Understanding the basic concept and mechanism of Ethereum

mechanism of Ethereum

Are you new to the crypto world and wish to learn the basic concept that operates behind the digital currency? Also, you are in great confusion about which cryptocurrency to choose for the trading purpose. Well, in that case, you might want to give this article a read till the end. In this post, we shall learn the comprehensive details about one of the most popular cryptocurrencies, Ethereum. As the title itself suggests, we shall be covering topics such as what is Ethereum and how does it work. So, without any further ado, let’s jump right into it.

So, what is Ethereum?

Well, this is one of the most popular cryptocurrencies that are available in the market and comes second on the list when it comes to widely used digital currency. It just not serves as the medium of exchange, but also intends to offer a lot of other trading facilities to the user. You can consider it to be a decentralized network that works on blockchain technology for mining Ether, the currency of Ethereum. Using Ethereum, you can not only invest in the stock market but also use it as a medium of exchange.

Moving on, let us now discuss how the whole process behind Ethereum works.

How does Ethereum work?

Similar to all the other cryptocurrencies, this platform also uses blockchain technology for mining Ether and that is why we can say that it is a decentralized system. A decentralized system here means that every detail regarding each crypto is recorded as well as verified making it less likely for the scams to take place. This simply means those who are buying or trading in Ethereum can get their hands on the minute details including the details of transactions, when it was mined, and so on.

The tokens that are generated on it are known as Ether that can be used in the form of digital currency for trading with goods and services. Those who have invested in it have witnessed huge gains and that is why people are investing more and more in it. For trading with Ethereum, one can either use its web platform as well as download the application, whatever he feels comfortable using.

Bitcoin vs Ethereum

The differentiation between BTC and ETH can be carried on different aspects that are mentioned below:

  • Basic concept

If we look at the basic concept that runs behind the two, then we can say that Bitcoin allows you to carry out peer-to-peer transactions and for the purpose of trading, you do not need to pay a lot of fees. While the P2P transaction-making facility is also available with Ethereum but the best thing about this is that it lets you carry out the smart contract which means you can invest anywhere using it.

  • The Mining process

The proof of work method is used for the purpose of mining BTC and the same is used for the mining of ETH as well. But, at the same time, it is worth noting that Ethereum uses the proof of stake method as well. In this process, the more tokens you have, the more power will be given to you.

  • Trading fees

For trading with Bitcoin, it is not compulsory that you pay the transaction fee as it can be avoided by paying an additional amount to the miner. On the other hand, you need to pay a certain fee in order to carry out a transaction on Ethereum.


Perhaps, your doubts about what is Ethereum and how does it work have cleared by now. Also, we have clearly discussed the mechanism behind it. After reading through the last section, your dilemma on which is a better cryptocurrency between Bitcoin and Ethereum must have cleared.

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