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Ethereum How Does Ethereum Work

What is Ethereum how does Ethereum work? Ethereum is a Decentralized, global platform for money and new types of applications. In Ethereum, you can write code that controls the numeric values. Works exactly as programmed, and is accessible from anywhere in the world.

Ethereum is a distributed public blockchain network that focuses on executing the programming code of any decentralized application. Simply put, it is a worldwide information sharing platform that cannot be manipulated or modified. So it is a secure system to store data.

Ether a digital decentralized digital currency also known as ETH. In addition to being a tradable Cryptocurrency, ether powers the Ethereum network by paying transaction fees and IT services. Ether paves the way for a smarter financial platform.

What is Ethereum?

Launched in 2015, it is the programmable blockchain in the world.

This is the foundation of a new Internet era:

An Internet where money and payment integration takes place.

An Internet where users can own their data and applications does not spy on you or rob you. Thus it stores data in a secure way.

A network where everyone has access to an open financial system.

An Internet built on a neutral open-access infrastructure controlled by no company or person.

Like other blockchains, Ethereum has its Cryptocurrency called Ether (ETH). This (ETH) is digital money. Maybe you have heard of Bitcoin, ETH has a lot of the same features. It is purely digital and can be sent immediately to anyone in the world.

The ETH offer is not controlled by any government or company. It is decentralized and rare. People all over the world use ETH to make payments, as a deposit or as collateral. Thus the ETH is not under the control of any government or company.

Ethereum How Does Ethereum Work

New Applications

Ethereum can do more, unlike other Blockchains. It is programmable, which means developers can use it to create new types of applications.

These decentralized applications reap the benefits of Cryptocurrency and blockchain technology. They are reliable and predictable, which means that once uploaded to Ethereum, they will still work as expected. These apps. can control digital assets to create new types of financial applications. The applications can be decentralized, which means that no entity or person controls them.

Thousands of developers around the world are currently creating applications on Ethereum. They are inventing new types of applications, many of which can be used today:

Cryptocurrency wallets that allow you to make cheap and immediate payments with ETH or other resources.

Financial applications that allow you to borrow, lend, or invest your digital assets. Thus helping in financial solutions.

Decentralized markets which allow you to trade digital assets or even trade forecasts on real-world events.

Games where you have game resources and can even win real money and much more.

Ethereum community is the most active and largest blockchain community in the world. It includes core protocol developers, crypto-economics researchers, artists, Cypherpunks, mining organizations, ETH owners, gamers, application developers, grandmothers, anarchists, Fortune 500 companies, and, as of now, you.

No centralized company or organization controls Ethereum. It is managed and improved over time by a diverse global community of taxpayers who work on everything from basic protocol to consumer applications. Therefore there is no central control of any individual or company on it.

Also Read: Ethereum vs Bitcoin Blockchain Size

Who created Ethereum?

At the end of 2013, Vitalik Buterin described his idea in a white paper. He sent this to some of his friends, who in turn sent it further. As a result, approximately 30 people contacted Vitalik to discuss the concept. He was expecting critical reviews and people who pointed out critical flaws in the concept, but it never happened.

The Ethereum project was announced publicly in January 2014. The main team was consists of Vitalik Buterin, Anthony Di Lorio, Mihaai, Joe Lubin, Charles Hoskinson, and Gavin Wood. Buterin also presented Ethereum on stage at a Bitcoin conference in Miami. After a few months later the team decided to mass-sell Ether, the network’s native token, to finance development.

Important Steps in the history of Ethereum

November 2013: Vitalik Buterin publishes the Ethereum White Paper.

January 2014: the development of the Ethereum platform has been publicly announced. Ethereum’s original development team included Vitalik Buterin, Mihai Alisie, Anthony Di Iorio, and Charles Hoskinson.

August 2014: Ethereum ends its ICO and raises $ 18.4 million.

May 2015: “Olympic” the Ethereum test network launched.

July 30, 2015: the first phase of the development of Ethereum, Frontier is released.

March 14, 2016: Homestead, the first “stable” version of Ethereum, released on block 1,150,000. Thus a new platform for the internet starts.

June 2016: $ 50 million DAO and Ether hacks occur, which at the time accounted for 15% of the total ether in circulation.

October 25, 2016: Ethereum Classic starts from the original Ethereum protocol.

October 16, 2017 – The upgrade of the Metropolis Byzantium fork occurs.

February 28, 2019 – The Metropolis Constantinople fork is updated. In its simplest form, Ethereum is an open software platform based on blockchain technology that allows developers to create and implement decentralized applications.


Like other cryptocurrencies, the validity of each Ether is provided by Ethereum Blockchain. This is an ever-growing list of records called blocks that are linked and protected by encryption. By design, the blockchain is intrinsically resistant to data modification. It is a large open and distributed ledger that records transactions between two parties in an efficient, verifiable, and permanent way.

Unlike Bitcoin, Ethereum works by using accounts and balances in a way called state transitions. It does not depend on unused transaction outflows (UTXO). The status shows the current balances of all accounts and additional data. The status is not stored on the Blockchain; it is stored in a tree separate from Merkle Patricia.

Cryptocurrency wallet stores public and private keys or addresses that can be used to receive or spend ether. These can be generated via the BIP 39 symbol for a BIP 32 “Portfolio HD”. In Ethereum this is not necessary because it does not work in a UTXO scheme. With the private key, it is possible to write on the blockchain, effectively performing an Ether transaction.

To send the Ether Ethereum value token to an account; this account requires the public key hash Keccak-256. Ethereum accounts are pseudonyms in the sense that they are not linked to individuals, but one or more specific addresses.

Ethereum Blockchain

The structure of the Ethereum blockchain is very similar to that of Bitcoin in that it is a shared record of all the transaction history. Each network node stores a copy of this history.

Ethereum nodes store the most recent status of each smart contract, in addition to all ether transactions. This is a big difference with the Ethereum.

For each Ethereum application, the network must maintain the current information or status for all of these applications, including the full smart contact code, each user’s balance, and the storage location.

For Bitcoin, it uses unspent transaction outputs to track who has how many Bitcoins.

Although it seems more complex, the idea is fairly simple. Every time a Bitcoin transaction is made, the network “divides” the total amount as if it were paper money, issuing Bitcoins so that the data behaves in the same way as the physical currencies or exchange them.

To carry out future transactions, the Bitcoin network must add up all its exchange items, classified as spent or unspent. Ethereum, meanwhile, uses the accounts.

Like funds from a bank account, ether tokens appear in a wallet and can be transferred (so to speak) to another account. The funds are still somewhere, but you don’t have what you might call an ongoing relationship

Is Ethereum similar to Bitcoin?

Ethereum is a public decentralized, distributed blockchain network like Bitcoin. While there are significant technical differences between the two, the most important distinction to keep in mind is that Bitcoin and Ethereum differ considerably in purpose and capacity. 

Bitcoin offers a particular application of blockchain technology, an electronic peer-to-peer payment system that enables online Bitcoin payments. Bitcoin is used to track the ownership of Bitcoin (Digital Currency), while the Ethereum is focusing on executing the programming codes of any decentralized application.

On Ethereum, instead of mining Bitcoin, miners work to earn Ether, a type of crypto token that powers the network. In addition to a tradable Cryptocurrency, Ether is also used by app developers to pay transaction fees and services on the Ethereum network. However, Ethereum can do more than Cryptocurrency.

There is a second type of token used to pay miners commissions to include transactions in their block, it is called gas, and each execution of a smart contract requires that a certain amount of gas be sent to induce miners to place it in the blockchain.

Bitcoin is primarily a currency; it is a particular application of a blockchain. However, this is far from the only application. To give a previous example of a similar situation, email is a particular use of the Internet and has certainly helped to spread it, but there are many others. – Gavin Wood, co-founder of Ethereum

Ethereum How Ethereum Work

As mentioned above, Ethereum is based on the Bitcoin protocol and its Blockchain design. But it is modified to support applications beyond monetary systems. The only similarity between the two blockchains is that they store complete transaction histories from their respective networks. But the Ethereum Blockchain does a lot more. 

In addition to the transaction history, each node on the Ethereum network must also download the latest status or current information for each smart contract within the network, each user’s balance, and all the smart contract code and where it is stored.

Essentially Ethereum Blockchain can be described as a transaction-based state machine. In computing, a state machine is defined as something that can read a series of inputs and go into a new state based on those inputs. When transactions are made, the machine goes to another state.

Each Ethereum state is made up of millions of transactions. These transactions are grouped to form “blocks”, each block is linked to its previous blocks. But before the transaction can be added to the ledger, it must be confirmed, which goes through a process called payment.


Mining is a process in which a group of nodes uses their computing power to take on a “proof of work” challenge, which is essentially a mathematical puzzle. The more powerful the computer, the faster you can solve the puzzle. An answer to this puzzle is itself a proof of work and guarantees the validity of a block.

Many miners around the world compete to create and validate a block, because every time a miner demonstrates a block, new Ether tokens are generated and assigned to that miner. The backbone of the Ethereum network are miners as the not only confirm and validate transactions and all other operations with the network but these miners also generate new network currency tokens.

What can Ethereum do?

First, this allows developers to create and distribute decentralized applications. Besides, any centralized service can be decentralized using the Ethereum platform. The potential of the Ethereum platform to create applications is nothing but the creativity of the creators.

Decentralized applications have the potential to completely change the relationship between businesses and their audience. Today, many services charge fees for simply providing child care and a platform for users to exchange goods and services.

On the other hand, the Ethereum Blockchain can allow customers to keep track of the origin of the product they buy. The implementation of smart contracts can guarantee quick and secure exchanges for both parties without any intermediary.

Blockchain technology itself has the potential to revolutionize web services, as well as industries with established contractual practices. For example, the insurance industry in the United States of America has over $ 7 billion in Inclined Life Insurance, which can be redistributed fairly and transparently using Blockchain.

Also, with the implementation of smart contracts, customers can simply file their insurance claim online and receive instant automatic payment, considering that their claim meets all the required criteria.

In essence, Ethereum Blockchain is capable of integrating its basic principles (trust, transparency, security, and efficiency) in any service, company, or sector.


Decentralized autonomous organizations (DOA) can be created by the Ethereum, which operate independently and transparently of any intervention without a single leader. CAD is done using the programming code and a collection of smart contracts written on the Blockchain. It is designed to eliminate the need for an individual or a group of individuals incomplete and centralized control of an organization.

DAOs belong to people who bought tokens. However, the number of tokens purchased does not equate to equity and ownership. Instead, tokens are contributions that give people the right to vote.           


Ethereum was proposed in 2013. It is a public distributed computing platform operating system. The system is based on an open-source blockchain that has smart contract (script) functionality. It supports a modified version of Nakamoto’s consent through transaction-based state transitions. However, it is more than a Cryptocurrency.

Ether is the Cryptocurrency generated by the Ethereum platform. It is a reward for data mining nodes for the calculations made and is the only currency accepted for the payment of transaction fees. Vitalik Buterin proposed Ethereum in late 2013. He is a Cryptocurrency researcher and programmer.

The development was financed by an online sale that took place between July and August 2014. Therefore, the system launched online on July 30, 2015, with 72 million coins cast. This represents around 65% of the total supply in circulation in April 2020.

In 2016, after exploiting a flaw in the CAD contract smart contract software and the consequent theft of $ 50 million ether. Ethereum was divided into two separate blockchains: the new separate version became Ethereum (ETH) with reverse flight and the original chain continued as Ethereum Classic (ETC).


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