If you want to learn the Crypto fundamentals you first need to brush up on your general knowledge about the cryptocurrencies. Understanding how these cryptocurrencies work and what makes the decentralized payment network is the first step in the right direction. Today we are going to discuss Bitcoin Ethereum and Tether.
Bitcoin
Bitcoin is the most popular, and widely used cryptocurrency in the world. These transactions run into several millions of dollars per minute, which contributes to its volatility. This means that the price and value is changing every minute. Thus, if you choose to invest in a crypto currency like Bitcoin, it is smart to get in and allow your money to sit and grow with time.
Bitcoin is immensely popular because fact that it is the most used cryptocurrency. When anyone brings up the topic, everyone’s mind goes to Bitcoin. A majority of companies accept payments made in the form of Bitcoin such as PayPal, Microsoft and Tesla. You can also send this cryptocurrency to a personal digital wallet. Each transaction is recorded in a public list called a blockchain.
Ethereum
Just like Bitcoin, Ethereum is an open-source, blockchain-based software platform predominantly used to support Ether. This is the transactional token of the network. Launched in July 2015, it is the second-largest cryptocurrency, following Bitcoin.
Value exchange and transfers are the main use of this platform, but it’s certainly not the only one. Notably, the Ethereum blockchain has developed several innovative concepts that transform various parts of human endeavor.
The man behind the technology is Vitalik Buterin who came up with the idea in 2013 at the age of 19. Buterin’s main motive was to develop a blockchain-based software more advanced than Bitcoin. Ethereum is a smart contract platform. Designed to remove third parties in any transaction, as well as give users more control over their personal finances.
How Does Ethereum work?
Ethereum is essentially based upon the same technology as Bitcoin on the blockchain, but it utilises it more extensively, not limiting it to only transactions. Ethereum works using these main components:
Smart Contracts:
Smart contracts act as non-biased intermediaries on the blockchain. You can program a smart contract to do anything. This includes posting a tweet if the temperature reaches 30 degrees Celsius, or sending your friend some money when their wallet balance goes below $100. The money is only transferred when an exchange of value takes place from both sides. Once a smart contract is deployed on the blockchain it is immutable.
Ethereum Virtual Machine (EVM):
Ethereum Virtual Machine is the technology that ensures rules are followed by smart contracts. This acts as an additional level of abstraction. EVM ensures that applications are separated from each other and the host.
Every activity or transaction on the Ethereum blockchain costs money. Gas is the unit of account used in the EVM. Gas helps to calculate transaction fees and the amount of Ether that must be paid by the users to the miners. Every type of operation on Ethereum has certain costs that are hardcoded in the system.
Ethereum Blockchain:
Is the public ledger technology similar to that of Bitcoin. Within the Ethereum blockchain ecosystem are participants, or ‘nodes.’ This distributed characteristic of the blockchain makes it decentralized. A node contains three types of information: Account info, smart contract code, and smart contract state.
Tether
Unlike Bitcoin, Ethereum and any other cryptocurrency, the concept of Tether is convenient for everyone. Tether is a cryptocurrency that has its value pegged to the US dollar. Thus, we can say it is the digital version of the dollar. If you have 1 USDT, you have approximately 1 USD.
Tether is based on a 1:1 ratio of fiat USD. Before we dive deeper into how Tether works, it’s crucial to give you an idea of stable coins, and why Tether is currently the biggest stablecoin on the market.
Tether As a Stablecoin
Just as the word “stable” indicates, stable coins include all the cryptocurrencies that are not at risk of considerable fluctuations. The fact is, not everyone feels confident with cryptocurrencies such as Ethereum and Bitcoin due to large swings in their prices.
Being the most traded cryptocurrency, you can never neglect the use of Tether as a stablecoin. Unlike volatile digital assets like Bitcoin and Ethereum, you can easily conduct transactions and send (or receive) your money across borders for a fraction of the cost.
How Tether Works
Initially, Omni Platform supported Tether just like other digital assets. The progress continued and now Tether tokens are existing on more than 8 blockchains including Ethereum, Solana and Tron. Tether peg maintenance is done through collateral. This means for every 1 USDT, there is 1 US dollar or any other asset worth 1 USD.
To keep the value of 1 USDT equalling $1, it must be exchangeable for $1 of fiat currency. As such, it’s the responsibility of Tether as well as exchanges to maintain the reserve of dollars and stabilize the price of USDT.
Currently, you can exchange USDT into USD via exchanges or through Tether Limited, for a significant fee.
Need Help In Dealing With Cryptocurrencies?
If you are looking to get your foot in the door and learn more about crypto trading and the fundamentals, feel free to contact me.
Signing off,
Brennan Balzi