At its simplest, Ethereum is an open software platform based on blockchain technology that enables developers to build and deploy decentralized applications. (Buy Ethereum)
Is Ethereum similar to Bitcoin? Well, sort of, but not really.
Like Bitcoin, Ethereum is a distributed public blockchain network. Although there are some significant technical differences between the two, the most important distinction to note is that Bitcoin and Ethereum differ substantially in purpose and capability. Bitcoin offers one particular application of blockchain technology, a peer to peer electronic cash system that enables online Bitcoin payments. While the Bitcoin blockchain is used to track ownership of digital currency (bitcoins), the Ethereum blockchain focuses on running the programming code of any decentralized application.
In the Ethereum blockchain, instead of mining for bitcoin, miners work to earn Ether, a type of crypto token that fuels the network. Beyond a tradeable cryptocurrency, Ether is also used by application developers to pay for transaction fees and services on the Ethereum network.
How Ethereum Works
Now that we've covered what ethereum is, let's dive deeper into how the platform functions under the hood.
Consider the online notebook application described in "What is Ethereum?"
Using ethereum, the app doesn't require one entity to store and control its data. To accomplish this, ethereum borrows heavily from bitcoin's protocol and its blockchain design, but tweaks it to support applications beyond money.
Ethereum aims to abstract away bitcoin's design, however, so that developers can create applications or agreements that have additional steps, new rules of ownership, alternative transaction formats or different ways to transfer state.
The goal of ethereum's 'Turing-complete' programming language is to allow developers to write more programs in which blockchain transactions could govern and automate specific outcomes.
