What is Ethereum and how does it work?
Ethereum: a bit of history
Vitalik Buterin created Ethereum in 2013, after what he perceived as limitations in the functionality of the Bitcoin programming language, namely Turing's lack of integrity. It published the first whitepaper later that year, outlining a distributed computing platform for running smart contracts and building decentralized applications (dApps). A year later, Buterin and some other early contributors created a nonprofit called the Ethereum Foundation, an organization dedicated to researching this cryptocurrency, developing core protocols, and growing the ecosystem. The foundation's first task was to host the Ethereum crowdsale, which raised 31,529 BTC ($ 18 million at the time) in exchange for roughly 60 million ether, and use the proceeds to fund the initial development of the network. The mainnet launched in July 2015, with the first live release called Frontier. Soon after, Augur (REP) held the first Initial Coin Offering (ICO), in which the startup sold its Ethereum-based REP tokens (created through the ERC-20 standard) to help fund the project.The ability to develop and sell a newly generated token to help raise capital became an attractive fundraising method because the projects could circumvent the legal policies and costs required by traditional companies. Ethereum-centric startups created thousands of new tokens since Augur's ICO, raising billions of dollars in the process.
Differences with Bitcoin
The main difference is the type of category in which they are included. While Bitcoin is used to make payments, Ethereum is a platform where to build other projects and their respective cryptocurrencies. Ethereum is an inflationary cryptocurrency, so it does not have an issuance limit. But this does not mean that it is unlimited. Its token, ether, is the gasoline or native means of payment that other projects use and that as it is used, it is liquidated as if it were a traditional fuel. Another big difference is the consensus algorithm, in this case it uses the proof of work and the standard token is ERC-20. Its main function is the execution of smart contracts.