Why is Bitcoin (BTC) considered a first-generation Blockchain?

In 2007, Bitcoin was the first cryptocurrency that successfully introduced blockchain technology to the world. The concept of a blockchain is one of decentralization, security, and transparency. As a result, there has been an explosion in the popularity of cryptocurrencies like Bitcoin and Ethereum in recent years with major companies like Microsoft entering into partnerships with them as they emerge as key technologies that are integral to the future of how work is done on Earth.

One thing you'll learn quickly if you're not already familiar with it: Bitcoin was not originally intended to be a cryptocurrency! It's still worth considering as an investment when you look at its history and see it's only been six years since it was first introduced. What originally started as "a peer-to-peer electronic cash system" has turned into a gold mine of valuable information on the Bitcoin and Ethereum (ETH) blockchains.

What makes Bitcoin and Ethereum so valuable?

They are the first blockchains to set records by achieving an incredible number of blockchain deployments with their main focus being on the development of decentralized applications. Both Bitcoin and Ethereum are currently used more than any other currencies, with a combined market cap of USD 120 billion!?

Why have these become such popular cryptocurrencies? Because they offer so much value. They're able to produce new application services, to change both the way we do business and how we store value. There's so much innovation happening that it will only continue. And with their permission fewer architectures, both are extremely difficult for governments to regulate. Some see Bitcoin as a potential threat or competitor to traditional fiat currencies such as the US dollar!

What is Blockchain Technology?

Blockchains are distributed databases that maintain a continuously growing list of records. They're like "an ever-increasing account book", allowing data to be modified by any party and forming a digital ledger of transactions shared between network participants called nodes. Each block is linked to a specific transaction and a previous one. So each adds a new transaction and shows the exchange of assets in that transaction. One mistake or omission breaks all the links after it becomes invalid.

Blockchains are extremely secure as they are decentralized and encrypted with advanced cryptographic techniques. They're also considered immutable, meaning once data has been added, it cannot be altered or deleted by anyone party because all parties have to consent to updates, making them impossible to alter without the consensus of everyone involved.

What Are Smart Contracts?

Smart contracts are computer programs that automatically execute when specific conditions are met, such as a digital payment from one party to another. They're designed to eliminate the need for middlemen, speed transactions, and ensure the exchange of value. This is the process that's made it so popular in recent years.

The concept of a smart contract, which has been around since 2004, serves as both an application layer and protocol layer on top of a blockchain network. It's a collection of code that defines what the program is designed to do and its terms and conditions. The smart contract itself must be stored in a blockchain or another type of distributed ledger network. But what makes them so revolutionary is that they're able to carry out this work on their own with minimal human interaction.

The most notable feature of smart contracts is that they're self-executing agreements between two parties. This means there's no third party involved who needs to be trusted to hold up their end of the bargain. In short, a smart contract is an electronic transaction protocol that executes the terms of a contract when certain conditions are met, like how a vending machine works today.

Some call them "a set of promises that are digitally encoded" and are embedded in the digital form inside an application or database. Smart contracts are executed automatically by a computer when the terms of the contract are met. This is done without any interference from a third party that's being trusted to complete the task.

Smart contracts are already starting to disrupt business models, making middlemen obsolete and speeding up transactions through automation. Take, for example, how stock trading could be changed with smart contracts. Today, you'd need to trust both parties involved in the trade and rely on an intermediary - such as a stockbroker - to be able to complete the deal.

Instead, smart contracts could eliminate brokers and facilitate peer-to-peer trades directly between two parties anywhere in the world with instant settlement. If you want to trade stock on an automated basis, your computer would automatically send and receive the necessary information, while the smart contract itself tracks all of these transactions.

Who Are The Key Players?

Bitcoin vs Ethereum - which is better?

In a world of rapidly developing technologies, it's clear that the blockchain industry has grown to be very popular. This has caused many companies to invest in their cryptocurrencies and develop their blockchains. To help you get started with your research, here's a comparison of the two most popular blockchains, Bitcoin and Ethereum (ETH).

Bitcoin was designed as peer-to-peer electronic cash in 2009 as Satoshi Nakamoto's solution to several problems plaguing existing currencies. The currency is focused on being a store of value than an actual currency because it can't be easily transacted quickly or processed with ease. It is, however, the most widely used blockchain in the world today and is considered to be the best performing digital currency by many.

Ethereum on the other hand was designed as a platform for developers and companies to develop decentralized applications. It's possible to create a cryptocurrency with Ethereum just like Bitcoin and there are currently more than 2000 different cryptocurrencies listed on Coinmarketcap. Ethereum has been in development for much longer than Bitcoin, although it's still relatively young.

Bitcoin Explained

Bitcoin works as a peer-to-peer payment system where everybody makes their transactions transparent to other users in a trustless environment. It uses a public ledger called blockchain technology that holds these transactions in an almost permanent way.

Bitcoin is mined by solving complex algorithms to generate bitcoins. It also runs a decentralized marketplace where sellers can list their products and buyers can search for them. Each transaction is accompanied by a price that is paid in bitcoins, but it remains impossible to know the actual price at any given time.

There are, however, several ways to get your hands on some bitcoins. There's an online exchange called Coinbase where you can buy Bitcoin using traditional currency like USD and other cryptocurrencies like Ethereum or Litecoin. Another option is to buy them through an exchange site that accepts payment in USD or other fiat currencies like the Euro or British Pound and offers bitcoin as a payment option.

Bitcoin has a fixed supply. This means that only 21 million bitcoins will ever be created. They're created through mining which happens when people use their computers to solve the Bitcoin algorithm. Everybody who's involved in mining gets paid for their service in new bitcoins.

Bitcoin pros:

Easy to set up and understand. It’s not just for geeks! Basic knowledge of computers and the internet is sufficient to be able to use Bitcoins.

Global accessibility: Bitcoins aren't bound by boundaries, so everyone around the world can use them anywhere and anytime, with or without an internet connection.

Security: Bitcoins are secure and can't be replicated or counterfeited. They're also impossible to hack.

Low transaction fees: Transfers of Bitcoins are free and almost immediate.

Bitcoin cons:

Volatility risk: One of the main disadvantages to Bitcoin is that its value is highly volatile. This has already happened a few times in the past where there were massive price surges followed by equally large drops quickly afterward. The currency has been widely criticized for this, and it's considered by many to be a bubble waiting to burst at any moment.

Associated with a crime: There are cases where Bitcoin has been used for illegal activities, like buying drugs and weapons on the dark web.

Ethereum Explained

Ethereum is based on blockchain technology just like Bitcoins, but it can do much more than just act as a currency. It was designed with smart contracts in mind so users around the world can easily create applications without having to rely on third parties. Ethereum also offers a decentralized computing platform that runs the programming code of any decentralized app (dapp) running on it. While Ethereum has its native currency called Ether (ETH), it's essentially a token to be used as “gas” or fuel for dapps and smart contracts.

Ethereum pros:

Programmable money: Ethereum allows users to create their cryptocurrencies and tokens. Some developers have already taken advantage of this and created some successful cryptocurrencies with funds being raised using the Ethereum platform.

Allows smart contracts: Ethereum dapps allow users to enter into a contract with each other without having to depend on third parties like PayPal or banks.

Open-source technology: Ethereum is open-source which means that it can be used by anyone without paying any license fees.

Quick transfers: Because there are no middlemen in the transaction, Ethereum dapps can process transactions more quickly than traditional financial institutions.

Ethereum cons:

Can only process 15 transactions a second whereas other cryptocurrencies can process around 1,000 transactions a second.

High transaction fees: Ethereum dapps tend to require you to pay more gas when using them as opposed to using simple services like PayPal or bank transfers.

Higher risk than traditional financial institutions: Because Ethereum is decentralized and doesn’t have a governing body, the system can become hacked or fall into disrepair at any time.

Which one is better? Most experts believe that BTC is the best option due to its popularity, market capitalization, and ability to remain relatively stable in value, while ETH offers superior programming support.

Does Ethereum use Proof of Work?

Both Bitcoin and Ethereum use different types of mining. Bitcoin's mining system is called "Proof of Work" (PoW), which means that miners must solve complex cryptographic puzzles to take ownership of a block. This also provides a way for the entire network to agree on everything.

Ethereum dapps use a different type of mining called "Proof of Stake" (PoS). The more Ether you hold, the more likely it is that you'll be able to mine new blocks next in line.

The two types of mining have some differences, but there are also some similarities.

How to Mine Ethereum?

To mine Ethereum, you'll need a computer and mining software. There are many mining software providers out there; the only thing you need is to find one that's compatible with your computer or device and it should be able to run the software. GHash.IO is a popular provider that offers both Windows and Mac OS X versions of their miner software as well as Linux (MinerGate). As long as you're ready to pay a small fee, all of the hardware needed for mining can be purchased online at sites like Amazon.com.

How to mine Ethereum

Step 1: Get a cryptocurrency wallet that supports Ethereum like Coinbase, MyEtherWallet, or Mist. These are all secure sites to keep your Ether safe.

Step 2: Download the mining software and open it up on your computer. You'll be asked to create a login to begin mining. This will give you access to the mining pool where your computer can connect with other computers around the world and start solving blocks together. You'll need an Ethereum address for this, but you can use an online wallet such as Coinbase or MyEtherWallet to create one beforehand as long as it supports Ethereum.

Step 3: Set up the mining software. This will vary depending on which software you've downloaded, but usually, you'll be asked to input your wallet address and choose the amount of GPU power (hash rate) you'd like to dedicate to mining. The best way to go about this is to mine with around 75% of your GPU power as much as possible, so that way there's room for error if something goes wrong without risking your computer or network from being compromised. Once you've set up the mining software, it should begin processing immediately. This can take anywhere from a few hours to a few days depending on your setup and how fast it can solve blocks. Don't expect to make a lot of money right away unless you're using a top-of-the-line GPU rig.

Step 4: Keep track of your earnings as they come in. The mining payout is not fixed, and it depends on what the network difficulty is each day. This means that the longer you mine, the more coins you'll receive as long as the network difficulty remains consistent. This can be checked by going to blockchain.info and viewing it under the Mining or Markets sections at any time.

Step 5: Once you've earned enough Ether to meet your needs, it's time to cash out. You can do this by transferring the Ether from your wallet to an exchange like Poloniex or Bittrex and selling it for Bitcoin. This is called "selling into fiat" and once you do this, your earnings will reflect the BTC equivalent at that time. You can then sell the Bitcoin for fiat currency on Coinbase or other exchanges like Shapeshift, which will allow you to cash out for USD or whatever currency you'd like. This process can take a couple of days, so be patient.

The Best Altcoins for Ethereum Mining

How to choose a good altcoin for mining:

Make sure it's listed on an exchange so you can easily cash out. Check to see if you can track your earnings using blockchain explorers like Etherscan or Ethplorer. Some coins will only pay between 1-8% interest per day which is usually not worth your time. Look at the coin's total supply (see below) and try to determine if there will be enough coins leftover once the supply cap is reached for it to still have value after mining stops. Determine if there's a long-term value for the coin. If it has a good community and developers, the coin will probably hold its price long enough for you to profit from it.

Are there any risks to investing in Ethereum?

The Ethereum network is still in its infancy, so it's not at all uncommon to see unexpected outages occur due to bugs or glitches that cause the network to crash. This can happen every week, especially as more people are trying out dapps on the platform. However, since this is a developing technology that's still in its infancy stages, we can expect these issues will be resolved over time.

Perhaps the biggest risk is the possibility of Ethereum's price dropping drastically in the future. We don't yet know how businesses will transition, or even if they'll ever transition, but it's possible that there could be a sharp decline in value once the currency has grown in popularity.

Ethereum Reward Schedule:

Rewards are based on the amount you contributed to mining and will increase over time as Ethereum earns more revenue. Each block mined gets assigned to a miner who contributes X amount to that block's reward and receives Y amount from it as a reward HOWEVER each miner also receives funds from all other miners who participate in that block based on how much electricity he or she contributed.

The difficulty of mine Ethereum is based on the amount of electricity used versus the amount of electricity that * they * use. This means if a miner has more powerful mining rigs, then his reward will be higher versus the miner with weaker mining rigs who will receive less money.

Where can I buy Ethereum?

Ethereum can be purchased from many different exchanges, but you have to pay attention to their ease of use and fees as 0.1% fees are not uncommon for smaller exchanges. Coinbase is one of the most popular exchanges for purchasing Ethereum with fiat currency (USD/EUR) and it's very beginner-friendly. Popular exchanges like Poloniex and Bittrex allow you to buy Ethereum with Bitcoin or other major cryptocurrencies, however, they don't support Ethereum directly due to the varying regulations associated with each country.

Ethereum Difficulty:

This is the average time it takes to mine a block on the Ethereum network. It's updated every day based on the transactions made in the previous 24 hours. As more miners join the fray, it's more difficult to find blocks and you'll have to compete with more people for a chance at being rewarded a block. The difficulty is 15 minutes apart every two weeks, so it's much harder for miners who join on a weekday to have an advantage. This can be checked at eth.blockchain.info.

Despite the rapid growth of Ethereum in 2017, it's quite hard to get your hands on some due to major exchanges not supporting direct purchasing of Ether from fiat currencies. Some exchanges have even stopped accepting new registrations and others have high fees for trading with fiat, so miners have to wait until an exchange allows Ether withdrawals to cash out their profits so they're not limited in their options when selling into fiat. This also makes it difficult for miners who are using mining pools to withdraw their earnings because the pool operator may not support withdrawals or may charge high withdrawal fees to make some of the money back that they contributed towards paying for the electricity used during mining.

Ethereum Mining Profitability:

The profitability of Ethereum mining depends largely on the price, difficulty, and amount of Ether being mined. Those who have been mining since early 2014 have seen their earnings drop by a large percentage due to several factors including network difficulty changes and a massive increase in the number of miners on the network. While it's still possible to make money from mining Ethereum, it's not as easy as it used to be. Going forward, we expect more miners to switch over to other coins that are easier to mine and have more ROI like Dash or Monero.