How Does Ethereum Work – Pros & Cons of Ethereum

After Bitcoin, Ethereum has gained the highest rank in the digital world of cryptocurrency. Ethereum is the medium that provides a user with an exclusive online transaction. The reason behind the popularity of Ethereum is that it powers the crypto-centric ecosystem. Here is much more about Ethereum that needs exploration.

What Is Ethereum?

Ethereum is an open-source huge network of blockchain technology that enables applications and smart contracts to run smoothly without any downtime, fraud, or interference from intermediates. Ethereum works on a decentralized blockchain network that keeps the records of verified transactions and uses cryptography to maintain high-level security.

How Does Ethereum Work?

As Ethereum doesn’t include middleman, so certain parts work in collaboration to ensure the proper functioning of Ethereum; 5 key parts are mentioned below:

1: Smart Contracts - The entire system of Ethereum is based on codes provided by smart contracts. It is executed automatically when the conditions are met without any intermediates. Smart contracts are not restricted to one network, and provide open access to anyone posing a high risk of vulnerability which is why it is criticized by some researchers or developers,

2: Ethereum Blockchain - Ethereum Blockchain is a platform that stores all the executed smart contracts. In a blockchain network, thousands of computers are linked, processing smart contracts, and keeping an online store of transactional details.

3: Ethereum Virtual Machine (EVM) - The EVM executes the smart contacts and translates them into the language of a computer. Approximately, the EVM executes 140 codes, each having different tasks.

4: Ether - It is a native Ethereum cryptocurrency that stores 2 types of accounts. One is an externally owned account that sends Ether to the customers and the other is a contract account that holds smart contracts.

5: Proof-of-Work - It creates a block of transactions by sending hash values toward the network to verify the nodes.

What Is the Purpose of Using Ethereum?

The purpose of using Ethereum is that it claims to provide a user with complete access to their data as well as assets. Moreover, it provides a highly secure platform for the application as it is built on a blockchain network that verifies stored data before certification.

What Is the Significance of Ethereum?

The applications offered by Ethereum are:

  • Cryptocurrency Wallet - allows the user to make transactions safely.
  • Smart contracts - permit the execution after the conditions of the contract met
  • Decentralized apps - allow the user to invest, play games, and send money.
  • Non-fungible tokens - specifically these tokens are for artists to sell art to buyers via smart contracts.
  • Decentralized finance - to avoid centralized control over digital assets.

What Are the Advantages and Risks of Ethereum?

There are several advantages and risks of using Ethereum:


  • Peer-to-peer
  • Always available
  • Open for all
  • Trust-lessness
  • Constant innovation


  • Energy-intensive
  • Smart contract vulnerabilities
  • High fees
  • Not user-friendly
  • The steep learning curve for developers
  • Scalability


In the digital currency world, Ethereum is only over-ranked by Bitcoin. Several factors work in collaboration for the proper functioning of Ethereum, providing several applications to smoothly run the network. Further, there is a wide range of applications on a blockchain network that might make Ethereum a more significant cryptocurrency than Bitcoin in the coming years.

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