What is Ethereum and What is It Used For?

Ethereum, the second-largest cryptocurrency. Ethereum was created by a team of inspired individuals, among which the most well-known one is <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/who-is-vitalik-buterin/">Vitalik Buterin</strong></a>.</p>\n<p>At some point, the initial Ethereum team broke up, and some members went on to create their own projects. One of those members was Charles Hoskinson, the now-known <strong>creator of Cardano.</strong></p>\n<p>In this section, I’ll tell you all about what is Cardano. To be more specific, I’ll introduce to you the history of the Cardano project, how its different from other blockchains such as Ethereum, and what makes Cardano special, in the first place.</p>\n<p>Let’s go!</p>\n<h2>What is Cardano?</h2>\n<p>To start this section off, we need to address the core question - what is Cardano?</p>\n<p>In order to answer this very question, allow me to continue with the story I’ve started telling in the introduction.</p>\n<p>The initial team behind Ethereum broke up because of a conflict of interest. Vitalik wanted Ethereum to remain <strong>a non-profit project</strong>, while team members such as Charles had the opposite point of view - he wanted Ethereum to start accepting venture capital, and to become a for-profit project.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is Cardano: What is Cardano?\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what-is-cardano-1.o.jpg/" alt=\"What is Cardano: What is Cardano?\" width=\"1000\" height=\"552\" /></p>\n<p>Charles Hoskinson created Cardano with a single goal - to provide a more balanced and sustainable ecosystem for the cryptocurrency world. At its very core, Cardano is simply a cryptocurrency project named after an Italian mathematician - just like many other crypto projects, it utilizes the Proof-of-Stake consensus algorithm (more on that later) and has a native coin called ADA.</p>\n<p>This is like you and your friend building a sandcastle on the beach, and having an argument on how many towers it should have. Since you can’t come to a resolution, your friend decides to build a separate castle of his own - one with as many towers and gateways as he wants!</p>\n<p>The thing that makes Cardano special, and also different from other, similar blockchains, is the goal that the project has. There are <strong>three problems</strong> that Cardano aims to solve, in regard to the crypto world - scalability, sustainability, and also interoperability.</p>\n<p>Big terms, but don’t worry - let’s break each of them down, in a simple manner!</p>\n<h3>Scalability</h3>\n<p>Scalability is often named the biggest problem that all cryptocurrencies face. Put simply, it references the inability of blockchains to keep up with a growing userbase, transaction speed-wise.</p>\n<p>Here’s a simple example for you to understand what I’m talking about:</p>\n<p>Imagine that you’re using <strong>traditional banking</strong> methods to pay for your online shopping - let’s say, you have VISA. Your transactions are processed pretty fast, since VISA can handle up to around 24,000 different transactions per second. However, every once in a while, you might experience lag spikes, if the network is encumbered - if there are tens of thousands of other people buying something at that point in time, using VISA, you might need to wait for a few minutes for your transaction to be approved.</p>\n<p><img title=\"What is Cardano: VISA.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what-is-cardano-2.o.jpg/" alt=\"What is Cardano: VISA.\" width=\"1000\" height=\"590\" /></p>\n<p>Blockchains experience the same issue. However, they also have notoriously small block sizes - in other words, many of the older blockchains can’t handle even close to the number of transactions that VISA can, per second. Ethereum is no exception - it can only deal with around 15 transactions per second!</p>\n<p>So, Cardano aims to address and solve this problem. Specifically, the plan that Charles and the team behind Cardano have to make it like this: the more users join the network, <strong>the faster it gets.</strong></p>\n<p>Sounds awesome, doesn’t it? However, how is this achieved?</p>\n<p>Well, as I’ve mentioned earlier, Cardano works on a <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-proof-of-stake-pos/">Proof-of-Stake consensus algorithm. It’s a ginormous topic, of its own, so I highly advise you to go check out a section on <strong>staking</strong> if you want to understand it better.</p>\n<p>For the sake of keeping things simple, basically, the Cardano network has validators (individual people, or organizations) that confirm transactions happening on the blockchain. The thing that makes Cardano different from other PoS networks, however, is Ouroboros.</p>\n<p>This is a special type of system <strong>made up of epochs</strong> (currently, these are periods of 5 days) and slots (1-second intervals). Each slot has a slot leader (who is selected from the transaction validators), and this leader is chosen to confirm transactions.</p>\n<p style=\"text-align: center;\"><img title=\"What is Cardano: Ouroboros.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what-is-cardano-3.o.jpg/" alt=\"What is Cardano: Ouroboros.\" width=\"1000\" height=\"669\" /></p>\n<p>All of that is, admittedly, extremely technical. I won’t be going deeper into the topic, since it’s so vast, that it requires a different section, of its own. For now, suffice to say that the Ouroboros system allows for the Cardano network to be much more secure than your traditional Proof-of-Stake blockchains, which then allows an increase in scalability.</p>\n<h3>Sustainability</h3>\n<p>Having dealt with that complicated can of worms, let’s move on to something that’s much simpler to understand - sustainability.</p>\n<p>In terms of Cardano (and cryptocurrencies, in general), this means two things - how eco-friendly a project is, and just how likely it is to prosper and maintain its functionality, long-term.</p>\n<p>Ecology-wise, Cardano’s Proof-of-Stake system allows it to be much more eco-friendly than cryptocurrencies such as <a href=https://www.bitdegree.org/"/crypto/buy-bitcoin-btc/">Bitcoin or Ethereum. While it’s still not ideal, Cardano is already <strong>leaping ahead</strong> of the two aforementioned coins, when it comes to energy preservation and ecology concerns.</p>\n<p>Now, project longevity-wise, the situation is kind of the same, too. Cardano has a dedicated treasury - it’s filled up with transaction fees, and then those fees are paid out in the form of rewards to anyone who makes a meaningful impact on the ecosystem (developers, scientists, and so on).</p>\n<p style=\"text-align: center;\"><img title=\"What is Cardano: Cardano sustainability.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what-is-cardano-4.o.jpg/" alt=\"What is Cardano: Cardano sustainability.\" width=\"1000\" height=\"508\" /></p>\n<p>On top of that, Cardano is actually really big on science and long-term planning, in general. There’s a popular internet meme that, in order to make something happen on Cardano, you need to write a research paper on the subject, and have it peer-reviewed by other blockchain professionals. While it is funny, it does showcase that Cardano is purely based on scientific research and advanced maths!</p>\n<p>Continuing on, at some point in time, Charles Hoskinson agreed on a collaboration with another co-founder of Ethereum, <strong>Jeremy Wood</strong>. This collaboration resulted in a brand new company, called IOHK (also known as Input-Output Hong Kong). Cardano is the main point of interest for IOHK, and the company itself is concerned with creating blockchain solutions for both private companies, as well as governmental institutions, worldwide!</p>\n<p>All of that is to say - Cardano is already a well-established project, with multiple backers, a company standing behind it, and huge plans for the future. Charles himself hosts frequent livestreams on YouTube in order to answer questions that the community might have, and to talk about the future of all things Cardano.</p>\n<h3>Interoperability</h3>\n<p>Now, interoperability is another <strong>big issue</strong> that blockchains of today are dealing with. In order to understand what the term actually means, allow me to give you an example:</p>\n<p>Imagine that you’re in a car, and are driving down a road. You’re going to check out another car - perhaps you want to buy it? Or maybe, simply meet a friend that drives a different car brand?</p>\n<p>At some point in your journey, you come across a river that needs to be crossed. No matter if you drive a sports car, a truck, or a tractor, you won’t be able to cross that river without a bridge. Blockchain interoperability is that bridge!</p>\n<p style=\"text-align: center;\"><img title=\"What is Cardano: Cardano interoperability.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what-is-cardano-5.o.jpg/" alt=\"What is Cardano: Cardano interoperability.\" width=\"1000\" height=\"286\" /></p>\n<p>To throw it back to our topic at hand, different blockchains need to have some sort of a “bridge” where they could communicate with each other. If a blockchain lacks interoperability, it means that it doesn’t have any <strong>cross-chain functionality</strong>, and you can only interact with it on its native projects and applications.</p>\n<p>Cardano solves this issue with what is known as the “KMZ sidechains protocol”. It acts as that bridge between two blockchains - thanks to the protocol, users are able to trade Cardano coins (or, to be more specific, ADA coins) for other cryptocurrencies!</p>\n<h2>The future of Cardano</h2>\n<p>So, then - up to this point, we’ve discussed what is Cardano, and how this blockchain network is different from most other cryptocurrency projects out there. As you might have figured out by now, it truly is special!</p>\n<p>What does the future hold for Cardano, though? And what does the community think about it?</p>\n<p>Well, for starters, it’s worth pointing out that Cardano has a really, REALLY strong community behind it. On one hand, this is amazing - it means that the project is strong and healthy, and that there’s avid interest in it, from a large number of people.</p>\n<p>On the flip side, though, it’s also worth mentioning that there are criticisms of Cardano that relate to this very fact. Some people claim that the project has basically become a Charles Hoskinson cult, with fans cheering every single word that he says. Furthermore, this then evolves into criticism that any progress made on the network developments is very slow, and that there are only unrealistic ideas being thrown around, without any signs of them being successfully implemented.</p>\n<p>What’s the reality, though?</p>\n<p>Well, in my own honest opinion, Cardano is truly an amazing project, with exponential potential! Sure, it does have some struggles, but this is true with any and all blockchains that you might <strong>evaluate and examine</strong>.</p>\n<p>At the same time, it’s also important to mention that, contrary to popular belief, Cardano isn’t an “enemy” of Ethereum. Instead, Charles has expressed, multiple times, that he feels that blockchains should work together in order to build “a better tomorrow”, and not “muscle up” against each other, on which of them has better scalability or smaller transaction fees.</p>\n<p style=\"text-align: center;\"><img title=\"What is Cardano: The future of Cardano.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what-is-cardano-6.o.jpg/" alt=\"What is Cardano: The future of Cardano.\" width=\"1000\" height=\"1055\" /></p>\n<p>That being said, I do also have to point out that Cardano and Ethereum are still very different from one another. While Ethereum is often praised as the “core technology behind the development of <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-web-3-0/">Web 3.0</strong></a>”, Cardano aims to work with governments and large organizations that are concerned with “managing identity, value, and governance” (as pointed out by Charles himself).</p>\n<p>With all of that being said, if you wish to learn more about the world of crypto make sure to check out the section about <a href=https://www.bitdegree.org/"/crypto/learn/what-is-web-3-0/">Web 3.0</strong></a>.</p>","meta_title":"What is Cardano in Crypto: Is it Worth the Hype?","meta_description":"In this section, you will learn what is Cardano, what is the Cardano coin & what are the three main problems the project aims to solve.","meta_keywords":"what is cardano, what is cardano in crypto, what is cardano coin, cardano crypto, cardano coin, cardano cryptocurrency, cardano ada","order":8,"language":"en","created_at":"2022-05-03T11:58:33.000000Z","updated_at":"2023-02-10T09:39:11.000000Z","modified_content":"<p>Now that you understand the general premise behind cryptocurrencies, and the differences between crypto coins and tokens, in this section, I will tell you all about what is Cardano!</p>\n<p>If you’ve spent even a day in the crypto markets, you’ve probably heard about <a href=https://www.bitdegree.org/"/crypto/buy-ethereum-eth/">Ethereum, the second-largest cryptocurrency. Ethereum was created by a team of inspired individuals, among which the most well-known one is <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/who-is-vitalik-buterin/">Vitalik Buterin</strong></a>.</p>\n<p>At some point, the initial Ethereum team broke up, and some members went on to create their own projects. One of those members was Charles Hoskinson, the now-known <strong>creator of Cardano.</strong></p>\n<p>In this section, I’ll tell you all about what is Cardano. To be more specific, I’ll introduce to you the history of the Cardano project, how its different from other blockchains such as Ethereum, and what makes Cardano special, in the first place.</p>\n<p>Let’s go!</p>\n<div class=\"container\">\n <div class=\"row justify-content-center\">\n <div class=\"col-md-10 comparison-suggestion pb-3 mb-4\">\n <div class=\"d-flex flex-row\">\n <div class=\"text-center\">\n <div class=\"img-block-yt\">\n <img src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/assets/images/compare-crypto-exchanges.gif/"/n alt=\"What is Cardano in Crypto? (Easily Explained!)\"\n title=\"What is Cardano in Crypto? (Easily Explained!)\" class=\"border-0\">\n <p>Video Explainer</p>\n </div>\n </div>\n <div class=\"col-xs-10 col-sm-10 col-md-10 text-left py-3 yt-info\">\n <h4 class=\"mb-1\">Video Explainer: What is Cardano and What is It Used For?</h4>\n <p class=\"py-1 mb-0 youtube-video-subtitle\">Reading is not your thing? Watch the \"What is Cardano and What is It Used For?\" video explainer</p>\n </div>\n </div>\n <div class=\"row justify-content-center text-center\">\n <div class=\"col-12 col-md-11 px-3\">\n <div class=\"wrapper mb-0\">\n <div class=\"youtube mb-4 bg-transparent p-0 video-modal-popup\" data-toggle=\"modal\"\n data-target=\"#video-modal\" data-id=\"bn6Vxt_RTbI\" data-title=\"CryptoFinallyExplained\">\n <div class=\"video-gradient-top\"></div>\n <p class=\"text-left dyk-video-title\">What is Cardano in Crypto? (Easily Explained!)</p>\n <img src=https://www.bitdegree.org/"https://i.ytimg.com/vi/bn6Vxt_RTbI/hq720.jpg/"/n alt=\"What is Cardano in Crypto? (Easily Explained!)\"\n title=\"What is Cardano in Crypto? (Easily Explained!)\"\n class=\"p-0\">\n <img class=\"play-button\" data-target=\"#video-modal\"\n src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/assets/video-button.png/"/n alt=\"What is Cardano in Crypto? (Easily Explained!)\">\n </div>\n </div>\n </div>\n </div>\n <div class=\"row justify-content-center text-center\">\n <div>\n <a href=https://www.bitdegree.org/"https://www.youtube.com/c/CryptoFinallyExplained?sub_confirmation=1\%22\n class=\"btn yt-promo mb-2\" target=\"_blank\" rel=\"nofollow noopener\">\n <div class=\"row justify-content-center align-items-center mx-0 text-center\">\n <div class=\"col-4 col-md-4\">\n <i class=\"fab fa-youtube yt-dyk-btn\"></i>\n </div>\n <div class=\"col-8 col-md-8 text-center yt-promo-text\">\n <h4 class=\"m-0 text-white\">SUBSCRIBE</h4>\n <span>ON YOUTUBE</span>\n </div>\n </div>\n </a>\n </div>\n </div>\n </div>\n </div>\n</div>\n<div class=\"modal fade\" id=\"video-modal\" tabindex=\"-1\" role=\"dialog\" aria-labelledby=\"bn6Vxt_RTbI\">\n <div class=\"modal-dialog modal-dialog-centered modal-lg\" role=\"document\">\n <div class=\"modal-content\">\n <div class=\"modal-body p-0\">\n <button type=\"button\" class=\"video-modal-close close\" data-dismiss=\"modal\" aria-label=\"Close\">\n <i aria-hidden=\"true\" class=\"fas fa-times\"></i>\n </button>\n <div id=\"iframe\"></div>\n </div>\n <a class=\"text-decoration-none\"\n href=https://www.bitdegree.org/"https://www.youtube.com/c/CryptoFinallyExplained?sub_confirmation=1\%22\n rel=\"nofollow noopener\" target=\"_blank\">\n <div class=\"modal-footer p-0 d-block bg-white\">\n <div class=\"row justify-content-center m-0\">\n <div class=\"col-3 col-md-4 col-lg-2 p-0\">\n <img class=\"w-100 h-100\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/assets/crypto-subscribe.jpg/" alt=\"Subscribe\">\n </div>\n <div class=\"col-9 col-md-8 col-lg-2 px-0 d-flex\">\n <div class=\"modal-subscribe w-100\">\n <p class=\"m-0 mt-1 mr-3\">SUBSCRIBE<br>\n <span class=\"m-0\">ON YOUTUBE</span>\n </p>\n </div>\n </div>\n <div class=\"col-12 col-md-12 col-lg-8 p-0 text-center d-flex justify-content-center align-items-center\">\n <div class=\"modal-subscribe-text\">\n <h4 class=\"m-0\">Understand crypto with ease</h4>\n <span>New explainer videos every week!</span>\n </div>\n </div>\n </div>\n </div>\n </a>\n </div>\n </div>\n</div>\n<h2>What is Cardano?</h2>\n<p>To start this section off, we need to address the core question - what is Cardano?</p>\n<p>In order to answer this very question, allow me to continue with the story I’ve started telling in the introduction.</p>\n<p>The initial team behind Ethereum broke up because of a conflict of interest. Vitalik wanted Ethereum to remain <strong>a non-profit project</strong>, while team members such as Charles had the opposite point of view - he wanted Ethereum to start accepting venture capital, and to become a for-profit project.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is Cardano: What is Cardano?\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what-is-cardano-1.o.jpg/" alt=\"What is Cardano: What is Cardano?\" width=\"1000\" height=\"552\" /></p>\n<p>Charles Hoskinson created Cardano with a single goal - to provide a more balanced and sustainable ecosystem for the cryptocurrency world. At its very core, Cardano is simply a cryptocurrency project named after an Italian mathematician - just like many other crypto projects, it utilizes the Proof-of-Stake consensus algorithm (more on that later) and has a native coin called ADA.</p>\n<p>This is like you and your friend building a sandcastle on the beach, and having an argument on how many towers it should have. Since you can’t come to a resolution, your friend decides to build a separate castle of his own - one with as many towers and gateways as he wants!</p>\n<p>The thing that makes Cardano special, and also different from other, similar blockchains, is the goal that the project has. There are <strong>three problems</strong> that Cardano aims to solve, in regard to the crypto world - scalability, sustainability, and also interoperability.</p>\n<p>Big terms, but don’t worry - let’s break each of them down, in a simple manner!</p>\n<h3>Scalability</h3>\n<p>Scalability is often named the biggest problem that all cryptocurrencies face. Put simply, it references the inability of blockchains to keep up with a growing userbase, transaction speed-wise.</p>\n<p>Here’s a simple example for you to understand what I’m talking about:</p>\n<p>Imagine that you’re using <strong>traditional banking</strong> methods to pay for your online shopping - let’s say, you have VISA. Your transactions are processed pretty fast, since VISA can handle up to around 24,000 different transactions per second. However, every once in a while, you might experience lag spikes, if the network is encumbered - if there are tens of thousands of other people buying something at that point in time, using VISA, you might need to wait for a few minutes for your transaction to be approved.</p>\n<p><img title=\"What is Cardano: VISA.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what-is-cardano-2.o.jpg/" alt=\"What is Cardano: VISA.\" width=\"1000\" height=\"590\" /></p>\n<p>Blockchains experience the same issue. However, they also have notoriously small block sizes - in other words, many of the older blockchains can’t handle even close to the number of transactions that VISA can, per second. Ethereum is no exception - it can only deal with around 15 transactions per second!</p>\n<p>So, Cardano aims to address and solve this problem. Specifically, the plan that Charles and the team behind Cardano have to make it like this: the more users join the network, <strong>the faster it gets.</strong></p>\n<p>Sounds awesome, doesn’t it? However, how is this achieved?</p>\n<p>Well, as I’ve mentioned earlier, Cardano works on a <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-proof-of-stake-pos/">Proof-of-Stake consensus algorithm. It’s a ginormous topic, of its own, so I highly advise you to go check out a section on <strong>staking</strong> if you want to understand it better.</p>\n<p>For the sake of keeping things simple, basically, the Cardano network has validators (individual people, or organizations) that confirm transactions happening on the blockchain. The thing that makes Cardano different from other PoS networks, however, is Ouroboros.</p>\n<p>This is a special type of system <strong>made up of epochs</strong> (currently, these are periods of 5 days) and slots (1-second intervals). Each slot has a slot leader (who is selected from the transaction validators), and this leader is chosen to confirm transactions.</p>\n<p style=\"text-align: center;\"><img title=\"What is Cardano: Ouroboros.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what-is-cardano-3.o.jpg/" alt=\"What is Cardano: Ouroboros.\" width=\"1000\" height=\"669\" /></p>\n<p>All of that is, admittedly, extremely technical. I won’t be going deeper into the topic, since it’s so vast, that it requires a different section, of its own. For now, suffice to say that the Ouroboros system allows for the Cardano network to be much more secure than your traditional Proof-of-Stake blockchains, which then allows an increase in scalability.</p>\n<h3>Sustainability</h3>\n<p>Having dealt with that complicated can of worms, let’s move on to something that’s much simpler to understand - sustainability.</p>\n<p>In terms of Cardano (and cryptocurrencies, in general), this means two things - how eco-friendly a project is, and just how likely it is to prosper and maintain its functionality, long-term.</p>\n<p>Ecology-wise, Cardano’s Proof-of-Stake system allows it to be much more eco-friendly than cryptocurrencies such as <a href=https://www.bitdegree.org/"/crypto/buy-bitcoin-btc/">Bitcoin or Ethereum. While it’s still not ideal, Cardano is already <strong>leaping ahead</strong> of the two aforementioned coins, when it comes to energy preservation and ecology concerns.</p>\n<p>Now, project longevity-wise, the situation is kind of the same, too. Cardano has a dedicated treasury - it’s filled up with transaction fees, and then those fees are paid out in the form of rewards to anyone who makes a meaningful impact on the ecosystem (developers, scientists, and so on).</p>\n<p style=\"text-align: center;\"><img title=\"What is Cardano: Cardano sustainability.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what-is-cardano-4.o.jpg/" alt=\"What is Cardano: Cardano sustainability.\" width=\"1000\" height=\"508\" /></p>\n<p>On top of that, Cardano is actually really big on science and long-term planning, in general. There’s a popular internet meme that, in order to make something happen on Cardano, you need to write a research paper on the subject, and have it peer-reviewed by other blockchain professionals. While it is funny, it does showcase that Cardano is purely based on scientific research and advanced maths!</p>\n<p>Continuing on, at some point in time, Charles Hoskinson agreed on a collaboration with another co-founder of Ethereum, <strong>Jeremy Wood</strong>. This collaboration resulted in a brand new company, called IOHK (also known as Input-Output Hong Kong). Cardano is the main point of interest for IOHK, and the company itself is concerned with creating blockchain solutions for both private companies, as well as governmental institutions, worldwide!</p>\n<p>All of that is to say - Cardano is already a well-established project, with multiple backers, a company standing behind it, and huge plans for the future. Charles himself hosts frequent livestreams on YouTube in order to answer questions that the community might have, and to talk about the future of all things Cardano.</p>\n<h3>Interoperability</h3>\n<p>Now, interoperability is another <strong>big issue</strong> that blockchains of today are dealing with. In order to understand what the term actually means, allow me to give you an example:</p>\n<p>Imagine that you’re in a car, and are driving down a road. You’re going to check out another car - perhaps you want to buy it? Or maybe, simply meet a friend that drives a different car brand?</p>\n<p>At some point in your journey, you come across a river that needs to be crossed. No matter if you drive a sports car, a truck, or a tractor, you won’t be able to cross that river without a bridge. Blockchain interoperability is that bridge!</p>\n<p style=\"text-align: center;\"><img title=\"What is Cardano: Cardano interoperability.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what-is-cardano-5.o.jpg/" alt=\"What is Cardano: Cardano interoperability.\" width=\"1000\" height=\"286\" /></p>\n<p>To throw it back to our topic at hand, different blockchains need to have some sort of a “bridge” where they could communicate with each other. If a blockchain lacks interoperability, it means that it doesn’t have any <strong>cross-chain functionality</strong>, and you can only interact with it on its native projects and applications.</p>\n<p>Cardano solves this issue with what is known as the “KMZ sidechains protocol”. It acts as that bridge between two blockchains - thanks to the protocol, users are able to trade Cardano coins (or, to be more specific, ADA coins) for other cryptocurrencies!</p>\n<h2>The future of Cardano</h2>\n<p>So, then - up to this point, we’ve discussed what is Cardano, and how this blockchain network is different from most other cryptocurrency projects out there. As you might have figured out by now, it truly is special!</p>\n<p>What does the future hold for Cardano, though? And what does the community think about it?</p>\n<p>Well, for starters, it’s worth pointing out that Cardano has a really, REALLY strong community behind it. On one hand, this is amazing - it means that the project is strong and healthy, and that there’s avid interest in it, from a large number of people.</p>\n<p>On the flip side, though, it’s also worth mentioning that there are criticisms of Cardano that relate to this very fact. Some people claim that the project has basically become a Charles Hoskinson cult, with fans cheering every single word that he says. Furthermore, this then evolves into criticism that any progress made on the network developments is very slow, and that there are only unrealistic ideas being thrown around, without any signs of them being successfully implemented.</p>\n<p>What’s the reality, though?</p>\n<p>Well, in my own honest opinion, Cardano is truly an amazing project, with exponential potential! Sure, it does have some struggles, but this is true with any and all blockchains that you might <strong>evaluate and examine</strong>.</p>\n<p>At the same time, it’s also important to mention that, contrary to popular belief, Cardano isn’t an “enemy” of Ethereum. Instead, Charles has expressed, multiple times, that he feels that blockchains should work together in order to build “a better tomorrow”, and not “muscle up” against each other, on which of them has better scalability or smaller transaction fees.</p>\n<p style=\"text-align: center;\"><img title=\"What is Cardano: The future of Cardano.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what-is-cardano-6.o.jpg/" alt=\"What is Cardano: The future of Cardano.\" width=\"1000\" height=\"1055\" /></p>\n<p>That being said, I do also have to point out that Cardano and Ethereum are still very different from one another. While Ethereum is often praised as the “core technology behind the development of <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-web-3-0/">Web 3.0</strong></a>”, Cardano aims to work with governments and large organizations that are concerned with “managing identity, value, and governance” (as pointed out by Charles himself).</p>\n<p>With all of that being said, if you wish to learn more about the world of crypto make sure to check out the section about <a href=https://www.bitdegree.org/"/crypto/learn/what-is-web-3-0/">Web 3.0</strong></a>.</p>","preview_url":"https://www.bitdegree.org/crypto/learn/what-is-cardano-in-crypto","youtube_video":{"id":15,"channel_id":1,"sort":47,"video_title":"What is Cardano in Crypto? (Easily Explained!)","description":"What is Cardano in crypto?\n\nCardano is a Proof-of-Stake blockchain project, with ADA being the native coin of the platform. Cardano is often referenced as being the direct competitor to Ethereum, and it was created by Charles Hoskinson, one of the original co-founders of ETH. \n\nWhile being somewhat similar to Ethereum, however, Cardano does have a lot of major differences, too. In this video, I discuss all of these differences, and also talk about the core features that make Cardano stand out from the blockchain crowd!\n\nWhat do you think about Cardano? Is it an awesome and innovative project, or is it overhyped? Share your thoughts below!\n\nVideo Time Table:\n\n0:00 Introduction to What is Cardano in Crypto\n0:50 What is Cardano?\n1:58 Cardano Scalability\n4:09 Cardano Sustainability\n5:50 Cardano Interoperability\n6:55 What is the Future of Cardano?\n8:30 Wrap-up: What is Cardano in Crypto?\n\nGet Quick Crypto Tips on Twitter - Follow:\nhttps://twitter.com/crypto_xplained\n\n#WhatisCardanoinCrypto #WhatisCardano #WhatisCardanoCoin #CardanoCrypto #CardanoCoin #CardanoCryptocurrency #CardanoADA","video_id":"bn6Vxt_RTbI","duration":522,"view_count":1267,"thumbnail_url":"https://i.ytimg.com/vi/bn6Vxt_RTbI/hq720.jpg","thumbnail_width":1280,"thumbnail_height":720,"published_at":"2022-03-08 17:11:20","created_at":"2022-03-08T23:00:01.000000Z","updated_at":"2023-05-21T23:00:04.000000Z","channel":{"id":1,"title":"CryptoFinallyExplained","channel_id":"UCOryUY0yxC08eJtK23mNgiA","main_playlist_id":"UUOryUY0yxC08eJtK23mNgiA"}}},"prevSection":{"id":37,"featured_image_id":8074,"original_id":null,"youtube_video_id":126,"author_id":42,"translator_id":null,"chapter_id":2,"title":"Bitcoin: the Pioneer of the Crypto World","slug":"what-is-a-bitcoin","definition":"Did you know that in 2010 two Papa John’s pizzas were purchased for 10,000 Bitcoin?","status":"published","content":"<p>In this section, I’m going to answer the question what is a Bitcoin, as well as look into how does it work!</p>\n<p>Cryptocurrencies have exploded in popularity, over the last decade or so. These days, everyone, and even their pets, have seemingly heard about crypto, <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/what-is-defi/">DeFi, <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/what-are-nfts/">NFTs, and so on. As time goes on, however, the popularity of the space is only growing and increasing - <strong>there are more and more talks about</strong> <strong>mass adoption, and</strong> <strong>the integration of crypto into our everyday lives!</strong></p>\n<p>Do you know where it all started, though? Well, most people do - with <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/buy-bitcoin-btc/">Bitcoin. However, what do you <em>*really*</em> know about Bitcoin? I mean, do you know who owns the most Bitcoin, or when was Bitcoin created, in the first place? Those are just a couple of the questions that you'll find answers to after reading this section!</p>\n<p>So, in this section, we’re going to look into what is a Bitcoin. Specifically, I’ll tell you about the history of this legendary cryptocurrency, what makes it special, and how it became a staple for a trillion-dollar industry!</p>\n<p><em>Without further ado, let’s get to it!</em></p>\n<h2>The History of Bitcoin</h2>\n<p>In order to start figuring out what is Bitcoin and how does it work, <strong>we need to go back in time, to 2009.</strong> This is the year when Bitcoin was created, and launched to the general public.</p>\n<p>Before Bitcoin came to be, however, there was first something called a “<a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-whitepaper/">White paper</strong></a>”. This is a term that describes a document containing all of the philosophy behind a specific crypto project - these days, most-all decentralized finance platforms and tokens have White papers written about them, and <strong>Bitcoin was no exception</strong>, either.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is a Bitcoin: The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_a_bitcoin_01.o.jpg/" alt=\"What is a Bitcoin: The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.\" width=\"1000\" height=\"876\" /></p>\n<p>How is this White paper so important, you might ask? Well, it can tell us a lot about two big topics - who started (or, created) Bitcoin, and what’s the purpose of this project, in the first place.</p>\n<p>If you love internet mysteries, you’ve probably heard the name “<a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/who-is-satoshi-nakamoto/">Satoshi Nakamoto</strong></a>” before. This is actually a pseudonym of the creator of Bitcoin, and not their real name - truth be told, to this very day, <strong>NO ONE KNOWS who created Bitcoin! </strong>Even after all these years, the creator <em>(or creators?)</em> has remained anonymous. For simplicity’s sake, I’ll be referring to Satoshi as a “he” - it could, however, be a woman, a group of people, or an entire organization!</p>\n<p>You'll find more information about Satoshi below, so, for now, let’s focus on the second question - <strong>WHY was Bitcoin created? </strong>Well, the answer might lie in the date of its creation.</p>\n<p>2009 wasn’t really a special year, globally speaking. However, Bitcoin was launched on January 3rd, 2009 - so, at the very beginning of the year. What this means is that the actual project was created a year prior. And, I have a feeling that I don’t even really need to tell you what happened in 2008.</p>\n<p>That’s right - <strong>the global financial crisis.</strong> In a very specific sense, Bitcoin was the result of this crisis.</p>\n<p>When a cryptocurrency is created, the very first block of its blockchain is called “<a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-genesis-block/">the Genesis block</strong></a>”. If you’d like to learn more about blockchains and how they work, there are a few dedicated sections concerning the topic in our Crypto 101 Handbook - make sure to check them out! Focusing on what is Bitcoin and how does it work, however, all that you need to know for now is that the creators of a cryptocurrency - such as Bitcoin - can leave<strong> a human-readable message </strong>within that Genesis block. Satoshi Nakamoto did just that - his message read:</p>\n<p><em>The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.</em></p>\n<p>It’s a reference to an article title of The Times newspaper, from the day when BTC was launched. As you might be able to tell, the title talks about the Chancellor of the United Kingdom bailing out banks, after the global financial crisis - since it’s widely accepted that banking institutions were a major element of the crisis, in the first place, you can probably see where this is going.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is a Bitcoin: The history of Bitcoin.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_a_bitcoin_02.o.jpg/" alt=\"What is a Bitcoin: The history of Bitcoin.\" width=\"1000\" height=\"300\" /></p>\n<p>To circle back to the questions of what is Bitcoin used for, and why it was created, the answer seems to be pretty simple - <strong>to take some economic power away from banks and governmental institutions, and hand it back to your common, everyday people.</strong> Bitcoin was initially meant to be a form of digital money that is both completely private, as well as transparent, and not belonging to any one entity - in other words, 100% decentralized.</p>\n<p>It is widely accepted that, whoever Satoshi Nakamoto was, he was very concerned with the state of the global economy, and how huge financial institutions could weasel their way out of a major financial crisis that they’ve caused, shifting all of the economic burdens that came with it onto the masses of innocent people. Bitcoin was the answer to this - a way for those masses of people to, for the first time, truly own their own money, and not have it tied to the state or government.</p>\n<p>Of course, when talking about these things, you could also question <strong>what is Bitcoin backed by, or how it tackles problems such as <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-inflation/">inflation and regulations.</strong> These are topics for other sections, though - in this section, our goal is to look at the basics of what is Bitcoin, and how it became the global phenomenon it is today.</p>\n<p>Going back to the creation of Bitcoin, after it was launched, Satoshi Nakamoto would still show up in various forums online. He was an avid fan of <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-cryptography/">cryptography, and would constantly hang out in related online forums and discussion boards, talking with other like-minded individuals, and trying to come up with what would eventually become Bitcoin. In fact, <strong>Bitcoin wasn’t even the first attempt at creating a form of digital currency</strong> - it was simply the attempt that was successful.</p>\n<p>Pretty soon, however, <strong>Satoshi disappeared </strong>- today, not only does no one know who he is, it’s impossible to say whether or not he’s still alive, or active among crypto circles around the world. I mean, who knows - perhaps he’s a very active member of the Bitcoin community, but no one could ever tell?</p>\n<p>Going back to the launch of BTC, you might ask - how much was Bitcoin in 2009? Well, the truth is - <strong>fractions of a penny! </strong>BTC only started gaining price traction around 2011, two years after its inception. Even then, you could purchase multiple Bitcoins with a single $1.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is a Bitcoin: Bitcoin Pizza day.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_a_bitcoin_03.o.jpg/" alt=\"What is a Bitcoin: Bitcoin Pizza day.\" width=\"1000\" height=\"330\" /></p>\n<p>You’ve probably heard about the legendary story of a guy who purchased two Papa John’s pizzas for 10,000 Bitcoin, back in 2010. While it was quirky and cool, it was also a very significant moment for Bitcoin, this being one of the very first major events where BTC was used to purchase actual, tangible real-world items. This event has become so notable, that there’s now even a <strong>Bitcoin Pizza day</strong> being held, every year.</p>\n<p>That’s no wonder, really - today, those pizzas would be worth over $200 million. It’s absolutely incredible to think about!</p>\n<p>Hearing all of these numbers being thrown around, you might also ponder - <strong>who owns the most Bitcoin?</strong> Well, there are actually two notable parties that need to be mentioned here.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_a_bitcoin_04.o.jpg/" alt=\"What is a Bitcoin: the largest BTC holders.\" width=\"1000\" height=\"389\" /></p>\n<p>As far as the public is concerned, a US-based software company called <strong>Microstrategy is the largest BTC whale</strong>, holding nearly 130k BTC. When you learn about what is a Bitcoin, this number really does appear to be mind-boggling!</p>\n<p>However, there’s another answer, too. It’s widely speculated that none other than <strong>Satoshi Nakamoto himself is the largest holder of BTC</strong> - if the calculations are true, Satoshi still holds over 1,1 million Bitcoin, spread throughout his wallets.</p>\n<p>Going back to the history of Bitcoin, and skipping through some minor events, the popularity - and, consequently, price - of BTC grew over the years. The first major crypto boom happened in 2017, and was followed by what we now call <strong>the Crypto Winter</strong> - a sudden price crash, and then a few years of stagnation.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is a Bitcoin: Crypto winter.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_a_bitcoin_05.o.jpg/" alt=\"What is a Bitcoin: Crypto winter.\" width=\"1000\" height=\"490\" /></p>\n<p>Today, Bitcoin alone is worth nearly $400 billion (market cap-wise), and that's not to mention the rest of the cryptocurrency industry. <strong>BTC paved the way for decentralized finance, NFTs, crypto gaming, and a new form of finance, as a whole</strong> - the importance of all of these things can’t be understated!</p>\n<h2>The Future of Bitcoin</h2>\n<p>Now that we’ve covered the general history and background of Bitcoin, we should also talk about the potential future of this cryptocurrency. In order to do that, though, we need to go back to the question of how does Bitcoin work, to begin with.</p>\n<p>As mentioned before, BTC is <strong>completely decentralized and anonymity-preserving.</strong> Meaning, the cryptocurrency can be traded between two parties, and while all trades will be public and visible on the blockchain, the actual participants will remain anonymous.</p>\n<p>This is done with the help of Bitcoin wallets. If you’re wondering what is a Bitcoin address, well, that’s just it - the term references a <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-address/">wallet address</strong></a>. It’s like a special string of numbers and letters, used to identify you on the blockchain. When you perform trades, or send BTC to your friends, <strong>only your wallet addresses will be visible</strong> - unless you tell the whole world that THIS wallet address belongs to YOU, no one will know! Well, generally speaking, that is.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is a Bitcoin: The future of Bitcoin.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_a_bitcoin_06.o.jpg/" alt=\"What is a Bitcoin: The future of Bitcoin.\" width=\"1000\" height=\"1141\" /></p>\n<p>Naturally, decentralization is another key factor. <strong>Bitcoin doesn’t belong to any single private or governmental entity. </strong>This means that there’s no single point of failure, either - in theory, this results in a fairer, more transparent financial system.</p>\n<p>If you’d like to learn more about the specifics of decentralization and anonymity, there's <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/decentralized-blockchain/">a section covering both of these topics</strong></a> - check it out!</p>\n<p>Having said all of that, and now that you know what is Bitcoin, how does it work, and what it’s used for, what’s next for this cryptocurrency - in other words, <strong>what is Bitcoin’s future?</strong></p>\n<p>Well, as you might expect, no one knows for sure! However, if we were to take a look at the history of Bitcoin, it seems that this cryptocurrency isn’t going anywhere.</p>\n<p>Throughout the years, thousands of new crypto projects have emerged and grown to become notable names in the industry. During all this time, though, <strong>Bitcoin has always remained the No. 1 crypto asset</strong>, market-wise, as well as in many people’s minds, too. There’s even a term for that - it’s called “Bitcoin maximalism”.</p>\n<p>As time goes on, <strong>Bitcoin is also getting progressively more difficult to mine.</strong> Combine that with the fact that this crypto asset has a <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-hard-cap/">hard cap</strong></a> of 21 million (that’s the total number of Bitcoin that will ever exist), and you have an asset that’s becoming more and more scarce, yet seemingly also increasingly more sought-after, as well.</p>\n<p>Whatever challenges Bitcoin might face in the future, one thing’s for sure - if not for this cryptocurrency, I wouldn’t be writing this, and you wouldn’t be reading it. Chances are that there wouldn’t be any DeFi or other cryptos, either, at least not in the form that we know them now! With this industry constantly growing and reaching new milestones, many enthusiasts believe that this is just the beginning of a long and adventure-filled journey.</p>","meta_title":"What is a Bitcoin and How Does It Work?","meta_description":"What is a Bitcoin? If you want to find an answer to this question, you're in luck! Find all there is to know about Bitcoin right here.","meta_keywords":"what is a bitcoin, what is bitcoin and how does it work, what is bitcoin used for, who started bitcoin, who owns bitcoin, bitcoins future, what can you buy with bitcoin, what is bitcoin backed by, what happens when the bitcoin block reward is gone, what is the highest bitcoin has ever been, what is bitcoin address, bitcoin white paper, when was bitcoin created, how much was bitcoin in 2009, who owns the most bit coin.","order":6,"language":"en","created_at":"2022-09-12T08:04:54.000000Z","updated_at":"2023-05-16T11:45:56.000000Z","modified_content":"<p>In this section, I’m going to answer the question what is a Bitcoin, as well as look into how does it work!</p>\n<p>Cryptocurrencies have exploded in popularity, over the last decade or so. These days, everyone, and even their pets, have seemingly heard about crypto, <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/what-is-defi/">DeFi, <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/what-are-nfts/">NFTs, and so on. As time goes on, however, the popularity of the space is only growing and increasing - <strong>there are more and more talks about</strong> <strong>mass adoption, and</strong> <strong>the integration of crypto into our everyday lives!</strong></p>\n<p>Do you know where it all started, though? Well, most people do - with <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/buy-bitcoin-btc/">Bitcoin. However, what do you <em>*really*</em> know about Bitcoin? I mean, do you know who owns the most Bitcoin, or when was Bitcoin created, in the first place? Those are just a couple of the questions that you'll find answers to after reading this section!</p>\n<p>So, in this section, we’re going to look into what is a Bitcoin. Specifically, I’ll tell you about the history of this legendary cryptocurrency, what makes it special, and how it became a staple for a trillion-dollar industry!</p>\n<p><em>Without further ado, let’s get to it!</em></p>\n<div class=\"container\">\n <div class=\"row justify-content-center\">\n <div class=\"col-md-10 comparison-suggestion pb-3 mb-4\">\n <div class=\"d-flex flex-row\">\n <div class=\"text-center\">\n <div class=\"img-block-yt\">\n <img src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/assets/images/compare-crypto-exchanges.gif/"/n alt=\"What is a Bitcoin & How Does it work? (Animated Explainer)\"\n title=\"What is a Bitcoin & How Does it work? (Animated Explainer)\" class=\"border-0\">\n <p>Video Explainer</p>\n </div>\n </div>\n <div class=\"col-xs-10 col-sm-10 col-md-10 text-left py-3 yt-info\">\n <h4 class=\"mb-1\">Video Explainer: Bitcoin: the Pioneer of the Crypto World</h4>\n <p class=\"py-1 mb-0 youtube-video-subtitle\">Reading is not your thing? Watch the \"Bitcoin: the Pioneer of the Crypto World\" video explainer</p>\n </div>\n </div>\n <div class=\"row justify-content-center text-center\">\n <div class=\"col-12 col-md-11 px-3\">\n <div class=\"wrapper mb-0\">\n <div class=\"youtube mb-4 bg-transparent p-0 video-modal-popup\" data-toggle=\"modal\"\n data-target=\"#video-modal\" data-id=\"DeREwrPVlDg\" data-title=\"CryptoFinallyExplained\">\n <div class=\"video-gradient-top\"></div>\n <p class=\"text-left dyk-video-title\">What is a Bitcoin & How Does it work? (Animated Explainer)</p>\n <img src=https://www.bitdegree.org/"https://i.ytimg.com/vi/DeREwrPVlDg/hq720.jpg/"/n alt=\"What is a Bitcoin & How Does it work? (Animated Explainer)\"\n title=\"What is a Bitcoin & How Does it work? (Animated Explainer)\"\n class=\"p-0\">\n <img class=\"play-button\" data-target=\"#video-modal\"\n src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/assets/video-button.png/"/n alt=\"What is a Bitcoin & How Does it work? (Animated Explainer)\">\n </div>\n </div>\n </div>\n </div>\n <div class=\"row justify-content-center text-center\">\n <div>\n <a href=https://www.bitdegree.org/"https://www.youtube.com/c/CryptoFinallyExplained?sub_confirmation=1\%22\n class=\"btn yt-promo mb-2\" target=\"_blank\" rel=\"nofollow noopener\">\n <div class=\"row justify-content-center align-items-center mx-0 text-center\">\n <div class=\"col-4 col-md-4\">\n <i class=\"fab fa-youtube yt-dyk-btn\"></i>\n </div>\n <div class=\"col-8 col-md-8 text-center yt-promo-text\">\n <h4 class=\"m-0 text-white\">SUBSCRIBE</h4>\n <span>ON YOUTUBE</span>\n </div>\n </div>\n </a>\n </div>\n </div>\n </div>\n </div>\n</div>\n<div class=\"modal fade\" id=\"video-modal\" tabindex=\"-1\" role=\"dialog\" aria-labelledby=\"DeREwrPVlDg\">\n <div class=\"modal-dialog modal-dialog-centered modal-lg\" role=\"document\">\n <div class=\"modal-content\">\n <div class=\"modal-body p-0\">\n <button type=\"button\" class=\"video-modal-close close\" data-dismiss=\"modal\" aria-label=\"Close\">\n <i aria-hidden=\"true\" class=\"fas fa-times\"></i>\n </button>\n <div id=\"iframe\"></div>\n </div>\n <a class=\"text-decoration-none\"\n href=https://www.bitdegree.org/"https://www.youtube.com/c/CryptoFinallyExplained?sub_confirmation=1\%22\n rel=\"nofollow noopener\" target=\"_blank\">\n <div class=\"modal-footer p-0 d-block bg-white\">\n <div class=\"row justify-content-center m-0\">\n <div class=\"col-3 col-md-4 col-lg-2 p-0\">\n <img class=\"w-100 h-100\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/assets/crypto-subscribe.jpg/" alt=\"Subscribe\">\n </div>\n <div class=\"col-9 col-md-8 col-lg-2 px-0 d-flex\">\n <div class=\"modal-subscribe w-100\">\n <p class=\"m-0 mt-1 mr-3\">SUBSCRIBE<br>\n <span class=\"m-0\">ON YOUTUBE</span>\n </p>\n </div>\n </div>\n <div class=\"col-12 col-md-12 col-lg-8 p-0 text-center d-flex justify-content-center align-items-center\">\n <div class=\"modal-subscribe-text\">\n <h4 class=\"m-0\">Understand crypto with ease</h4>\n <span>New explainer videos every week!</span>\n </div>\n </div>\n </div>\n </div>\n </a>\n </div>\n </div>\n</div>\n<h2>The History of Bitcoin</h2>\n<p>In order to start figuring out what is Bitcoin and how does it work, <strong>we need to go back in time, to 2009.</strong> This is the year when Bitcoin was created, and launched to the general public.</p>\n<p>Before Bitcoin came to be, however, there was first something called a “<a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-whitepaper/">White paper</strong></a>”. This is a term that describes a document containing all of the philosophy behind a specific crypto project - these days, most-all decentralized finance platforms and tokens have White papers written about them, and <strong>Bitcoin was no exception</strong>, either.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is a Bitcoin: The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_a_bitcoin_01.o.jpg/" alt=\"What is a Bitcoin: The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.\" width=\"1000\" height=\"876\" /></p>\n<p>How is this White paper so important, you might ask? Well, it can tell us a lot about two big topics - who started (or, created) Bitcoin, and what’s the purpose of this project, in the first place.</p>\n<p>If you love internet mysteries, you’ve probably heard the name “<a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/who-is-satoshi-nakamoto/">Satoshi Nakamoto</strong></a>” before. This is actually a pseudonym of the creator of Bitcoin, and not their real name - truth be told, to this very day, <strong>NO ONE KNOWS who created Bitcoin! </strong>Even after all these years, the creator <em>(or creators?)</em> has remained anonymous. For simplicity’s sake, I’ll be referring to Satoshi as a “he” - it could, however, be a woman, a group of people, or an entire organization!</p>\n<p>You'll find more information about Satoshi below, so, for now, let’s focus on the second question - <strong>WHY was Bitcoin created? </strong>Well, the answer might lie in the date of its creation.</p>\n<p>2009 wasn’t really a special year, globally speaking. However, Bitcoin was launched on January 3rd, 2009 - so, at the very beginning of the year. What this means is that the actual project was created a year prior. And, I have a feeling that I don’t even really need to tell you what happened in 2008.</p>\n<p>That’s right - <strong>the global financial crisis.</strong> In a very specific sense, Bitcoin was the result of this crisis.</p>\n<p>When a cryptocurrency is created, the very first block of its blockchain is called “<a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-genesis-block/">the Genesis block</strong></a>”. If you’d like to learn more about blockchains and how they work, there are a few dedicated sections concerning the topic in our Crypto 101 Handbook - make sure to check them out! Focusing on what is Bitcoin and how does it work, however, all that you need to know for now is that the creators of a cryptocurrency - such as Bitcoin - can leave<strong> a human-readable message </strong>within that Genesis block. Satoshi Nakamoto did just that - his message read:</p>\n<p><em>The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.</em></p>\n<p>It’s a reference to an article title of The Times newspaper, from the day when BTC was launched. As you might be able to tell, the title talks about the Chancellor of the United Kingdom bailing out banks, after the global financial crisis - since it’s widely accepted that banking institutions were a major element of the crisis, in the first place, you can probably see where this is going.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is a Bitcoin: The history of Bitcoin.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_a_bitcoin_02.o.jpg/" alt=\"What is a Bitcoin: The history of Bitcoin.\" width=\"1000\" height=\"300\" /></p>\n<p>To circle back to the questions of what is Bitcoin used for, and why it was created, the answer seems to be pretty simple - <strong>to take some economic power away from banks and governmental institutions, and hand it back to your common, everyday people.</strong> Bitcoin was initially meant to be a form of digital money that is both completely private, as well as transparent, and not belonging to any one entity - in other words, 100% decentralized.</p>\n<p>It is widely accepted that, whoever Satoshi Nakamoto was, he was very concerned with the state of the global economy, and how huge financial institutions could weasel their way out of a major financial crisis that they’ve caused, shifting all of the economic burdens that came with it onto the masses of innocent people. Bitcoin was the answer to this - a way for those masses of people to, for the first time, truly own their own money, and not have it tied to the state or government.</p>\n<p>Of course, when talking about these things, you could also question <strong>what is Bitcoin backed by, or how it tackles problems such as <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-inflation/">inflation and regulations.</strong> These are topics for other sections, though - in this section, our goal is to look at the basics of what is Bitcoin, and how it became the global phenomenon it is today.</p>\n<p>Going back to the creation of Bitcoin, after it was launched, Satoshi Nakamoto would still show up in various forums online. He was an avid fan of <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-cryptography/">cryptography, and would constantly hang out in related online forums and discussion boards, talking with other like-minded individuals, and trying to come up with what would eventually become Bitcoin. In fact, <strong>Bitcoin wasn’t even the first attempt at creating a form of digital currency</strong> - it was simply the attempt that was successful.</p>\n<p>Pretty soon, however, <strong>Satoshi disappeared </strong>- today, not only does no one know who he is, it’s impossible to say whether or not he’s still alive, or active among crypto circles around the world. I mean, who knows - perhaps he’s a very active member of the Bitcoin community, but no one could ever tell?</p>\n<p>Going back to the launch of BTC, you might ask - how much was Bitcoin in 2009? Well, the truth is - <strong>fractions of a penny! </strong>BTC only started gaining price traction around 2011, two years after its inception. Even then, you could purchase multiple Bitcoins with a single $1.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is a Bitcoin: Bitcoin Pizza day.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_a_bitcoin_03.o.jpg/" alt=\"What is a Bitcoin: Bitcoin Pizza day.\" width=\"1000\" height=\"330\" /></p>\n<p>You’ve probably heard about the legendary story of a guy who purchased two Papa John’s pizzas for 10,000 Bitcoin, back in 2010. While it was quirky and cool, it was also a very significant moment for Bitcoin, this being one of the very first major events where BTC was used to purchase actual, tangible real-world items. This event has become so notable, that there’s now even a <strong>Bitcoin Pizza day</strong> being held, every year.</p>\n<p>That’s no wonder, really - today, those pizzas would be worth over $200 million. It’s absolutely incredible to think about!</p>\n<p>Hearing all of these numbers being thrown around, you might also ponder - <strong>who owns the most Bitcoin?</strong> Well, there are actually two notable parties that need to be mentioned here.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_a_bitcoin_04.o.jpg/" alt=\"What is a Bitcoin: the largest BTC holders.\" width=\"1000\" height=\"389\" /></p>\n<p>As far as the public is concerned, a US-based software company called <strong>Microstrategy is the largest BTC whale</strong>, holding nearly 130k BTC. When you learn about what is a Bitcoin, this number really does appear to be mind-boggling!</p>\n<p>However, there’s another answer, too. It’s widely speculated that none other than <strong>Satoshi Nakamoto himself is the largest holder of BTC</strong> - if the calculations are true, Satoshi still holds over 1,1 million Bitcoin, spread throughout his wallets.</p>\n<p>Going back to the history of Bitcoin, and skipping through some minor events, the popularity - and, consequently, price - of BTC grew over the years. The first major crypto boom happened in 2017, and was followed by what we now call <strong>the Crypto Winter</strong> - a sudden price crash, and then a few years of stagnation.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is a Bitcoin: Crypto winter.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_a_bitcoin_05.o.jpg/" alt=\"What is a Bitcoin: Crypto winter.\" width=\"1000\" height=\"490\" /></p>\n<p>Today, Bitcoin alone is worth nearly $400 billion (market cap-wise), and that's not to mention the rest of the cryptocurrency industry. <strong>BTC paved the way for decentralized finance, NFTs, crypto gaming, and a new form of finance, as a whole</strong> - the importance of all of these things can’t be understated!</p>\n<h2>The Future of Bitcoin</h2>\n<p>Now that we’ve covered the general history and background of Bitcoin, we should also talk about the potential future of this cryptocurrency. In order to do that, though, we need to go back to the question of how does Bitcoin work, to begin with.</p>\n<p>As mentioned before, BTC is <strong>completely decentralized and anonymity-preserving.</strong> Meaning, the cryptocurrency can be traded between two parties, and while all trades will be public and visible on the blockchain, the actual participants will remain anonymous.</p>\n<p>This is done with the help of Bitcoin wallets. If you’re wondering what is a Bitcoin address, well, that’s just it - the term references a <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-address/">wallet address</strong></a>. It’s like a special string of numbers and letters, used to identify you on the blockchain. When you perform trades, or send BTC to your friends, <strong>only your wallet addresses will be visible</strong> - unless you tell the whole world that THIS wallet address belongs to YOU, no one will know! Well, generally speaking, that is.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is a Bitcoin: The future of Bitcoin.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_a_bitcoin_06.o.jpg/" alt=\"What is a Bitcoin: The future of Bitcoin.\" width=\"1000\" height=\"1141\" /></p>\n<p>Naturally, decentralization is another key factor. <strong>Bitcoin doesn’t belong to any single private or governmental entity. </strong>This means that there’s no single point of failure, either - in theory, this results in a fairer, more transparent financial system.</p>\n<p>If you’d like to learn more about the specifics of decentralization and anonymity, there's <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/decentralized-blockchain/">a section covering both of these topics</strong></a> - check it out!</p>\n<p>Having said all of that, and now that you know what is Bitcoin, how does it work, and what it’s used for, what’s next for this cryptocurrency - in other words, <strong>what is Bitcoin’s future?</strong></p>\n<p>Well, as you might expect, no one knows for sure! However, if we were to take a look at the history of Bitcoin, it seems that this cryptocurrency isn’t going anywhere.</p>\n<p>Throughout the years, thousands of new crypto projects have emerged and grown to become notable names in the industry. During all this time, though, <strong>Bitcoin has always remained the No. 1 crypto asset</strong>, market-wise, as well as in many people’s minds, too. There’s even a term for that - it’s called “Bitcoin maximalism”.</p>\n<p>As time goes on, <strong>Bitcoin is also getting progressively more difficult to mine.</strong> Combine that with the fact that this crypto asset has a <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-hard-cap/">hard cap</strong></a> of 21 million (that’s the total number of Bitcoin that will ever exist), and you have an asset that’s becoming more and more scarce, yet seemingly also increasingly more sought-after, as well.</p>\n<p>Whatever challenges Bitcoin might face in the future, one thing’s for sure - if not for this cryptocurrency, I wouldn’t be writing this, and you wouldn’t be reading it. Chances are that there wouldn’t be any DeFi or other cryptos, either, at least not in the form that we know them now! With this industry constantly growing and reaching new milestones, many enthusiasts believe that this is just the beginning of a long and adventure-filled journey.</p>","preview_url":"https://www.bitdegree.org/crypto/learn/what-is-a-bitcoin","youtube_video":{"id":126,"channel_id":1,"sort":24,"video_title":"What is a Bitcoin & How Does it work? (Animated Explainer)","description":"What is a Bitcoin, and how does it work?\n\nWith cryptocurrencies becoming more and more popular, as time goes on, people are getting used to cracking difficult subjects, such as DeFi, NFTs, the metaverse, and so on. However, before jumping into those difficult concepts, have you ever asked yourself if you really know what is Bitcoin, and how does it work?\n\nIn this video, I’ll be telling you all about that. We will cover the history of Bitcoin (how it came to be, who created it, and so on), its purpose, as well as what the future might hold for this particular cryptocurrency, and the entirety of the crypto space, as a whole.\n\nHow did you hear about Bitcoin, for the very first time? Share your experiences in the comment section below!\n\nVideo Time Table:\n\n0:00 Introduction to What is a Bitcoin\n1:06 The history of Bitcoin\n7:28 The Future of Bitcoin\n9:32 Wrap-up: What is a Bitcoin & How Does it work?\n\nMore Related Videos:\n\n? What is a Cryptocurrency?\nhttps://www.youtube.com/watch?v=eVLUrZtKhBk&t=0s\n? How Does Cryptocurrency Work?\nhttps://www.youtube.com/watch?v=rAtJ7Lw90KA\n? Crypto Token VS Coin\nhttps://www.youtube.com/watch?v=kNAC7CXFOTw&t=119s\n\nGet Quick Crypto Tips on Twitter - Follow:\nhttps://twitter.com/crypto_xplained\n\n#WhatisaBitcoin #WhatisBitcoinAndHowDoesitWork #WhatisBitcoinUsedFor","video_id":"DeREwrPVlDg","duration":618,"view_count":470,"thumbnail_url":"https://i.ytimg.com/vi/DeREwrPVlDg/hq720.jpg","thumbnail_width":1280,"thumbnail_height":720,"published_at":"2022-09-21 14:04:28","created_at":"2022-09-21T23:00:02.000000Z","updated_at":"2023-05-21T23:00:04.000000Z","channel":{"id":1,"title":"CryptoFinallyExplained","channel_id":"UCOryUY0yxC08eJtK23mNgiA","main_playlist_id":"UUOryUY0yxC08eJtK23mNgiA"}}},"chapterTitle":"Cryptocurrencies","cryptoBookSection":{"id":334,"featured_image_id":8199,"original_id":null,"youtube_video_id":127,"author_id":42,"translator_id":null,"chapter_id":2,"title":"The Ultimate Blockchain for dApp Creation: Ethereum","slug":"what-is-ethereum","definition":"Did you know that Ethereum is one of the most popular blockchains for the development of crypto-based projects?","status":"published","content":"<p>In this section, we’re going to answer the questions <strong>what is Ethereum, and how does it work?</strong></p>\n<p>What visuals come to your mind when you hear the term “global computer”? Some people will probably imagine a sentient being, overseeing all of the different processes that we perform, every day. Or maybe you’re thinking about something along the lines of the Terminator - a dangerous machine that’s out to destroy humanity?</p>\n<p>Well, while everyone is going to have their own thoughts concerning the matter, <strong>“global computer” is actually a term that is</strong> <strong>often used to describe a very well-known cryptocurrency project called Ethereum</strong>.</p>\n<p>In this section, we are going to talk about Ethereum. To be a bit more specific, we’ll look into what is Ethereum, in simple terms, the history of this project (how it came to be), what makes it so special, and we’ll also ponder on what does the future of ETH look like, as well.</p>\n<p><em>So, let’s get to it!</em></p>\n<h2>What is Ethereum?</h2>\n<p>Let’s start off with the core question - <strong>what is Ethereum?</strong></p>\n<p>Now, as I’ve hinted in the beginning, the term “global computer” is actually quite accurate, when describing ETH. In technical terms, <strong>Ethereum is a public blockchain software</strong> that allows users to create different middleman-less projects on it, with the help of <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-smart-contract/">smart contracts</strong></a> and a native coin called <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/buy-ethereum-eth/">Ether.
/n
$\"What$ dedicated section</strong></a> on our Crypto 101 Handbook, explaining all of the different intricacies of smart contract functionality. For now, suffice to say that smart contracts were first introduced on Ethereum, and that they act as a middleman between two parties participating in some sort of a process (such as selling a car).</p>\n<p>The kicker here, though, is that smart contracts are automated, decentralized, and immutable. In theory, they make everything much faster and simpler, too!</p>\n<p>Thanks to smart contracts and some arduous development work, <strong>Ethereum has become the second-largest cryptocurrency project on the market</strong>, right after Bitcoin. This is a massive deal, and has put a pretty big spotlight on ETH, and the technology behind it! In fact, smart contract functionality is where the definition “global computer” originated from, as well. On top of that, it’s also part of the answer to the question <em>“what is the difference between Bitcoin and Ethereum?”</em> - smart contracts!</p>\n<p>While I only gave you a single example of how the technology behind Ethereum can be used in the real world, the possibilities are endless! ETH can theoretically help automate a huge assortment of actions and services, all the while making them much fairer and faster, too. A lot of developers know this, and thus choose to build their own crypto-native projects on the Ethereum blockchain.</p>\n<p>More on that a bit later, though - in order to talk about this side of Ethereum, we need to first look into the history of this cryptocurrency project.</p>\n<h2>The History of Ethereum</h2>\n<p>Ethereum first saw the light of day in 2015. Up until that point, though, the technology behind this blockchain project had already been in development for a couple of years.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is Ethereum: The History of Ethereum.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_ethereum_02.o.jpg/" alt=\"What is Ethereum: The History of Ethereum.\" width=\"1000\" height=\"340\" /></p>\n<p>Whenever we think about Ethereum today, we usually associate it with a man named <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/who-is-vitalik-buterin/">Vitalik Buterin</strong></a>. He was *one* of the co-founders of ETH, but as you might have guessed, not the only one. In fact, in total, <strong>Ethereum was founded by 8 people</strong>, including the likes of Charles Hoskinson (the founder of Cardano) and <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/who-is-gavin-wood/">Gavin Wood</strong></a> (the creator of Polkadot).</p>\n<p>Why, then, is Vitalik the only one who people associate with Ethereum, nowadays? Well, it’s a whole big story, in of itself. However, long story short, out of those 8 initial founders, <strong>Vitalk is currently the only one left, working on ETH</strong>.</p>\n<p>Throughout the years, Ethereum had a variety of ups and downs, and has experienced a lot of different updates in the process. While the blockchain was always a bit controversial <em>(mostly due to its problems with scalability and network fees)</em>, the biggest controversy that it has experienced, to date, is likely a hack that happened all the way back in 2016. It was a <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/what-are-decentralized-autonomous-organizations-dao/">DAO hack during which a huge amount of Ether was stolen, and that divided the Ethereum community into two.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is Ethereum: Ethereum VS Ethereum Classic.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_ethereum_03.o.jpg/" alt=\"What is Ethereum: Ethereum VS Ethereum Classic.\" width=\"1000\" height=\"446\" /></p>\n<p>Like, literally - Ethereum experienced a <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-hard-fork-blockchain/">hard fork</strong></a>, which resulted in two separate blockchain projects. <strong>Ethereum that we know today</strong> (this is the updated version of the original blockchain, with the security vulnerability fixed), and <strong>Ethereum Classic</strong>, the original ETH project, but with multiple security vulnerabilities still supposedly present. So, when someone asks <em>“what is Ethereum Classic?”,</em> or <em>“what is the difference between Ethereum and Ethereum Classic?”</em>, you’ll now know!</p>\n<p>Now, I’ve also just mentioned a number of different terms - DAOs, hard forks, and so on. If you’re not familiar with any of these terms, or are wondering - what is Ethereum gas, or address types, please feel free to <strong>check out other chapters in our Crypto 101 Handbook</strong> - there's a variety of dedicated sections explaining difficult cryptocurrency topics, as simply as possible!</p>\n<p>The history of Ethereum deserves a section of its own, and I won’t bore you with all of the specific details that made ETH what it is today - instead, we’re going to focus on figuring out <strong>what is Ethereum used for, and how it works</strong>.</p>\n<p>My point here is that, while ETH experienced a lot of bumps in the road, as of writing this section, it’s still one of the most popular cryptocurrency projects in the industry, and one that has paved the way for <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-defi/">decentralized finance</strong></a> (or, DeFi) and a huge variety of technological blockchain advancements.</p>\n<p>In order to get Ethereum explained fully, you do also need to know <strong>what is Wrapped Ethereum</strong>. There's a <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/what-are-stablecoins/">dedicated section</strong></a> about wrapped coins, in general, but if you come across wETH, and don’t understand what that is, just keep in mind that it simply is Ethereum based on a different network, such as the Binance Chain.</p>\n<h2>What Makes Ethereum Special?</h2>\n<p>Continuing on with this “What is Ethereum?” section, it's actually a good place to transition to <strong>what makes ETH special</strong>, and how it managed to become the second-largest crypto project in the world.</p>\n<p>As I’ve mentioned earlier, many developers, to this day, choose to build their projects on Ethereum. The fact that they are able to do so, in the first place, is one of the big reasons behind the popularity of this blockchain.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is Ethereum: DeFi, NFTs, crypto-based games, and smart contracts.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_ethereum_04.o.jpg/" alt=\"What is Ethereum: DeFi, NFTs, crypto-based games, and smart contracts.\" width=\"1000\" height=\"1011\" /></p>\n<p><strong>You can think of Ethereum as an actual computer!</strong> If you want to play a game, write an essay, or create a slideshow presentation, you can do so on a huge variety of different computers out there - however, if you have the chance to use a time-tested, reliable machine, you would probably go for it, right? While the computer might not support some super-fancy applications, and has some occasional lag, with it, you’d be able to access most games and apps on the market - it’s a huge factor to consider!</p>\n<p>The same is true with Ethereum. If you’re creating a <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/what-are-decentralized-applications-dapps/">decentralized application</strong></a> (a dApp - say, a crypto game), you probably want to do so on a reliable blockchain, and one that houses as many potential players as possible. In both cases, Ethereum comes out on top!</p>\n<p><strong>With most dApps and various crypto projects still being built on ETH</strong>, this incentivizes new developers to do the same (since there’s a booming ecosystem on the said blockchain). From the user perspective, things aren’t much different - if you use an Ethereum dApp, chances are that it will have a large community following, which might not be the case for the same dApp built on a different blockchain.</p>\n<p><em>So… How does this make Ethereum special? </em>Well, to put it in layman’s terms, over time, Ethereum has essentially managed to build a huge following, and a dedicated group of users. This is true both in regards to developers, as well as end-users, who interact with the projects present on this blockchain.</p>\n<p>Initially, Ethereum attracted people due to its groundbreaking smart contract functionality. As more and more people started using the network, this resulted in a snowball effect - with DeFi, NFTs, and crypto gaming surging in popularity, more people are starting to interact with these areas, and with most of the projects being based on Ethereum, this results in the growth of this particular network, as well.</p>\n<h2>Wrapping Up: The Future of Ethereum</h2>\n<p>In this “Ethereum explained” section, we’ve talked about what is Ethereum used for, and what makes this piece of crypto technology so special. At this point, you should be pretty well-versed in all-things-ETH, both when it comes to the history of the network, as well as the hype surrounding it, as well.</p>\n<p><strong>What does the future of Ethereum look like, though?</strong> After all, as time goes on, there are new, more modern and improved networks coming around - ones that seemingly offer many more perks than ETH!</p>\n<p>Well, truth be told, there have been countless <em>“Ethereum killers”</em> over the years - yet, the blockchain still stands tall as one of the most popular crypto projects of all time. Yes, it’s true that ETH isn’t without its issues and controversies - lack of scalability, huge network gas fees, outdated functionalities, and so on. However, as of writing this section, the <strong>Ethereum Merge</strong> has just recently happened.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is Ethereum: From Proof-of-Work to Proof-of-Stake.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_ethereum_05.o.jpg/" alt=\"What is Ethereum: From Proof-of-Work to Proof-of-Stake.\" width=\"1000\" height=\"269\" /></p>\n<p>While it will take some time to see the true effects of ETH 2.0, if you’re wondering <em>“what is Ethereum 2.0?”,</em> just know that this is <strong>the biggest update to the Ethereum network</strong>, as of yet, and it aims to solve (or at least mitigate) many of the issues associated with this blockchain, one of which is the transition from <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-proof-of-work-pow/">Proof-of-Work to <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-proof-of-stake-pos/">Proof-of-Stake (so, people would now be able to stake Ethereum). If you’d like to learn more about what all of that means, or the ETH 2.0 update, make sure to go through the whole Crypto 101 Handbook - it features sections covering many of these topics!</p>","meta_title":"What is Ethereum and What is It Used For?","meta_description":"Trying to figure out what is Ethereum? Wondering what is Ethereum used for? You're in luck because you'll find all the answers right here!","meta_keywords":"what is ethereum, ethereum explained, what is ethereum used for, what is ethereum gas, what is an ethereum address, what is ethereum 2.0, what is the difference between bitcoin and ethereum, what is staking ethereum, what is weth vs eth, what is wrapped ethereum, what is ethereum classic, what is the difference between ethereum and ethereum classic","order":7,"language":"en","created_at":"2022-10-05T08:27:32.000000Z","updated_at":"2022-10-17T07:26:10.000000Z","modified_content":"<p>In this section, we’re going to answer the questions <strong>what is Ethereum, and how does it work?</strong></p>\n<p>What visuals come to your mind when you hear the term “global computer”? Some people will probably imagine a sentient being, overseeing all of the different processes that we perform, every day. Or maybe you’re thinking about something along the lines of the Terminator - a dangerous machine that’s out to destroy humanity?</p>\n<p>Well, while everyone is going to have their own thoughts concerning the matter, <strong>“global computer” is actually a term that is</strong> <strong>often used to describe a very well-known cryptocurrency project called Ethereum</strong>.</p>\n<p>In this section, we are going to talk about Ethereum. To be a bit more specific, we’ll look into what is Ethereum, in simple terms, the history of this project (how it came to be), what makes it so special, and we’ll also ponder on what does the future of ETH look like, as well.</p>\n<p><em>So, let’s get to it!</em></p>\n<div class=\"container\">\n <div class=\"row justify-content-center\">\n <div class=\"col-md-10 comparison-suggestion pb-3 mb-4\">\n <div class=\"d-flex flex-row\">\n <div class=\"text-center\">\n <div class=\"img-block-yt\">\n <img src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/assets/images/compare-crypto-exchanges.gif/"/n alt=\"What is Ethereum & What is it Used For? (Animated Explanation)\"\n title=\"What is Ethereum & What is it Used For? (Animated Explanation)\" class=\"border-0\">\n <p>Video Explainer</p>\n </div>\n </div>\n <div class=\"col-xs-10 col-sm-10 col-md-10 text-left py-3 yt-info\">\n <h4 class=\"mb-1\">Video Explainer: The Ultimate Blockchain for dApp Creation: Ethereum</h4>\n <p class=\"py-1 mb-0 youtube-video-subtitle\">Reading is not your thing? Watch the \"The Ultimate Blockchain for dApp Creation: Ethereum\" video explainer</p>\n </div>\n </div>\n <div class=\"row justify-content-center text-center\">\n <div class=\"col-12 col-md-11 px-3\">\n <div class=\"wrapper mb-0\">\n <div class=\"youtube mb-4 bg-transparent p-0 video-modal-popup\" data-toggle=\"modal\"\n data-target=\"#video-modal\" data-id=\"HqJVW994hV8\" data-title=\"CryptoFinallyExplained\">\n <div class=\"video-gradient-top\"></div>\n <p class=\"text-left dyk-video-title\">What is Ethereum & What is it Used For? (Animated Explanation)</p>\n <img src=https://www.bitdegree.org/"https://i.ytimg.com/vi/HqJVW994hV8/hq720.jpg/"/n alt=\"What is Ethereum & What is it Used For? (Animated Explanation)\"\n title=\"What is Ethereum & What is it Used For? (Animated Explanation)\"\n class=\"p-0\">\n <img class=\"play-button\" data-target=\"#video-modal\"\n src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/assets/video-button.png/"/n alt=\"What is Ethereum & What is it Used For? (Animated Explanation)\">\n </div>\n </div>\n </div>\n </div>\n <div class=\"row justify-content-center text-center\">\n <div>\n <a href=https://www.bitdegree.org/"https://www.youtube.com/c/CryptoFinallyExplained?sub_confirmation=1\%22\n class=\"btn yt-promo mb-2\" target=\"_blank\" rel=\"nofollow noopener\">\n <div class=\"row justify-content-center align-items-center mx-0 text-center\">\n <div class=\"col-4 col-md-4\">\n <i class=\"fab fa-youtube yt-dyk-btn\"></i>\n </div>\n <div class=\"col-8 col-md-8 text-center yt-promo-text\">\n <h4 class=\"m-0 text-white\">SUBSCRIBE</h4>\n <span>ON YOUTUBE</span>\n </div>\n </div>\n </a>\n </div>\n </div>\n </div>\n </div>\n</div>\n<div class=\"modal fade\" id=\"video-modal\" tabindex=\"-1\" role=\"dialog\" aria-labelledby=\"HqJVW994hV8\">\n <div class=\"modal-dialog modal-dialog-centered modal-lg\" role=\"document\">\n <div class=\"modal-content\">\n <div class=\"modal-body p-0\">\n <button type=\"button\" class=\"video-modal-close close\" data-dismiss=\"modal\" aria-label=\"Close\">\n <i aria-hidden=\"true\" class=\"fas fa-times\"></i>\n </button>\n <div id=\"iframe\"></div>\n </div>\n <a class=\"text-decoration-none\"\n href=https://www.bitdegree.org/"https://www.youtube.com/c/CryptoFinallyExplained?sub_confirmation=1\%22\n rel=\"nofollow noopener\" target=\"_blank\">\n <div class=\"modal-footer p-0 d-block bg-white\">\n <div class=\"row justify-content-center m-0\">\n <div class=\"col-3 col-md-4 col-lg-2 p-0\">\n <img class=\"w-100 h-100\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/assets/crypto-subscribe.jpg/" alt=\"Subscribe\">\n </div>\n <div class=\"col-9 col-md-8 col-lg-2 px-0 d-flex\">\n <div class=\"modal-subscribe w-100\">\n <p class=\"m-0 mt-1 mr-3\">SUBSCRIBE<br>\n <span class=\"m-0\">ON YOUTUBE</span>\n </p>\n </div>\n </div>\n <div class=\"col-12 col-md-12 col-lg-8 p-0 text-center d-flex justify-content-center align-items-center\">\n <div class=\"modal-subscribe-text\">\n <h4 class=\"m-0\">Understand crypto with ease</h4>\n <span>New explainer videos every week!</span>\n </div>\n </div>\n </div>\n </div>\n </a>\n </div>\n </div>\n</div>\n<h2>What is Ethereum?</h2>\n<p>Let’s start off with the core question - <strong>what is Ethereum?</strong></p>\n<p>Now, as I’ve hinted in the beginning, the term “global computer” is actually quite accurate, when describing ETH. In technical terms, <strong>Ethereum is a public blockchain software</strong> that allows users to create different middleman-less projects on it, with the help of <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-smart-contract/">smart contracts</strong></a> and a native coin called <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/buy-ethereum-eth/">Ether.
/n
$\"What$ dedicated section</strong></a> on our Crypto 101 Handbook, explaining all of the different intricacies of smart contract functionality. For now, suffice to say that smart contracts were first introduced on Ethereum, and that they act as a middleman between two parties participating in some sort of a process (such as selling a car).</p>\n<p>The kicker here, though, is that smart contracts are automated, decentralized, and immutable. In theory, they make everything much faster and simpler, too!</p>\n<p>Thanks to smart contracts and some arduous development work, <strong>Ethereum has become the second-largest cryptocurrency project on the market</strong>, right after Bitcoin. This is a massive deal, and has put a pretty big spotlight on ETH, and the technology behind it! In fact, smart contract functionality is where the definition “global computer” originated from, as well. On top of that, it’s also part of the answer to the question <em>“what is the difference between Bitcoin and Ethereum?”</em> - smart contracts!</p>\n<p>While I only gave you a single example of how the technology behind Ethereum can be used in the real world, the possibilities are endless! ETH can theoretically help automate a huge assortment of actions and services, all the while making them much fairer and faster, too. A lot of developers know this, and thus choose to build their own crypto-native projects on the Ethereum blockchain.</p>\n<p>More on that a bit later, though - in order to talk about this side of Ethereum, we need to first look into the history of this cryptocurrency project.</p>\n<h2>The History of Ethereum</h2>\n<p>Ethereum first saw the light of day in 2015. Up until that point, though, the technology behind this blockchain project had already been in development for a couple of years.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is Ethereum: The History of Ethereum.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_ethereum_02.o.jpg/" alt=\"What is Ethereum: The History of Ethereum.\" width=\"1000\" height=\"340\" /></p>\n<p>Whenever we think about Ethereum today, we usually associate it with a man named <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/who-is-vitalik-buterin/">Vitalik Buterin</strong></a>. He was *one* of the co-founders of ETH, but as you might have guessed, not the only one. In fact, in total, <strong>Ethereum was founded by 8 people</strong>, including the likes of Charles Hoskinson (the founder of Cardano) and <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/who-is-gavin-wood/">Gavin Wood</strong></a> (the creator of Polkadot).</p>\n<p>Why, then, is Vitalik the only one who people associate with Ethereum, nowadays? Well, it’s a whole big story, in of itself. However, long story short, out of those 8 initial founders, <strong>Vitalk is currently the only one left, working on ETH</strong>.</p>\n<p>Throughout the years, Ethereum had a variety of ups and downs, and has experienced a lot of different updates in the process. While the blockchain was always a bit controversial <em>(mostly due to its problems with scalability and network fees)</em>, the biggest controversy that it has experienced, to date, is likely a hack that happened all the way back in 2016. It was a <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/what-are-decentralized-autonomous-organizations-dao/">DAO hack during which a huge amount of Ether was stolen, and that divided the Ethereum community into two.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is Ethereum: Ethereum VS Ethereum Classic.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_ethereum_03.o.jpg/" alt=\"What is Ethereum: Ethereum VS Ethereum Classic.\" width=\"1000\" height=\"446\" /></p>\n<p>Like, literally - Ethereum experienced a <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-hard-fork-blockchain/">hard fork</strong></a>, which resulted in two separate blockchain projects. <strong>Ethereum that we know today</strong> (this is the updated version of the original blockchain, with the security vulnerability fixed), and <strong>Ethereum Classic</strong>, the original ETH project, but with multiple security vulnerabilities still supposedly present. So, when someone asks <em>“what is Ethereum Classic?”,</em> or <em>“what is the difference between Ethereum and Ethereum Classic?”</em>, you’ll now know!</p>\n<p>Now, I’ve also just mentioned a number of different terms - DAOs, hard forks, and so on. If you’re not familiar with any of these terms, or are wondering - what is Ethereum gas, or address types, please feel free to <strong>check out other chapters in our Crypto 101 Handbook</strong> - there's a variety of dedicated sections explaining difficult cryptocurrency topics, as simply as possible!</p>\n<p>The history of Ethereum deserves a section of its own, and I won’t bore you with all of the specific details that made ETH what it is today - instead, we’re going to focus on figuring out <strong>what is Ethereum used for, and how it works</strong>.</p>\n<p>My point here is that, while ETH experienced a lot of bumps in the road, as of writing this section, it’s still one of the most popular cryptocurrency projects in the industry, and one that has paved the way for <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-defi/">decentralized finance</strong></a> (or, DeFi) and a huge variety of technological blockchain advancements.</p>\n<p>In order to get Ethereum explained fully, you do also need to know <strong>what is Wrapped Ethereum</strong>. There's a <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/what-are-stablecoins/">dedicated section</strong></a> about wrapped coins, in general, but if you come across wETH, and don’t understand what that is, just keep in mind that it simply is Ethereum based on a different network, such as the Binance Chain.</p>\n<h2>What Makes Ethereum Special?</h2>\n<p>Continuing on with this “What is Ethereum?” section, it's actually a good place to transition to <strong>what makes ETH special</strong>, and how it managed to become the second-largest crypto project in the world.</p>\n<p>As I’ve mentioned earlier, many developers, to this day, choose to build their projects on Ethereum. The fact that they are able to do so, in the first place, is one of the big reasons behind the popularity of this blockchain.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is Ethereum: DeFi, NFTs, crypto-based games, and smart contracts.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_ethereum_04.o.jpg/" alt=\"What is Ethereum: DeFi, NFTs, crypto-based games, and smart contracts.\" width=\"1000\" height=\"1011\" /></p>\n<p><strong>You can think of Ethereum as an actual computer!</strong> If you want to play a game, write an essay, or create a slideshow presentation, you can do so on a huge variety of different computers out there - however, if you have the chance to use a time-tested, reliable machine, you would probably go for it, right? While the computer might not support some super-fancy applications, and has some occasional lag, with it, you’d be able to access most games and apps on the market - it’s a huge factor to consider!</p>\n<p>The same is true with Ethereum. If you’re creating a <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/what-are-decentralized-applications-dapps/">decentralized application</strong></a> (a dApp - say, a crypto game), you probably want to do so on a reliable blockchain, and one that houses as many potential players as possible. In both cases, Ethereum comes out on top!</p>\n<p><strong>With most dApps and various crypto projects still being built on ETH</strong>, this incentivizes new developers to do the same (since there’s a booming ecosystem on the said blockchain). From the user perspective, things aren’t much different - if you use an Ethereum dApp, chances are that it will have a large community following, which might not be the case for the same dApp built on a different blockchain.</p>\n<p><em>So… How does this make Ethereum special? </em>Well, to put it in layman’s terms, over time, Ethereum has essentially managed to build a huge following, and a dedicated group of users. This is true both in regards to developers, as well as end-users, who interact with the projects present on this blockchain.</p>\n<p>Initially, Ethereum attracted people due to its groundbreaking smart contract functionality. As more and more people started using the network, this resulted in a snowball effect - with DeFi, NFTs, and crypto gaming surging in popularity, more people are starting to interact with these areas, and with most of the projects being based on Ethereum, this results in the growth of this particular network, as well.</p>\n<h2>Wrapping Up: The Future of Ethereum</h2>\n<p>In this “Ethereum explained” section, we’ve talked about what is Ethereum used for, and what makes this piece of crypto technology so special. At this point, you should be pretty well-versed in all-things-ETH, both when it comes to the history of the network, as well as the hype surrounding it, as well.</p>\n<p><strong>What does the future of Ethereum look like, though?</strong> After all, as time goes on, there are new, more modern and improved networks coming around - ones that seemingly offer many more perks than ETH!</p>\n<p>Well, truth be told, there have been countless <em>“Ethereum killers”</em> over the years - yet, the blockchain still stands tall as one of the most popular crypto projects of all time. Yes, it’s true that ETH isn’t without its issues and controversies - lack of scalability, huge network gas fees, outdated functionalities, and so on. However, as of writing this section, the <strong>Ethereum Merge</strong> has just recently happened.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is Ethereum: From Proof-of-Work to Proof-of-Stake.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_ethereum_05.o.jpg/" alt=\"What is Ethereum: From Proof-of-Work to Proof-of-Stake.\" width=\"1000\" height=\"269\" /></p>\n<p>While it will take some time to see the true effects of ETH 2.0, if you’re wondering <em>“what is Ethereum 2.0?”,</em> just know that this is <strong>the biggest update to the Ethereum network</strong>, as of yet, and it aims to solve (or at least mitigate) many of the issues associated with this blockchain, one of which is the transition from <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-proof-of-work-pow/">Proof-of-Work to <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-proof-of-stake-pos/">Proof-of-Stake (so, people would now be able to stake Ethereum). If you’d like to learn more about what all of that means, or the ETH 2.0 update, make sure to go through the whole Crypto 101 Handbook - it features sections covering many of these topics!</p>","preview_url":"https://www.bitdegree.org/crypto/learn/what-is-ethereum","youtube_video":{"id":127,"channel_id":1,"sort":23,"video_title":"What is Ethereum & What is it Used For? (Animated Explanation)","description":"What is Ethereum, and what is Ethereum used for?\n\nEthereum is one of the most popular cryptocurrencies - there’s no denying that. Often referred to as a “global computer”, Ethereum is the cornerstone of smart contract technology, and the world of DeFi, overall. However, have you ever thought about what is Ethereum, really, and how does this crypto project work?\n\nIn this video, I’ll tell you about just that. We’ll look into what is Ethereum, in general, as well as talk about the history behind this crypto network. On top of that, I will tell you what makes ETH special, and what the network might look like, in the future.\n\nWhen was the first time you heard about Ethereum? Share your experiences in the comment section below!\n\nVideo Time Table:\n\n0:00 Introduction to What is Ethereum\n0:56 Ethereum Explained\n3:17 History of Ethereum\n5:48 What Makes Ethereum Special?\n7:56 Wrap-up: What is the Future of Ethereum?\n\nMore Related Videos:\n\n🔑 What is a Bitcoin & How Does it work?\nhttps://www.youtube.com/watch?v=DeREwrPVlDg\n🔑 What is a Cryptocurrency?\nhttps://www.youtube.com/watch?v=eVLUrZtKhBk\n🔑 How Does Cryptocurrency Work?\nhttps://www.youtube.com/watch?v=rAtJ7Lw90KA\n\n#WhatisEthereum #EthereumExplained #WhatisEthereumUsedFor","video_id":"HqJVW994hV8","duration":546,"view_count":476,"thumbnail_url":"https://i.ytimg.com/vi/HqJVW994hV8/hq720.jpg","thumbnail_width":1280,"thumbnail_height":720,"published_at":"2022-10-12 15:42:21","created_at":"2022-10-12T23:00:03.000000Z","updated_at":"2023-05-21T23:00:04.000000Z","channel":{"id":1,"title":"CryptoFinallyExplained","channel_id":"UCOryUY0yxC08eJtK23mNgiA","main_playlist_id":"UUOryUY0yxC08eJtK23mNgiA"}},"featured_image":{"id":8199,"uuid":"eea421af-8373-441f-98a1-a6ff7e5bf580","public_url":"https://assets.bitdegree.org/crypto/storage/media/what-is-ethereum-featured-image.o.jpg","path":"crypto/storage/media/what-is-ethereum-featured-image.o.jpg","original_path":"crypto/storage/media/what-is-ethereum-featured-image.jpg","name":"what-is-ethereum-featured-image.o.jpg","original_name":"what-is-ethereum-featured-image.jpg","title":null,"alt":null,"width":768,"height":478,"disk":"spaces","status":"uploaded","readable_file_size":"65.20KB"}},"chapterList":[{"id":1,"title":"Blockchain","slug":"blockchain","updated":null,"chapter":"https://assets.bitdegree.org/crypto/assets/crypto-book/chapters/learn-blockchain.jpg","chapter_simple":"https://assets.bitdegree.org/crypto/assets/crypto-book/chapters-simple/blockchain-101.jpg","rating":100,"sections":[{"slug":"what-is-blockchain","title":"What 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Terms","updated":false,"chapter":"https://assets.bitdegree.org/crypto/assets/crypto-book/chapters/crypto-101-glossary.jpg","chapter_simple":"https://assets.bitdegree.org/crypto/assets/crypto-book/chapters-simple/crypto-glossary-101.jpg","rating":100,"sections":["A","B","C","D","E","F","G","H","I","J","K","L","M","N","O","P","Q","R","S","T","U","V","W","X","Y","Z"]}],"currentChapter":"cryptocurrencies","currentSection":"what-is-ethereum","readingTime":9,"readingLevel":"easy"},"url":"/crypto/learn/what-is-ethereum","version":"cdd198d50cbe5c9c21c9329d7c096ffc"}" class="container-fluid d-flex crypto-book p-0">
All Crypto From

Scratch!

Crypto 101 Handbook

Chapter 1: Blockchain

1.1

What is the Blockchain?
1.2

Anonymous & Decentralized Blockchains: The Cornerstone of Crypto
1.3

What is a Blockchain Transaction in Crypto?
1.4

The Different Types of Crypto Fees Explained
1.5

The Key Notion Behind the Concept of Bridging in Crypto
1.6

Different Types of Blockchains: What to Look Out For?
Chapter 2: Cryptocurrencies

2.1

What is a Cryptocurrency?
2.2

How Does Cryptocurrency Work?
2.3

Is Cryptocurrency a Good Investment? The Pros & Cons
2.4

Coin VS Token: How Do They Differ?
2.5

What are Stablecoins, Altcoins & Wrapped Coins?
2.6

Bitcoin: the Pioneer of the Crypto World
2.7

The Ultimate Blockchain for dApp Creation: Ethereum
2.8

What is Cardano and What is It Used For?
2.9

Shiba Inu: the Dogecoin Killer
2.10

Is Solana an Improved Version of Ethereum?
2.11

The Bridge Between Blockchains: Polkadot
2.12

Polygon: the Essential Scaling Solution for Ethereum
2.13

The Practical Use of Crypto
Chapter 3: Crypto Exchanges

3.1

How do Cryptocurrency Exchanges Work?
3.2

DEX VS CEX: Two Sides of the Crypto Exchange Industry
3.3

Crypto Day Trading: The Difference Between Buying, Trading, and Swapping
3.4

KYC & AML: The Key to Complying With Legal Industry Standards
3.5

From Fiat to Crypto: How to Buy Crypto for the First Time
3.6

Taking Profits: Turning Crypto Into Fiat
3.7

You’ve Got Crypto: What Can You Do With It?
Chapter 4: Crypto Wallets

4.1

What is a Crypto Wallet?
4.2

Hot Wallet VS Cold Wallet: Which One to Pick?
4.3

What are Non-Custodial Crypto Wallets?
4.4

Metamask: The Leading Non-Custodial Wallet
4.5

The Key Crypto Wallet Safety Practices: How Safe Can Crypto Be?
Chapter 5: NFTs

5.1

What are Non-Fungible Tokens (NFTs)?
5.2

NFT Trading: The Ins and Outs
5.3

Tips and Tricks of Choosing the Right NFTs
5.4

How to Store NFTs: Best Practices
5.5

How to Create Your Own NFTs?
5.6

Making Passive Money with NFTs
Chapter 6: dApps & Defi

6.1

What is Decentralized Finance (DeFi)?
6.2

DeFi 2.0: The New Version of Decentralized Finance
6.3

What Are dApps and How Do They Work?
6.4

Picking the Right dApps: Dos and Don'ts
6.5

Web 3.0: The Future of the Internet
6.6

What is the Core Purpose of Smart Contracts?
6.7

The Notion of a Decentralized Autonomous Ogranization (DAO)
6.8

What is the Goal of Staking Crypto Assets?
6.9

What is a Liquidity Pool and How Does It Work?
6.10

Automated Market Maker: the Cornerstone of the Decentralized Crypto Exchange Industry
6.11

The Main Yield Farming Techniques
6.12

Crypto Oracles: The Link Between Blockchain and Outside World Data
6.13

The Peculiarities of Decentralized Crypto Gambling
6.14

Metaverse: A New Perception of Reality
Chapter 7: Trading & Investing

7.1

Where Can You Trade Cryptocurrencies?
7.2

Investing in Crypto: What Investing Options Do You Have?
7.3

ICO vs IDO vs IEO: Which One is the One?
7.4

What are Crypto Airdrops and How to Get Them?
7.5

How to Get Free Crypto Assets?
7.6

What is Crypto Arbitrage: The Main Principles
7.7

What is FUD: How to Use It to Your Advantage While Investing in Crypto?
7.8

Investing in Cryptocurrency: How to Manage Your Risks?
7.9

What is a Rug Pull in Crypto?
7.10

How to Spot and Avoid Rug Pulls?
7.11

The Key Legal Techniques of Avoiding Crypto Taxes
Chapter 8: Crypto Analysis

8.1

Bearish and Bullish Markets: Do They Matter?
8.2

5 Best Crypto Technical Analysis Indicators You Must Know About
8.3

Technical Analysis: What are Candlesticks, Trendlines, and Patterns?
8.4

Crypto Tracking: How to Track Your Favorite Coins & Tokens?
8.5

Crypto Research Fundamentals & Social Signals: Your Daily Trading Strategy
Chapter 9: Mining

coming soon

Chapter 10: Crypto Terms

10.1

All Crypto Terms

Handbook Cover Page

Chapter 2: Cryptocurrencies

The Ultimate Blockchain for dApp Creation: Ethereum

Did you know that Ethereum is one of the most popular blockchains for the development of crypto-based projects?

Easy

9 minutes

Watch Video

In this section, we’re going to answer the questions what is Ethereum, and how does it work?

What visuals come to your mind when you hear the term “global computer”? Some people will probably imagine a sentient being, overseeing all of the different processes that we perform, every day. Or maybe you’re thinking about something along the lines of the Terminator - a dangerous machine that’s out to destroy humanity?

Well, while everyone is going to have their own thoughts concerning the matter, “global computer” is actually a term that is often used to describe a very well-known cryptocurrency project called Ethereum.

In this section, we are going to talk about Ethereum. To be a bit more specific, we’ll look into what is Ethereum, in simple terms, the history of this project (how it came to be), what makes it so special, and we’ll also ponder on what does the future of ETH look like, as well.

So, let’s get to it!

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What is Ethereum?

Let’s start off with the core question - what is Ethereum?

Now, as I’ve hinted in the beginning, the term “global computer” is actually quite accurate, when describing ETH. In technical terms, Ethereum is a public blockchain software that allows users to create different middleman-less projects on it, with the help of smart contracts and a native coin called Ether.

That’s a lot to unpack, I admit - let me give you an example.

Imagine that you want to sell your car. You have a few choices, none of which are looking ideal to you - you could sell it yourself, but that would involve having to likely talk to a lot of different people, and spend your time and energy showing the car. You could skip this, and hire a car-selling service, but they would then take a huge cut from your sale.

To add to all of that, after the sale is done, there’s also a ton of paperwork to go through and sort out - once again, it looks like a really big headache!

As you think about your options, you come across an interesting service online - a special platform that allows you to sell your car without any middlemen, or any additional bureaucratic processes to go through. Once the sale is done, the platform takes a small commission, and all of your paperwork gets sorted out automatically, as well. The entire process is 100% automated and provably fair!

Theoretically, that is very possible, with the help of Ethereum and smart contracts. If you’d like to learn more about the latter, there is a dedicated section on our Crypto 101 Handbook, explaining all of the different intricacies of smart contract functionality. For now, suffice to say that smart contracts were first introduced on Ethereum, and that they act as a middleman between two parties participating in some sort of a process (such as selling a car).

The kicker here, though, is that smart contracts are automated, decentralized, and immutable. In theory, they make everything much faster and simpler, too!

Thanks to smart contracts and some arduous development work, Ethereum has become the second-largest cryptocurrency project on the market, right after Bitcoin. This is a massive deal, and has put a pretty big spotlight on ETH, and the technology behind it! In fact, smart contract functionality is where the definition “global computer” originated from, as well. On top of that, it’s also part of the answer to the question “what is the difference between Bitcoin and Ethereum?” - smart contracts!

While I only gave you a single example of how the technology behind Ethereum can be used in the real world, the possibilities are endless! ETH can theoretically help automate a huge assortment of actions and services, all the while making them much fairer and faster, too. A lot of developers know this, and thus choose to build their own crypto-native projects on the Ethereum blockchain.

More on that a bit later, though - in order to talk about this side of Ethereum, we need to first look into the history of this cryptocurrency project.

The History of Ethereum

Ethereum first saw the light of day in 2015. Up until that point, though, the technology behind this blockchain project had already been in development for a couple of years.

Whenever we think about Ethereum today, we usually associate it with a man named Vitalik Buterin. He was *one* of the co-founders of ETH, but as you might have guessed, not the only one. In fact, in total, Ethereum was founded by 8 people, including the likes of Charles Hoskinson (the founder of Cardano) and Gavin Wood (the creator of Polkadot).

Why, then, is Vitalik the only one who people associate with Ethereum, nowadays? Well, it’s a whole big story, in of itself. However, long story short, out of those 8 initial founders, Vitalk is currently the only one left, working on ETH.

Throughout the years, Ethereum had a variety of ups and downs, and has experienced a lot of different updates in the process. While the blockchain was always a bit controversial (mostly due to its problems with scalability and network fees), the biggest controversy that it has experienced, to date, is likely a hack that happened all the way back in 2016. It was a DAO hack during which a huge amount of Ether was stolen, and that divided the Ethereum community into two.

Like, literally - Ethereum experienced a hard fork, which resulted in two separate blockchain projects. Ethereum that we know today (this is the updated version of the original blockchain, with the security vulnerability fixed), and Ethereum Classic, the original ETH project, but with multiple security vulnerabilities still supposedly present. So, when someone asks “what is Ethereum Classic?”, or “what is the difference between Ethereum and Ethereum Classic?”, you’ll now know!

Now, I’ve also just mentioned a number of different terms - DAOs, hard forks, and so on. If you’re not familiar with any of these terms, or are wondering - what is Ethereum gas, or address types, please feel free to check out other chapters in our Crypto 101 Handbook - there's a variety of dedicated sections explaining difficult cryptocurrency topics, as simply as possible!

The history of Ethereum deserves a section of its own, and I won’t bore you with all of the specific details that made ETH what it is today - instead, we’re going to focus on figuring out what is Ethereum used for, and how it works.

My point here is that, while ETH experienced a lot of bumps in the road, as of writing this section, it’s still one of the most popular cryptocurrency projects in the industry, and one that has paved the way for decentralized finance (or, DeFi) and a huge variety of technological blockchain advancements.

In order to get Ethereum explained fully, you do also need to know what is Wrapped Ethereum. There's a dedicated section about wrapped coins, in general, but if you come across wETH, and don’t understand what that is, just keep in mind that it simply is Ethereum based on a different network, such as the Binance Chain.

What Makes Ethereum Special?

Continuing on with this “What is Ethereum?” section, it's actually a good place to transition to what makes ETH special, and how it managed to become the second-largest crypto project in the world.

As I’ve mentioned earlier, many developers, to this day, choose to build their projects on Ethereum. The fact that they are able to do so, in the first place, is one of the big reasons behind the popularity of this blockchain.

You can think of Ethereum as an actual computer! If you want to play a game, write an essay, or create a slideshow presentation, you can do so on a huge variety of different computers out there - however, if you have the chance to use a time-tested, reliable machine, you would probably go for it, right? While the computer might not support some super-fancy applications, and has some occasional lag, with it, you’d be able to access most games and apps on the market - it’s a huge factor to consider!

The same is true with Ethereum. If you’re creating a decentralized application (a dApp - say, a crypto game), you probably want to do so on a reliable blockchain, and one that houses as many potential players as possible. In both cases, Ethereum comes out on top!

With most dApps and various crypto projects still being built on ETH, this incentivizes new developers to do the same (since there’s a booming ecosystem on the said blockchain). From the user perspective, things aren’t much different - if you use an Ethereum dApp, chances are that it will have a large community following, which might not be the case for the same dApp built on a different blockchain.

So… How does this make Ethereum special? Well, to put it in layman’s terms, over time, Ethereum has essentially managed to build a huge following, and a dedicated group of users. This is true both in regards to developers, as well as end-users, who interact with the projects present on this blockchain.

Initially, Ethereum attracted people due to its groundbreaking smart contract functionality. As more and more people started using the network, this resulted in a snowball effect - with DeFi, NFTs, and crypto gaming surging in popularity, more people are starting to interact with these areas, and with most of the projects being based on Ethereum, this results in the growth of this particular network, as well.

Wrapping Up: The Future of Ethereum

In this “Ethereum explained” section, we’ve talked about what is Ethereum used for, and what makes this piece of crypto technology so special. At this point, you should be pretty well-versed in all-things-ETH, both when it comes to the history of the network, as well as the hype surrounding it, as well.

What does the future of Ethereum look like, though? After all, as time goes on, there are new, more modern and improved networks coming around - ones that seemingly offer many more perks than ETH!

Well, truth be told, there have been countless “Ethereum killers” over the years - yet, the blockchain still stands tall as one of the most popular crypto projects of all time. Yes, it’s true that ETH isn’t without its issues and controversies - lack of scalability, huge network gas fees, outdated functionalities, and so on. However, as of writing this section, the Ethereum Merge has just recently happened.

While it will take some time to see the true effects of ETH 2.0, if you’re wondering “what is Ethereum 2.0?”, just know that this is the biggest update to the Ethereum network, as of yet, and it aims to solve (or at least mitigate) many of the issues associated with this blockchain, one of which is the transition from Proof-of-Work to Proof-of-Stake (so, people would now be able to stake Ethereum). If you’d like to learn more about what all of that means, or the ETH 2.0 update, make sure to go through the whole Crypto 101 Handbook - it features sections covering many of these topics!

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All Crypto From

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Crypto 101 Handbook

The Ultimate Blockchain for dApp Creation: Ethereum

Video Explainer: The Ultimate Blockchain for dApp Creation: Ethereum

What is Ethereum?

The History of Ethereum

What Makes Ethereum Special?

Wrapping Up: The Future of Ethereum

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