How Does Ethereum Work?
Ethereum is a decentralized platform that enables developers to build and deploy smart contracts and decentralized applications (DApps). Unlike Bitcoin, which primarily serves as digital currency, Ethereum allows for a broader range of applications and functionality.
Smart Contracts
At the core of Ethereum's functionality is the concept of smart contracts—self-executing contracts with the agreement directly written into code. These contracts automatically enforce and execute terms once predetermined conditions are met, thus eliminating the need for intermediaries.
Ethereum Virtual Machine (EVM)
The Ethereum Virtual Machine (EVM) is the runtime environment for executing smart contracts. It ensures that all transactions and operations within Ethereum are processed uniformly, maintaining the integrity of the network and allowing for various decentralized applications to function seamlessly.
Consensus Mechanism
Ethereum initially operated on a Proof of Work (PoW) consensus mechanism, like Bitcoin, but has transitioned to Proof of Stake (PoS) with the Ethereum 2.0 upgrade. In PoS, validators are chosen to create new blocks based on the number of coins they hold and are willing to "stake", promoting energy efficiency and scalability.
Conclusion
Ethereum's unique features, including smart contracts, the EVM, and its evolving consensus mechanism, differentiate it from Bitcoin. While Bitcoin focuses on peer-to-peer transactions, Ethereum opens a gateway to a decentralized world, facilitating innovation across various industries.