1. WHAT IS ETHEREUM?
As an investor we know that so many cars are going to come out to market and we love to make an investment in the fuel which helps to run the car. In real life we know that petrol is manufactured by oil manufacturing companies. In ethereum world, ether is the fuel for running ethereum based applications and the fuel is created by ethereum developers(via ICO) and support team (minors or people who take cares of writing the data created by ethereum applications) into decentralized database, called as blockchain.
2. WHAT IS ETHER IN DETAIL?
To put it another way, ether is the incentive ensuring that developers write quality applications, and that the network remains healthy. People are compensated with ether for their contributed resources towards ethereum project as I mentioned above.
3. HOW ARE ETHER CREATED?
1. As part of Initial coin offering ot ICO. This is similar to IPO’s in stock market
2. As incentives to minors who write data in ledger, similar to incentives given to patrol pump owners for selling patrol.
The total supply of ether and its rate of issuance was decided by the donations gathered on the 2014 presale or ICO. The results were roughly:
- 60 million ether created to contributors of the presale
- 12 Million (20% of the above) were created to the development fund, most of it going to early contributors and developers and the remaining to the Ethereum Foundation
- 5 ethers are created every block (roughly 15-17 seconds) to the miner of the block
- 2-3 ethers are sometimes sent to another miner if they were also able to find a solution but his block wasn’t included (called uncle/aunt reward)
4. IS THE SUPPLY OF ETHER INFINITE?
But the rate is not expected to be kept: sometime in 2017 Ethereum will be switched from Proof of Work to a new consensus algorithm under development, called Casper that is expected to be more efficient and require less mining subsidy.
The exact method of issuance and which function it will serve is an area of active research, but what can be guaranteed now is that (1) the current maximum is considered a ceiling and the new issuance under casper will not exceed it (and is expected to be much less) and (2) whatever method is ultimately picked to issue, it will be a decentralized smart contract that will not give preferential treatment to any particular group of people and whose purpose is to benefit the overall health and security of the network.
5. WHO NEEDS ETHER?
6. RELATIONSHIP BETWEEN BITCOIN AND ETHER
Below are few examples for relation between BTC and Ether
Trade BTC for ETH: Many third party companies (coinbase, poloniex) are working to make the exchanging of ether and bitcoins as easy and seamless as possible. If so desired one could trade bitcoins for ether with the purpose of executing contracts and trade it back immediately in order to keep their value pegged and secured by the bitcoin network.
The latest version of the wallet (eg: myetherwallet) includes an automatic conversion between ether and bitcoin. India is waiting for its exchanges like zebpay to enhance their application to include ethereum and thus allowing trade between BTC and Ether.
Use a pegged derivative: Ethereum is a great tool for creating complex trading between multiple parties. If you have a source for the price of Bitcoin that all parties trust, then it’s possible to create an ethereum based currency whose value is pegged to the market value of Bitcoin. This means that you could trade bitcoins to a token that is guaranteed to always trade back to the same amount of bitcoins while still being fully compatible with other ethereum contracts.
Ether is to be treated as “crypto-fuel”, a token whose purpose is to pay for computation. Though it is not intended to be used as or considered a currency or asset, we can buy and hold it for long term which could potentially be a multi-bagger.
7. WHAT IS A SMART CONTRACT?
A real world example is the stop loss we put for a stock. Once the order is placed, we dont need to be in front of the computer or trading terminal for the order to execute. If stock price breaches the stop loss level, the trade is automatically triggered. Similarly smart contracts run on the blockchain and they run exactly as programmed without any possibility of censorship fraud or third party influence.
8. WHAT IS ETHEREUM VIRTUAL MACHINE?
The Ethereum Virtual Machine makes the process of creating blockchain applications much easier and efficient than ever before. Instead of having to build an entirely original blockchain for every new application, Ethereum virtual machine enables the development of potentially thousands of different applications all on one platform.
9. HOW TO STORE ETHER?
conclusion: Personally I am more interested in ethereum due to its disruptive technology potentials and its disciplined growing developers community. As always caution advised while investing. And post has been bit technical, sorry for that 👳