Bitcoin has been widely accepted as the leader for global digital currency because of its reliance on blockchain technology. Things are changing; the development of Ethereum is looking to surpass the popularity of Bitcoin as the best cryptocurrency available.
What is Ethereum?
In truth, this is not even a cryptocurrency. Ethereum is a blockchain based open surface platform and essentially a big decentralized computer. It is able to develop and use applications known as smart contracts which are pieces of code that can transfer data. This data can be monetary or property and the program run specifically as programmed. The only drawback is that smart contracts are open to theoretical attacks but they are safe from fraud.
The open source public ledger platform of Ethereum works on blockchain technology and additionally uses scripting and smart contracts. Through the exclusive Ethereum network as well as public nodes, contracts can be implemented. The currency used comes in the form of a token called ‘Ether’ and is easily transferable between people.
One major advantage over Bitcoin is that Ethereum is able to handle accounts and transactions as well as permanently store computer programs. This allows Ethereum to provide a level of validity like no other.
How does Ethereum Work?
The network relies on an internal pricing system known as Gas, which prevents spam. In 2016, it had a hard fork bearing two blockchains which formed Ethereum and Ethereum Classic. Ethereum Classic uses unforked blockchain and incorporates all users from the larger Ethereum community that had originally rejected the fork.
The system centers on a shared universal infrastructure with a unique blockchain and represents property ownership and allows for value movements. Developers can create markets, move funds as applicable and safeguard against debt registries without risk to other parties and without the interference of middle men.
Who Developed Ethereum?
The founder is widely acknowledged to be Vitalik Buterin. He was awarded the Peter Thiel Fellowship for his work and inspired other developers to soon join the movement. Dr. Gavin Wood wrote the Ethereum ‘technical bible’ which outlines how the Ethereum virtual machine works.
Why the Soaring Price?
As the number of startups and companies that use Ethereum increases, so does the price. The platform provided can be used in so many ways; it is easily adopted by many corporations. Applications can vary from currency to domain names or financial contracts and voting systems.
How to Get Ethereum
Despite its growing popularity, Ethereum is hard to get. Bitcoins are generally easy to obtain from several different platforms, but it is harder to locate a secure platform for Ethereum. That being said, there are a few exchanges that deal with Ethereum such as Kraken, GDAX and Bitfinex.
What are some Ethereum Wallets?
These wallets are an interface to the blockchain and contain both a public address and private key for you to enter the Ethereum currency. The most common Ethereum wallets are discussed below.
1. Geth: This is a standard command line platform for creating and using contracts as well as sending and receiving Ethereum. While this is an ideal choice for programmers, it is not a simple platform so will not work for everyone.
2. Ethereum Wallet: More commonly known as ‘Mist’ this is the wallet provided by the Ethereum project and is considered to be the most secure. You can write and use smart contracts as well as store Ethereum tokens and other currencies.
What is Ethereum Mining?
Miners try to earn the purchasable and tradable ‘Ether’ through blockchains. Mining is a process where ETH is acquired and accumulated through transaction over the network. Mining consists of the participation in validation transactions as a way to sustain any Ethereum blockchain activities. It can take place on most platforms including home computers and tailored rigs. It is easier to use on Unix over Microsoft devices.
How Ethereum Mining Works
As with other Bitcoin acquisitions, miners quickly complete puzzles and provide answers to win currency. Specifically, miners run metadata through a hash function while only changing the ‘nonce’ value, which alters the hash value that you get.
When they find a hash that matches the target, miners receive Ether and the block is shared across a network for each node to authenticate. It then gets included in individual ledger copies. When Miner A gets the hash, Miner B will stop using that block and repeat the process on another one.
It is easy to cheat at this game which is why the puzzle solving technique if often called ‘proof-of-life’. It does not take a lot of time for other miners to realize that the hash value is correct. Every node has this function.
A block is found by a miner every 12 to 15 seconds and if this rate changes, the system automatically adjusts the difficulty level to ensure this 12 second time is kept constant. The process of earning Ethereum is completely random and depends on luck as well as the computer power that the miner is using.
How to Mine Ethereum
This can be achieved using any platform but miners usually set their computers loose to decipher cryptographic puzzles. Mining is not as easy as it sounds. It usually requires for a few attempts at computational puzzles before one will unlock and Ether will be rewarded. Pretty much anyone can set their platform to crack the puzzles. The catch is that public blockchains need more power because of the continual increase of miners investing in better hardware.
1. Selecting Mining Hardware: The two main types of hardware are GPU and CPU and this has to be established before starting your cryptocurrency venture. GPUs have a higher hash rate so are faster at solving puzzles. When choosing a GPU, its usefulness will be determined by hash rate and power consumption. GPUs are the more reliable option when it comes to mining for Ether.
2. Installation of Mining Software: After you set your hardware, you need to install the desired software. You need an exclusive client first to link to the main network and to run the node. Software such as Geth is highly recommended. Your node then interacts with others on the Ethereum network. You get an interface that deploys smart contracts at the same time as sending transactions through a command line.
3. Testing: While on your private network you can test the cryptocurrency using decentralized applications or smart contracts. You only need a simple home computer for this with the mining software. While experimenting can be useful, generally most people find that this fake mining is never as appealing.
4. Install Ethminer: To effectively mine Ether you need legitimate mining software which you can download. Once your node has linked to the network you can install Ethminer, picking the option that is compatible with your device. Once installed, your node will work securely in the exclusive Ethereum network.
5. Join an Ethereum Mining Pool: Mining individually is rarely effective, so miners choose to work together in a pool. The combined computational power provides better probability of cracking difficult puzzles. Additionally, the profit is shared depending on the individual’s contribution.
When joining a mining pool you there are certain factors to consider because of the different computational capacities that are always changing. A pool cannot exist forever and pools come with diverse payout structures.
When will Ethereum change to Proof-of-Stake Mining?
The idea is to get rid of the main algorithm used by the Ethereum network so the need for mining will not last forever. The ‘proof-of-work’ which validates and protects against tampering will be changed for a Casper Proof-of-Stake where the Ethereum network will be safeguarded by token owners.
For most Ethereum users this is great but this is not the case for miners. Using Proof-of-stake will no longer require mining because the task of establishing the next block will be given to the token owners on the blockchain.