Although ‘Bitcoin‘ and ‘Ethereum’ are terms that are often paired together, the reality is that they are vastly different. The only thing Ethereum shares with Bitcoin is that it’s a cryptoasset running on top of blockchain.
Instead of being just a cryptocurrency, like Bitcoin, Ethereum also has features which effectively makes it a huge decentralized computer.
What is a blockchain?
A blockchain, simply put, is a database. It’s an ever growing database of certain kind of data and has quite remarkable properties:
- Once data is stored in the database, it can never be modified or deleted. Every record on a blockchain is permanent for eternity.
- No single individual or organization maintains the database; several thousand individuals do, and everyone has a copy of the database with themselves.
To understand how several people are able to keep their copies of the database in sync with everyone else, imagine there are ten individuals in a network. Everyone is sitting with an empty file folder and an empty page in front of them. Whenever anyone does something important in the network, like transferring money, they announce it to everyone in the network.
Everyone makes a note of the announcement on their pages until the page is filled. When it does, everyone has to seal the contents of the page by solving a mathematical puzzle. Solving the mathematical puzzle ensures that everyone’s page had same contents and that they can never be modified. Whoever does it first, gets rewarded with some amount of cryptocurrency.