Ethereum is a cryptocurrency and decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud, or third-party interference.
Initially proposed in 2013 by Vitalik Buterin, Ethereum has since grown to be the second-largest blockchain network behind Bitcoin with a market cap of over $40 billion USD at the time of writing.
In this article, I will attempt to provide you with everything you need to know about Ethereum including its history and what makes it different from other cryptocurrencies.
What is Ethereum cryptocurrency?
Ethereum is a decentralized, open-source cryptocurrency that was originally created by Vitalik Buterin in 2013. It has an underlying technology called the Ethereum Virtual Machine (EVM) with smart contracts. Its goal is to provide a platform where developers can build and deploy programs without any third-party interference.
A smart contract, also known as an automated contract, is the combination of two elements: software code and blockchain technology. The software code can be written in any programming language like Solidity or Serpent. It then executes on the Ethereum Virtual Machine (EVM), which is what makes it possible for people without coding experience to use these smart contracts.
Developers can take advantage of the relative lack of risk when storing sensitive information online because it is backed by this new form of currency, which can facilitate these types of transactions without any third party or middleman involved in its operation.
Additionally, Ethereum has been called “the most important computing platform of our time.”
How does Ethereum work?
Ethereum is a cryptocurrency system that allows people to mine transactions and add new blocks. It also uses tokens known as Ether, which can be traded for services or used in exchange for other cryptocurrencies.
Ethereum works on blockchain technology with public ledgers that verify all transactions through consensus among the nodes.
The Ethereum project explains how the process of mining works; when someone mines a block they create it by solving difficult mathematical puzzles with help from the computer hardware. The miner then receives about three ether coins per block plus transaction fees paid by users who send money through the blockchain network.
This cryptocurrency can be used to handle complex financial transactions such as smart contracts and distributed applications (DApps).
Ethereum History
Etymology
The name is derived from the ethereal, which means “above” or “over.” It refers to how Ethereum’s blockchain operates above all other platforms.
Launch and milestones
Ethereum was created in 2013 and by 2018 it had become the second most valuable blockchain after Bitcoin.
It was originally launched in July 2015, and its development timeline is classified into three phases: pre-sale, crowd sale, and launch.
Ethereum’s first phase of crowd sale ran from November 2014 to January 2015; the second one began on May 30th, 2016, and finished on June 29th; this time it raised $18 million USD worth of Ether coins (the currency used for transactions within Ethereum).
Launch and milestones are key components for Ethereum protocol upgrades. The launch sets the foundation of a specific network, while the milestones determine how it will be upgraded over time.
Olympic was an Ethereum test network launched in May 2015. This private network enabled Ethereum developers to iron out the protocol’s wrinkles before its public release.
The Ethereum development process was broken into four stages to ensure a seamless and clear development process for developers.
Frontier was the initial stage of the Ethereum network, providing just the bare-bones capabilities of Ethereum. Users could purchase and sell Ethereum, mine Ethereum, and develop, test, and upload Ethereum smart contracts and distributed applications in this version.
Homestead is Ethereum’s first “stable” release, launched on March 14, 2016, at block 1,150,000. The Homestead release formally designated the Ethereum blockchain as “secure” and contained a few protocol and networking modifications that enabled future updates. This update, and all subsequent ones, are “hard forks” of the network, which means that the blockchain that follows is incompatible with the pre-fork version.
The DAO event
The DAO was created on Ethereum’s network and distributed funds to investors, but it caused controversy in the crypto-community because not all investors were able to withdraw their funds before it collapsed due to a bug in its code.
The issue with The DAO is that the code included a weakness, which was disclosed to the creators during the crowd sale by concerned parties.
The DAO’s code has a “recursive call” issue that enabled smart contract users to withdraw twice as much Ether as they had deposited.
The DAO issued a statement confirming that they were aware of the situation and that no Ether held by the DAO was in danger. Regrettably, they were incorrect. In June 2016, an anonymous attacker exploited the vulnerability and removed 50 million USD (about 15% of all Ether at the time) from the smart contract, draining it into a child DAO under their control.
Due to the DAO breach, the blockchain was updated via a hard fork in order to repay affected accounts. However, because the blockchain is meant to be immutable and smart contracts are self-enforcing (as described before in the open letter), this conduct sparked outrage within the Ethereum community.
In consequence, the Ethereum blockchain was divided into two separate blockchains: Ethereum and Ethereum Classic. The Ethereum blockchain utilized a modified version of the blockchain that restored all stolen cash to its original accounts, whilst the Ethereum Classic blockchain used the original blockchain, which included the DAO breach. This split was unintentional on the part of the Ethereum developers and resulted from a clash between justice (returning stolen Ether to its rightful owners) and the blockchain’s goals (decentralization and the immutability of the blockchain). Since then, the two blockchains have stayed separate, thus creating 2 different cryptocurrencies that share a common ancestor.
What is the difference between Ethereum and Bitcoin?
Ethereum is a platform while Bitcoin is just a cryptocurrency. It has different qualities that make it unique to other cryptocurrencies. Ether, the currency of Ethereum, is used for transactions within the network and can also be traded on exchanges for fiat currencies or other cryptocurrencies.
The Ethereum blockchain allows for the creation of smart contracts, which are agreements between two parties that can be automatically enforced without any third-party oversight or trust. The Ethereum blockchain was designed specifically with smart contracts in mind, meaning its capabilities go far beyond what Bitcoin offers and what other cryptocurrencies can provide.
NFTs (non-fungible tokens) can be created on this blockchain and they exist only digitally. A notable auction for an NFT was held in March 2021 where nearly $70 million worth of NFTs was sold at very high rates to investors.
As non-fungible tokens represent ownership of digital assets, they have been used to create “ERC721” standard token registries on top of the Ethereum network as well as other blockchains such as NEO’s ONT Ontology Network Token (ONT)and EOS’ EOS.
Is Ethereum better than Bitcoin?
In our opinion – Ethereum is better than Bitcoin. Unlike Bitcoin which was designed to support peer-to-peer transactions and digital payments, Ethereum has been designed from the ground up for industrial-grade production of new tokens and can be used by anyone to create new cryptocurrencies.
The Ethereum blockchain can also be used to build decentralized apps and create new coins/tokens for the public with no need for approval from anyone else. In other words, Ethereum seeks to build a world computer on top of its blockchain and create applications that are safe from malicious attacks.
There are more than 10 times the developers on Github working on Ethereum vs Bitcoin!
In addition to this technological innovation, it has been called “the next big thing” in the cryptocurrency world with huge potential for growth and development.
What are some criticisms of Ethereum?
There are many criticisms of Ethereum. Some of the most common criticisms include how the same database is held by thousands of nodes, which makes it difficult to maintain privacy and security. Cloud computing allows multiple nodes to interact on a single database, which can lead to centralization problems.
Additionally, critics have pointed out some flaws in Ethereum design including slow speed due to which it can’t compete on market share against new cryptocurrencies that offer faster transaction times.
It also has scalability issues and high carbon footprint due to mining operations in China (where most of the coins were mined).
Benefits of building on Ethereum
Ethereum is the world’s first decentralized blockchain platform that allows developers to build and deploy decentralized applications. Developers can use Ethereum to create smart contracts, which are self-executing business logic running on the Ethereum Virtual Machine (EVM).
The flexibility of building applications on Ethereum has made it a popular choice for many startups.
Some of the benefits offered by developing on Ethereum include scalability, security, open-source development model, and reduced costs compared with traditional centralized development models.
The virtual machine, which can be deployed to run on the Ethereum platform, is Turing-complete and allows for the development of decentralized apps (DApps).
Solidity is a programming language that was specifically designed to build on top of this new technology.
Using its large user base, developers can deploy their apps on Ethereum’s network without any risk or fees for using the service.
The 2nd generation Ethereum protocol will be backward compatible with previous versions and will allow users who have invested in Ether to access it easily.
Ethereum forks
Ethereum has changed since its initial launch. It was originally designed to have a fixed supply of ether, which sat at 100 million. However, due to the success of the project and the demand for ether, it became difficult for Ethereum’s developers to maintain this number.
The solution? A hard fork! The hard fork created three different versions of Ethereum:
- Original Ethereum (ETH) – Holders are still able to create new blocks but no longer receive any additional ether from mining rewards.
- Ethereum Classic (ETC) – Holders are still able to create new blocks and receive the same amount of ether as they would have received before the hard fork.
- Ethereum Hard Fork (ETHHF) – Holders now receive 2x more ether per block than ETH holders. This is by far the most popular version of Ethereum, with over 70% of all ether currently in circulation being stored on this blockchain.
Hard forks are major changes to the system and aren’t backward compatible. When a hard fork happens, the new version of the blockchain is created from a previous block in the chain. The old “old” blockchain is then discarded and later this occurs with all its transactions.
Ethereum has had several major forks since it debuted in 2013. There have been many smaller forks of Ethereum since then some resulting from disagreements about changes to the underlying codebase while others being created as new versions of the blockchain allowing for more features.
How does the price of Ethereum change?
Ethereum is less affected by economic and political influences, which makes it more stable than other cryptocurrencies. The value of Ethereum fluctuates based on factors such as availability, regulation, and fluctuating supply over time.
The price fluctuates based on the news coverage it gets, negative or positive. It has gained popularity because of its security and longevity.
Despite this, there are some technological advances that still need to be made for blockchain technology to become more widespread among society at large as well as Ethereum’s own platform itself
Projects built on the Ethereum platform
Projects built on the Ethereum platform can be used by anyone in the world with an internet connection and are not limited to only those who have invested in it.
The first application was released in 2015 called “the Decentralized Autonomous Organization” which allowed people to invest their money into the project without having to trust anyone and without the need for intermediaries.
Ethereum claims that its platform can be used to build “any application, anywhere in the world.”
Ethereum can be used to build applications like DeFi or NFTs.
Currently, the most popular projects based on Ethereum are MakerDao, Uniswap, Chainlink, Axie Infinity, and Aave.
What is Ethereum 2.0 (Eth2)
Ethereum 2.0 (Eth2) is the next generation of Ethereum. It has been designed to improve scalability, speed, and security for smart contracts on the blockchain. The new version will also allow applications to be built without having to rely on centralized servers or cloud computing services like Amazon Web Services (AWS). Eth2 is still in its infancy so there are many questions surrounding it.
With Eth2, the old Ethereum 1.x will be renamed to “Ethereum Classic” or ETC for short, so you can tell them apart at first glance when they come up on your screen
What Is ETH trading?
ETH is a cryptocurrency and digital asset that can be bought or sold on various exchanges. There are currently six major trading platforms which include Coinbase, Kraken, Bitstamp, Gemini, Binance, and Bitfinex. The current choices include using all of these sites to purchase ETH with fiat currency such as USD or EUR.
As mentioned previously, crypto prices are extremely volatile so investing in this market comes with risks. It is recommended for consumers who want their money to grow over time to use apps like Robinhood and Gemini. These apps allow consumers to invest in cryptocurrency without paying any fees, which can help minimize losses due to price volatility.
Should you buy Ether?
Ethereum is a virtual currency with value. Ethereum’s blockchain currently runs on the Proof of Work consensus algorithm and will likely migrate to a new protocol called Casper that uses Proof of Stake as its consensus mechanism.
Applications on the Ethereum network could increase demand for ETH which could lead to increased price volatility. In all fairness, we expect the price of ETH to rise in the future, so it could be a good investment (please note that this isn’t financial advice!).
Before investing or trading Ether, it’s important to consider the risks involved with cryptocurrencies. These are largely unregulated and they have no underlying assets backing them up so their value is entirely based on speculation of whether people will continue using them as currencies.
