Although the name may suggest otherwise, Ethereum did not emerge out of thin air. It uses similar blockchain technology to Bitcoin, but its platform is Turing-complete, which is why it's also called a "programmable blockchain." This means that much more advanced functionality and applications can be developed on top of it, including other cryptocurrencies.
Not All Blockchains are Created Equal
Smart Contracts and the Ethereum Virtual Machine are core features to the Ethereum blockchain--features that, together, allow the Ethereum network to be more than just a digital currency payment system. Smart Contracts are self-executing contracts written in code.
For example, let’s say I make a $100 bet with Bob that each Ether will be worth $500 USD by the end of this month, and we both write the terms up in a Smart Contract. This Smart Contract is now on the public ledger and therefore cannot be meddled with or adjusted without breaking the underlying code of the program. Now let’s assume it’s July, and Ethereum is still under $500 USD. With a normal contract or a simple handshake bet, I can say, “Oh, I was just kidding,” or “I don’t actually have the money.” Bob would then have to sue me in the court of law for his $100. With a Smart Contract, the terms of the deal self-execute, or in other words, the terms of the deal are automated as programmed per the original code of the contract.
Although other blockchain technologies can execute Smart Contracts, Ethereum has this feature baked into its payment system, allowing instantaneous transfers of value across a decentralized global market with zero downtime and no middlemen--at least in theory.
Back in the real world, ETH transactions have already been slowed down significantly at the time of an "Initial Coin Offering" (ICO), which gained its name from its resemblance to an Initial Public Offering (IPO) of stocks in a company. An ICO is when companies offer their own tokens/coins that are built on top of the Ethereum platform, as a way to obtain investment to fund the development of their technologies. When high interest is expressed for an ICO and too many people try to buy Ether, the network has shown its limits. However, the group of developers behind Ethereum have already started working on some mid- and long-term scalability fixes.
Despite some hurdles, Ethereum has already had a profound real-world effect. Using the Ethereum blockchain, the United Nations successfully authenticated food aid vouchers for 10,000 Syrian refugees and now plans to expand the project to include 100,000 refugees by August.
