Cryptocurrency

ABC Crypto, Lesson 8: Ethereum and the birth of the contracts smart

In all the world, when people talk about cryptocurrencies and crypto world, so the first thing in what they think is in Bitcoin. However, it would be an unforgivable mistake to focus only on the first criptomoneda. Thus, although even today continues to be the main virtual currency in the world, and the image of the crypto community. There are a multitude of cryptocurrencies out there that require our attention. And today we will dedicate this lesson ABC Crypto to one of them: Ethereum.

The birth of Ethereum

Since its birth, and luckily for all members of the crypto community. The Bitcoin has been harshly criticized even by the most important advocates of the technology Blockchain. Therefore, despite the great leap forward that this currency represents the global level. There are many obstacles that arise in the development of BTC. Among these problems of the Bitcoin, there are two that stand out above the others. The first would be the size of the block chain of BTC. Which are limited to 1 MB currently. A figure that, although it was more than enough when BTC was presented to the public in 2008 With the growth of the criptomoneda has been found to be insufficient. And is that, as the number of users and transactions of the criptomoneda has increased. The small size of their blocks finished by slowing the execution of the transactions with Bitcoins. Forming long queues within the Blockchain for transactions to be run. Despite the fact that this problem is widely known by the community of Bitcoin. The difficulty in putting according to the big players of the ecosystem, i.e. the farms with the most votes in the network. Has been avoided that the same has been remedied in a satisfactory manner. Which is closely related to the second drawback to Bitcoin. And is their lack of flexibility for developers Blockchain. Therefore, the fact that it is so difficult to put according to the actors that it depends on the update of BTC. Makes the criptomoneda not be as flexbile to create new applications for the same. Of these problems is realized Vitalik Buterin, creator of Ethereum. Who in 2013 started the development of its own criptomoneda. To try to answer some of the biggest obstacles of Bitcoin. Seeing light for the first time its creation in the year 2015.

Achievements: dApps and smart contracts

Ethereum, is a criptomoneda designed essentially to achieve two important objectives. Beyond being, of course, a currency, and therefore serve as a medium of exchange for goods and services. On the way to fiat money. But, besides this, Ethereum is also an ideal platform for the development of decentralized applications. These consist in applications similar to the Apps classic as Instagram or Twitter. But whose administration is not centralized. So who are the users of the same, the charge to protect your information. That is to say, while using Instagram all the information you share in your application, whether we like it or not, it goes through the servers of Facebook. And therefore, it ends up being a tool in the hands of these companies to generate profits. In the decentralized applications the information is kept encrypted in the Blockchain. And therefore, is not in possession of any of the users or administrators. Meanwhile, the second goal of Ethereum can become even more interesting. We refer to the creation of smart contracts or contracts smart. Contracts that instead of being written on a sheet of paper and sealed by a notary. Are scheduled in a block of the Blockchain. This brings with it the advantage of automating the process of execution of the same. So, for example, if you create a contract smart about the purchase of a product. It might run automatically the payment for this, once the same is in the hands of the buyer. This decreases tremendously the transaction costs. Well, you do not need a judicial system that is powerful, which would oblige the contracting parties to comply with their contractual obligations. But, it is the code of smart contracts is protected in the Blockchain and therefore unalterable, which carries forward the execution of the contract.

Challenge of Ethereum

These important capabilities of Ethereum, have earned him an honoured place within the world of cryptocurrencies. Being the second criptoactivo in the world by market capitalization. In addition to being the second most recognized and widely used worldwide. That does not mean that is not full of problems to solve. Two of them especially painful for this criptomoneda. Referring first to the problem of scalability of Ethereum, which shares with the majority of the cryptocurrencies. And is that, as there are more users that use Ethereum on a daily basis. The computing power assembled in the chain Blockchain of itself, is insufficient to run the operations in an acceptable time. Ethereum is one of the cryptocurrencies most important in the whole world, Resulting in an added difficulty to the adoption of the cryptocurrencies. Therefore, a currency that is not be able to make transactions almost instantaneous. It is a poor competitor for the fiat money traditional, capable of carrying out payments in seconds. On the other hand, the second great difficulty of Ethereum is located in its extreme dependence with respect to Bitcoin. Because, despite the fact that ETH tries to be independent as much as you can from the shadow of Bitcoin. The influence of the same in the crypto market is simply too big. Marking the direction on the prices of the other criptoactivos. This generates a dynamic in which it is very complex to measure the increases and falls of Ethereum, according to its own merits. Well, most of these are a result of variations in the value of the Bitcoin. They end up expanding to all the crypto world, setting the standard in the pricing of the other cryptocurrencies. This being, therefore, an obstacle of great importance for Ethereum. If this currency intends to stay being one of the great cryptocurrencies the world. Something that will not get if you do not reach the necessary scalability for the overcrowding. And the strength, in terms of capital, to resist Bitcoin. The following two tabs change content below. Student of International Studies, interested in issues of economy and international politics. Passionate about the progress of the Fourth Industrial Revolution in general and the cryptocurrencies in particular.

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About the author

Caroline W.

Caroline W.

Caroline is passionate about learning languages, cultures and the Internet. She has years of experience working at international online advertising projects. Growing interested in Bitcoin and cryptocurrencies in late 2018, she joined CurrencyMarket24 as a writer.

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