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What is Ethereum

Ethereum is a decentralized technology

lalav
lalavDec 08, 2022
What is Ethereum

Ethereum is a decentralized technology for building apps and organizations, holding assets, transacting, and communicating without being controlled by a central authority. Ethereum has its own cryptocurrency, Ether, which can be used to pay for services on the network or sold as an investment opportunity.

According to this article by Amazon AWS, Ethereum is a decentralized blockchain platform that establishes a peer-to-peer network that securely executes and verifies application code called smart contracts. Smart contracts allow participants to transact with each other without a trusted central authority. Transaction records are immutable, verifiable, and securely distributed across the network, giving participants full ownership and visibility into transaction data. Transactions are sent from and received by user-created Ethereum accounts. A sender must sign transactions and spend Ether, Ethereum’s native cryptocurrency, as a cost of processing transactions on the network.

If we were to explain it to five year olds; It is a supercomputer that is formed by so many other computers that speak to each other. This computer can’t be turned off or tampered with because no one can simultaneously break into the homes of all the thousands of people controlling the many computers talking to one another and turn them off or modify how they operate. Unless you can persuade all the thousands of people using those computers to communicate with one another to modify exactly the same thing at the same time about how those machines communicate with one another. That is referred to be a hard fork, but you have to bring strong reasons to persuade those thousands of individuals.

A brief history of Ethereum

2013

  • Vitalik Buterin 19-year-old programmer (and Bitcoin Magazine cofounder) releases a whitepaper proposing a highly flexible blockchain that could support virtually any kind of transaction.

2014

  • Vitalik with other cofounders including Gavin Wood, crowdfunds the development of the Ethereum protocol with the sale of $18 million in pre-launch tokens.

2015

  • In July, the first public version of the Ethereum blockchain is released, and smart contract functionality begins to be implemented on the Ethereum blockchain.

2016

  • Using a software bug, hackers steal around $50 million from the DAO (short for Decentralized Autonomous Organization), a smart-contract-powered venture fund. In a contentious vote, Ethereum’s community decides to revise the protocol in order to restore the lost funds. This causes the Ethereum blockchain to split into two separate blockchains (via a hard fork), each with its own active community: Ethereum and Ethereum Classic.

2017

  • The creation of the ERC-20 standard facilitates the development of interoperable applications. A token is a digital asset that is built using the Ethereum blockchain, and ERC-20 outlines how to build them.
  • A game called CryptoKitties, in which players gather and exchange virtual kittens is the first immensely popular Ethereum-based application. At its height, rare digital cats sell for more than $200,000, and it turns into a real craze.
  • Launched with the goal of creating useful applications for smart contract technology, the nonprofit Ethereum Enterprise Alliance Microsoft, Mastercard, Samsung, and JP Morgan are a few of the members.
  • The Ethereum blockchain sees the debut of MakerDAO, the first Decentralized Finance (or DeFi) system. The first ETH-based Stablecoin, DAI, is also introduced by Maker.
  • For the first time, ETH surpasses $100 USD.

2018

  • Compound- A lending protocol, and Uniswap, a decentralized exchange, provide DeFi launched. The project aimed to revolutionize the financial services sector by making transactions quicker, cheaper, and more secure—greater traction.
  • Release of the USDC Stablecoin with support from the Centre Consortium a collaboration between Coinbase and Circle,
  • ETH finally crosses the $1,000 USD barrier in January before tumbling back under $100.

2020

  • The Ethereum 2.0 upgrade begins in December. The complete transition from Ethereum 1.0 to Ethereum 2.0 is scheduled to take around two years to complete.
  • As part of Ethereum 2.0’s first phase, Proof of Stake is introduced. ETH 1.0 continues to use Proof of Work as its consensus mechanism.

2021

2022

  • The Ethereum Merge finally reaches fruition. The Merge did away with the requirement for energy-intensive mining and instead allowed the network to be secured using staked ETH. This is a huge success in realizing the Ethereum vision of scalability, security, and sustainability.

Some Features of Ethereum

  1. Ether

Ethereum uses the cryptocurrency ether (ETH). It is a digital and peer-to-peer currency, similar to Bitcoins, that is used to pay for computing power, transaction costs, and gas- which is the fee users pay to perform transactions on the Ethereum network. On the Ethereum platform, decentralized applications can be created and deployed using ether as payment.

  1. Smart Contracts

A “smart contract” is a self-executing program or set of functions that run on the Ethereum blockchain. It was first proposed in 1994 by Nick Szabo, an American computer scientist who invented a virtual currency called “Bit Gold” in 1998, nearly ten years before bitcoin. He is frequently rumored to be the real Satoshi Nakamoto. Smart contracts allow developers to build a wide variety of decentralized apps and tokens. They’re used in building everything from financial tools to logistics, gaming applications, and more.

  1. The Ethereum virtual machine (EVM)

The Ethereum virtual machine (EVM) is sometimes referred to as “the heart of Ethereum,” it works like a large decentralized or master computer to complete all types of tasks on the blockchain. EVM makes it easier for developers to write smart contracts and DApps in the Solidity programming language.

**NB: **Bitpowr supports Ethereum-based assets making it easy for you build dApps , DeFi platforms & exchanges, reach out to find out how we can help.

How is Ethereum different from Bitcoin?

The easiest way to define Bitcoin is it’s a form of money like the dollar. It is not regulated by any bank or central government but it’s not really a technology. It’s not a company. It’s your money, held in a digital form online.

People buy Bitcoin in order to store their money somewhere other than a bank. Some people buy Bitcoin as an investment, believing that its value will increase in a few months or years, while others buy Bitcoin in order to invest in companies that raise funds through an ICO, because equities in those companies cannot be bought with traditional currency.

On the other hand, Ethereum is another cryptocurrency but it is also a technology Ethereum’s coin value is referred to as “Ether,” and just like Bitcoin is bought and sold and used by investors to buy into ICO opportunities. The primary distinction between Ethereum and Bitcoin is that Bitcoin is merely a currency, whereas Ethereum is a ledger technology used by businesses to develop new programs. Both Bitcoin and Ethereum rely on “blockchain” technology, but Ethereum’s is far more robust.

In addition, there is heavy support behind Ethereum’s technology  The Enterprise Ethereum Alliance for instance is a super-group of Fortune 500 companies that have all agreed to work together to learn and build upon Ethereum’s blockchain technology .

Ethereum use cases

The ETH (ether) cryptocurrency that powers the Ethereum blockchain enable programmers to build new kinds ETH-based tokens ( ERC-20 token) that leverage smart contracts to power dApps and you can access these tokens and more on Bitpowr to build your exchange platforms, dApps, cross boarder payment platforms, etc.

Below are some of the major use cases that have been built on Ethereum so far.

  1. Ethereum Token Launches

Ethereum is the mechanism by which startups and large blockchain projects launch and raise money through token sales called Initial Coin Offerings (ICOs) it functions similarly to the traditional Initial Public Offering (IPO). Example of companies that leveraged ICOs to raise money are , Bancor, Polkadot, etc.

  1. NFTs on Ethereum

NFTs are tokens that we can use to represent ownership of special items. They enable us to tokenize items like artwork, valuables, and even real estate. The Ethereum blockchain secures asset ownership; no one can alter the ownership record or copy/paste a new NFT into existence. The release of the digital cat collectibles by CryptoKitties in late 2017 ignited the hype surrounding NFTs, since then its potential uses have grown rapidly. NFTs have drawn a wider audience to blockchain and crypto like the NBA, Ubisoft, and LVMH all testing NFTs.

  1. Decentralized autonomous organizations (DAOs)

Decentralized autonomous organizations (DAOs) are blockchain-based organizations that function without central authorities, and they represent an early use case discovered by Ethereum developers. They are regulated by laws that are programmed into software, and a group of stakeholders votes on administrative decisions. One of the first inventions to be tried on Ethereum was the DAO, which is still relevant today. While the 2016 hack of the ground-breaking Ethereum-based DAO marked a turning point in the history of blockchain, DAOs continue to be open-source and community-governed. Similar to the first DAO, numerous DAOs today, such as MolochDAO and MetaCartel, pool user funds to award rewards to Ethereum business owners.

  1. Stablecoins on Ethereum

**74% of stablecoins are issued on Ethereum,** these are tokens designed to stay at a fixed value, even when the price of ETH changes.

  1. Decentralized finance on Ethereum

Decentralized finance applications, sometimes known as “DeFi,” are among the most promising real-world uses for Ethereum. This includes loans supported by smart contracts, Stablecoin production, and decentralized exchanges. One project that stands out in this group is “MakerDAO,” which made use of complex Ethereum smart contracts to enable the development of a Stablecoin (DAI) that is backed by ether and has a fixed value of $1.

How is Ethereum secure?

  • Ethereum is secure because it is decentralized.
  • Ethereum uses a consensus mechanism called proof of stake
  • Ethereum uses a blockchain to record transactions, making it more secure than other blockchains with similar purposes because no one entity has control over the entire database (i.e., no one person or organization can change anything).
  • The smart contract system built into Ethereum allows users to create their own contracts that execute automatically when certain conditions are met; this makes it possible for many new applications without having to rely on third parties like banks or governments.

Conclusion

Ethereum is a technology that can be used for so much more than just cryptocurrency and blockchain. It has the potential to revolutionize industries from finance to education, from healthcare to music. With its open source ecosystem and ability to run smart contracts on its network, Ethereum could become the backbone of our future digital economy.

Bitpowr supports Ethereum-based assets making it easy for you to easily build DApps , DeFi platforms & exchanges, reach out to find out how we can help your business launch and scale next-level products.

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