What is Ethereum and how does it work?

What is Ethereum?

Ethereum is a distributed ledger, i.e., a decentralized computing platform. It differs from a computer or PC as this computing platform does not run on a single device. Instead, it runs on a network of computers across the globe, meaning no one can really enjoy the ownership.

The bitcoin blockchain is the first of its kind distributed ledger. Ethereum, like the Bitcoin blockchain, is fueled by a native token and allows the transfer of virtual currencies. In addition to that, Ethereum has the advantage of deploying smart contracts. It helps the developers and projects in the blockchain space to deploy their code on the network, and the community members can interact with these applications. Ethereum blockchain is flexible, supporting the launch of sophisticated programs/ decentralized applications. 

These decentralized applications run across the network instead of a centralized server. What difference does it make from conventional applications? The traditional applications are stored in a centralized server, which becomes the hotspot for potential hackers. A data breach is probable. On the other hand, decentralized applications (DApps) store data decentralized, i.e., information is widely spread in a network of computers. There is no chance for data being altered or tampered with. Thus, the Ethereum blockchain became the root cause of the decentralized finance revolution (DeFi). 

The Birth of Ethereum

In 2008, Bitcoin was founded by an anonymous developer Satoshi Nakamoto. This had been the revolution in the digital money landscape. Following Bitcoin, Ethereum was founded by a young programmer Vitalik Buterin in 2013. The blog he proposed was entitled: The Ultimate Smart Contract and Decentralized Application Platform. His idea was to create blockchain as a full Turing machine that could follow any command and when given enough resources could run any application. 

As expected Ethereum outworked the design limitations of Bitcoin blockchain and the type of applications that could be deployed on the ethereum blockchain would be limited only by the developer's imagination.

How does Eteherum Blockchain work?

The Ethereum blockchain is very similar to a book where you can add pages to store data. Each data unit (page) is called a block where the transaction details get appended. The blocks are not created randomly. Instead, they follow a specific sequence linking to the previous blocks. Thus, anyone can see the details of the block without any disruption. 

There is a process called hashing very similar to page numbers in the book. Every block references the previous block, so people can backtrack to see the last information block. Hashing is the process of converting the block information into a unique identifier. No two data will have the same hash. Also, it is practically impossible to decrypt these hashes back to the data, which is why blockchain is highly secured and anonymous. This hashing is seen as a mechanism to order the blocks, and any attempt to change the order or tamper the blocks will be in vain.

In simple, the Ethereum blockchain could be seen as a simple state machine that updates state on every transaction occurring in the network. At any given time, the network members can have a snapshot of the ledger details and smart contracts. After specific actions are performed, the nodes will be updated automatically, and the snapshot will reflect the change.

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Annamalai V


An enthusiastic writer on the crypto and blockchain niche. Content strategist and whitepaper writer who has worked with a ton of leading projects in the cryptocurrency space. My passion to draft content will never get old.


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