parameters are met.

 

Ether

Ether is the coin used for operating the distributed application platform that is Ethereum. It is a form of payment made by the clients of the platform to the machines executing the requested operations. You need ethers when you want to build applications that use the ethereum blockchain or if you want to make your own smart contract. There is a limited supply of ethers that can be created every year. This means that the more people use the ethereum platform, the higher the price of Ether will become. At the time of writing the price of one Ether is around 310 dollar. At the start of 2017, it was just 8 dollars.

 

How to get your own Ethers?

You can buy your own Ethers on Coinbase. You can find a detailed guide here explaining how to make your own wallet and how to buy bitcoins. However, the same principle applies to buying ethers. You can also exchange it for other cryptocoins on big exchanges like bitfinex.com. These exchanges work just like a regular stock exchange.

When you are planning to buy a lot of ethers, it is strongly advised to keep them secured on a hardware wallet!