Ethereum – the crypto giant with big plans
Ethereum is a well-known decentralized open-source blockchain known for being the number one rival for Bitcoin. However, Ethereum is not exactly a direct competition to Bitcoin, as this protocol has different goals, applications, features, and crucial differences to its technology. Ethereum is more than just an investment instrument – let us tell you why!
History of Ethereum
The history of Ethereum goes back to 2013, when the ideology of Ethereum was described in the project’s white paper by Ethereum’s co-creator Vitalik Buterin. Among the other things, the goal of Ethereum was to enable decentralized application building on the Ethereum blockchain. According to Buterin, Bitcoin did not offer this option, and to his mind, blockchain technology could be used for a wider array of applications besides money and trading. This would, however, require a more robust language for application development, and that is when Ethereum steps in; to offer a blockchain application that could attach real-world assets to the blockchain. The first version of the protocol was known as Ethereum 1.0. The Ethereum Foundation was founded to support the development of the network.
When talking about the history of Ethereum, one can’t ignore The DAO hack. In 2016 Ethereum was faced with somewhat of a crisis revolving around The DAO. The DAO has a critical vulnerability, which was uncovered in an unfortunate exploit that would lead to a loss of millions of dollars. To reverse this, the Ethereum network voted for a “hard fork” rolling back the network to before the exploit.
Ethereum software trivia
The Ethereum software aims to enable many real-world applications through its blockchain. These include transactions, coin holders’ ability to earn interest through staking, trade cryptocurrencies, use NFTs (non-fungible tokens), play games, and the list goes on. But how is this enabled on a software basis?
This all comes initially down to the decentralized characteristics of this protocol, where thousands of computers worldwide participate in the Ethereum network as “nodes.” The interactions in this network known as “transactions” are stored within the blocks of this blockchain. As Ethereum is a Proof of Work (PoW) blockchain, these blocks are validated by miners. By mining, miners contribute to the blockchain with their computer power to find an identification code for transaction verification. In return, they are rewarded with ETH funded in transactions as a so-called “gas” fee. These fees can vary by network activity. With high demand, this becomes a problem as transaction costs can become monstrously high. This problem will be addressed in the Ethereum 2.0 update when the network transitions to a Proof of Stake (PoS) consensus mechanism. From then on, miners won’t play a role anymore in verifying transactions.
But how does this all high tech connect to real-world applications? Ethereum interaction is based on cryptocurrency, Ether, stored in a wallet. By connecting these wallets to, i.e., DApps, you have the passport to the Ethereum ecosystem.
Ether, the token
Naturally to blockchains, Ethereum has its own native token Ether, known for its ticker ETH or Ξ. The token is a very popular trading instrument proven to be a good investment for many skilled crypto traders. As Ethereum is a PoW blockchain, Ether can be acquired through mining. ETH is considered a so-called utility token rather than a token of value, which means its supply is infinite.
The future of Ethereum
Ethereum is a very well-established blockchain with a widely traded token. Due to its established position in blockchain and crypto, Ethereum is a go-to solution to many projects under development; thanks to its popularity and decentralized nature, the blockchain is considered safe and adaptable. Ethereum is even considered to be the next step for the internet. This next-generation web would rely mainly on decentralization through, i.e., DApps (decentralized applications), DeFi (decentralized finance), and DEXs (decentralized exchanges). In the near future, Ethereum will transition to a PoS mechanism marking a new era for the network.