In the Ethereum blockchain, instead of “mining” to get Bitcoins, users work to earn “Ethers”, a type of cryptocurrency that powers the wider network. Beyond exchangeable crypto currency, Ether is also used by developers to pay for services on the Ethereum network
As for other crypto-currencies, the ether uses a distributed database that records all transactions made with the ether. It is accessible to all, completely transparent and very difficult to modify retroactively.
It is known as blockchain, and is created through the mining process.
Miners are responsible for verifying transactions to form “blocks” and secure them cryptographically by solving complex algorithms. The difficulty of these algorithms can be adjusted to keep the block processing time approximately constant: about one every 14 seconds.
The new blocks are linked to the existing blockchain, and the miner receives a “reward”, that is, a specified amount of cryptocurrency. This quantity varies according to the minted cryptocurrency. For the ether, for example, the reward currently stands at 5 units. This quantity could decrease if the value of the cryptocurrency continues to increase.
The ethereum blockchain is very similar to that of bitcoin, but it is programmed in a language that allows developers to write software with which blockchain transactions can manage and automate specific results. These software are called smart contracts.
If a traditional contract describes the terms of a relationship, a smart contract ensures that these terms are respected by entering it in lines of code deployed in the blockchain. The software automatically executes the agreement as soon as the predefined conditions are met, eliminating the wait and costs involved in manually executing a transaction.
For example, an ethereum user can create a smart contract to send a certain amount of ether to a friend on a certain date. They deploy this code in the blockchain and, as soon as the contract is filled, that is to say at the set date, the ethers are automatically sent to the other party.
Ethereum is based on Bitcoin’s protocol and its Blockchain design but is tweaked so that applications beyond money systems can be supported. The two Blockchains’ only similarity is that they store entire transaction histories of their respective networks, but Ethereum’s Blockchain does a lot more than that. Besides the history of transactions, every node on Ethereum network also needs to download the most recent state, or the current information, of each smart contract within the network, every user’s balance and all the smart contract code and where it’s stored.