How is Ethereum Similar to Bitcoin?

Ethereum’s token is called Ether, shortened to ETH. This is a cryptocurrency that can be traded for other cryptocurrencies or other sovereign currencies, just like BTC. ETH ownership is tracked on
the Ethereum blockchain, just like BTC ownership is tracked on Bitcoin’s blockchain.

Like Bitcoin, Ethereum has a blockchain, which contains blocks of data (pure ETH payments as well as smart contracts). The blocks are mined by some participants and distributed to other participants who validate them. You can explore this blockchain on etherscan.io. Like Bitcoin, Ethereum blocks form a chain by referring to the hash of the previous block.

Like Bitcoin, the main Ethereum network is a public, permissionless network. Anyone can download or write some software to connect to the network and start creating transactions and smart contracts, validating them, and mining blocks without needing to log in or sign up with any other organisation.

When people talk about Ethereum they usually mean the main public permissionless version of the network. However, like Bitcoin, you can take Ethereum software, modify it slightly, and create private networks that are not connected to the main public network. The private tokens and smart contracts won’t be compatible with the public tokens though, just like private Bitcoin networks.

Like Bitcoin, mining participants create valid blocks by spending electricity to find solutions to a mathematical challenge. Ethereum’s PoW maths challenge, called Ethash, works slightly differently from Bitcoin’s, and allows more common hardware to be used. It is deliberately designed to reduce the efficiency edge of specialised chips called ASICs, which are common in Bitcoin mining. Commodity hardware is allowed to compete efficiently, and this allows for a greater decentralisation of miners. In practice though, specialised hardware has been created and so most blocks in Ethereum are created by one of a small group of miners.

On Ethereum’s roadmap there is a plan to move from electricity-expensive, proof-of-work mining, to a more energy-efficient, proof-of-stake mining protocol called Casper in a future release of the Ethereum software called Serenity. Proof-of-stake is a mining protocol in which your chance of creating a valid block is proportional to the number of coins (ETH) in your mining wallet - contrast this to proof-of-work, where your chance of creating a valid block is proportional to the amount of
computational cycles your hardware can crunch through.

How might this impact the community? For starters, this would dramatically reduce the energy footprint of the cryptocurrency. Miners will no longer need to consume electricity competitively in order to win blocks. On the other hand, some people think that proof-of-stake is less democratic, because those who already have accumulated a lot of ETH will have a higher chance of winning more blocks. So, the argument goes, new money will flow towards the wealthy, increasing the Gini
coefficient of Ethereum holders.

There are flaws in the ‘less democratic’ argument. With proof-of-work the high capital costs and expertise required mean that only a very small minority of people can actually make money mining, so it is not actually that democratic. Whereas with proof-of-stake, every ETH has an identical
chance of winning a block, so you can get started with much less capital. Think of it as an interest rate: if you have more money you get more interest, but at least those with small amounts of money can still get interest. Reducing the negative externalities of pollution caused by proof-of-work is a decent and honourable goal.

Notable Cryptocurrencies and Tokens

There are many cryptocurrencies that either exist as blockchains in themselves or as tokens recorded in smart contracts on other blockchains, usually on Ethereum’s public chain. Onchainfx.com and Coinmarketcap.com do a good job in cataloguing these if they trade over a certain amount of volume per day.

Currency tokens (Primarily used as Money/Store of Value):
• Bitcoin (BTC) - the original cryptocurrency and store of value, created by pseudonymous Satoshi Nakamoto, launched in 2009.
• Ripple (XRP) - a token used to move value across the Ripple network, designed as a currency that was initially described to compete against banks then to be used by banks to improve foreign exchange and international payments. Created in 2012 by OpenCoin (rebranded to Ripple Inc in 2015).
• Litecoin (LTC) - an early Bitcoin clone with faster blocks and a different mining proof-of-work. Called ‘Silver to Bitcoin’s Gold’ by its founder Charlie Lee who announced that he sold all of his Litecoin in Dec 2017.
• Zcash (ZEC) - a privacy focused coin using advanced cryptography called zero knowledge proofs to shield transaction data. Created by Zooko Wilcox-O’Hearn in 2016.
• Dash (DASH) - another privacy focused coin, created as XCoin in 2014 by Evan Duffield, renamed Darkcoin, renamed DASH.
• Monero (XMR) - yet another privacy focused coin, uses ring-signatures to obscure payer and recipient addresses. Launched in 2014.

Platform tokens (i.e. those used as gas to power smart contracts):
• Ethereum (ETH) - the original smart contract enabled blockchain platform, created by a Vitalik Buterin and launched in 2015.
• Ethereum Classic (ETC) - fork of Ethereum which didn’t bail out DAO investors. Proponents like immutability. Forked from Ethereum in July 2016.
• New Economy Movement (NEM) - a blockchain with ‘smart assets’.
• EOS (EOS) - a new blockchain structure designed to be more scalable than Ethereum.

Utility tokens (Built for Specific-Use Networks):
• Augur (REP) - a token used for betting on things on a ‘prediction market,’ i.e. a betting platform. Launched in 2015 from San Francisco.
• Siacoin (SC) - a token used for paying for encrypted decentralised file storage. Launched in 2015.
• Golem (GNT) - a token used for paying for decentralised computations & calculations. Launched in 2016.
• Gnosis (GNO) - another prediction market coin. Launched in 2016 from Germany.

Brand tokens (Specific-Use on Single Entity’s Network):
• Basic Attention Token (BAT) - Token used to make micropayments in a web browser called Brave. Launched in 2017.
• Civic (CVC) - Something to do with identity verification on the blockchain. I hope it solves the problem of having too many passwords. Launched in 2017.
• Steem (STEEM) - Token used for making micropayments on social media and forum sites. Launched in 2016.

This is just a short list of the many tokens and platforms that exist today.