News • 4 min read
By Judy Unger
While Bitcoin still ranks as the top cryptocurrency, it is the technology behind the Ethereum network that is fuelling many altcoins and decentralised finance (DeFi) applications, as well as driving developments in the blockchain space with huge potential.
The 30th of July, 2021 will mark the sixth anniversary of the launch of the Ethereum network - and that is not the only reason to celebrate as the ETH price has been reaching new all-time-highs since the beginning of this year. But how did Ethereum end up as such a vital force in the world of cryptocurrencies and what is behind the basics?
If you have read some of the articles on our Bitpanda Academy Beginners’ section, you already know that Ethereum is a decentralised blockchain which is mostly known for DApps and smart contracts. Just like other blockchains, it is a database running on a network of computers (called “nodes”) all over the world where transactions are shared and updated simultaneously. This means that every participating computer keeps an up-to-date copy of the current state of the Ethereum network.
While the term “Ethereum” is used to denote different types of things, here are some of the actual definitions. Ethereum is the name given to the Ethereum network but Ether (ETH), the native cryptocurrency of the Ethereum network that is used for transactions and a store of value, is also often simply referred to as “Ethereum”.
“Gas”, on the other hand, measures the computational effort required to execute such a transaction. This “gas” is the equivalent of the required network fees to process a specific transaction and is paid in Ether (ETH).
So why didn’t Bitcoin evolve the way Ethereum did? Simply put, for technological reasons.
In computer programming, scripting languages are used to automate the execution of tasks. While the scripting ability of Bitcoin is limited to peer-to-peer transactions, Ethereum set out to create a distributed system that also offers functionality for the decentralised automation of mechanisms for digital assets.
The technology behind Ethereum allows two or more parties to use protocols that are called smart contracts. These smart contracts perform pre-set computations or actions (if certain conditions are triggered) and manage tokens. Smart contracts are immutable. They are used in applications such as decentralised applications (DApps) and have many more potential use cases.
In its most basic sense, a token is a single element of a programming language that is considered a unit of value. There are different ways to differentiate between tokens. One is the difference between security tokens and utility tokens. A security token represents a share in a company issuing the token while a utility token, such as Bitpanda’s ecosystem token BEST, provides access to and the ability to make use of specific services. It is the Ethereum ERC20 token standard that is behind a huge range of blockchain projects.
In the Ethereum network, standards (the agreed way of doing things) ensure compatibility for all implementers and users. The letters “ERC” stand for “Ethereum Request for Comment” which is a document containing rules written by programmers of smart contracts that become standards across the Ethereum ecosystem once an improvement proposal has been accepted by the community. There is a broad range of ERC standards, with ERC20 and ERC721 being the most important.
The ERC20 token standard is a standard for fungible tokens (more about this to follow), such as tokens used for staking or payments and is the world’s most widely-used standard for launching tokens on a blockchain. On the other hand, the ERC721 standard is Ethereum’s non-fungible token standard for the creation of a unique token, such as a record of ownership.
What do the terms “fungible” and “non-fungible” mean? Any fungible asset, such as a one-dollar bill or Bitcoin, is mutually interchangeable with another. For instance, units of Bitcoin are fungible tokens. Fungibility means that a unit of value can be replaced by an identical unit.
Let’s say you go shopping, pay for something and get a one-euro coin back that someone else paid for their shopping with. This one-euro coin is fungible - the coin itself does not matter as it has the same value as every one-euro coin and it doesn’t matter which particular one-euro coin you hold.
A non-fungible token (NFT) on the other hand, certifies a unique digital asset that is not interchangeable. A non-fungible token can be used to digitally represent a person’s ownership of a unique item, such as a work of art or music on the Ethereum blockchain. A non-fungible token is one of a kind, it cannot be modified or interchanged with another token. For this reason, NFTs, as records of ownership and stores of value, are currently all the rage in the art world.
We are convinced that the ecosystem around Ethereum remains one of the most innovative and exciting projects in the crypto space - what do you think?
Buy ETH today
Why your money is safe with BitpandaRead more
News • 2 min read
Bitpanda GmbH ve grup şirketleri (Bitpanda) Türk Parasının Kıymetini’nin Korunması Hakkında 32 sayılı Karar’ın 2/b maddesine göre Türkiye’de yerleşik sayılan hiçbir kişiye yönelik olarak 6362 sayılı Sermaye Piyasası Kanunu başta olmak üzere Türkiye Cumhuriyeti Devleti mevzuatı hükümleri gereği Türkiye’de faaliyet izni gerektiren hiçbir sermaye piyasası faaliyetine dair hizmet sunmamaktadır. Şayet Bitpanda’nın yabancı sermaye piyasalarında vermiş olduğu hizmetlerden Türkiye’de yerleşik kişilerin faydalandığı tespit edilecek olursa tüm zararları kullanıcıya ait olmak üzere bu hizmetler ivedilikle sona erdirilecektir.
The information we collect is used by us as part of our EU-wide activities. Cookie settings
As the name would suggest, some cookies on our website are essential. They are necessary to remember your settings when using Bitpanda, (such as privacy or language settings), to protect the platform from attacks, or simply to stay logged in after you originally log in. You have the option to refuse, block or delete them, but this will significantly affect your experience using the website and not all our services will be available to you.
We use such cookies and similar technologies to collect information as users browse our website to help us better understand how it is used and then improve our services accordingly. It also helps us measure the overall performance of our website. We receive the date that this generates on an aggregated and anonymous basis. Blocking these cookies and tools does not affect the way our services work, but it does make it much harder for us to improve your experience.
These cookies are used to provide you with adverts relevant to Bitpanda. The tools for this are usually provided by third parties. With the help of these cookies and such third parties, we can ensure for example, that you don’t see the same ad more than once and that the advertisements are tailored to your interests. We can also use these technologies to measure the success of our marketing campaigns. Blocking these cookies and similar technologies does not generally affect the way our services work. Please note, however, that while you’ll still see advertisements about Bitpanda on websites, the adverts will no longer be personalised for you.