What is Ethereum Explained
What is Ethereum?
If Bitcoin (BTC) is the future of money, then what is Ethereum? For those unfamiliar with the cryptosphere, this is a reasonable question. Likely because of everywhere in the exchanges and news, Ethereum and its native cryptocurrency Ethereum (ETH) are appearing alongside Bitcoin. However, it would be unfair to assume that Ethereum is in direct competition with Bitcoin. There are multiple lenses, features, and even technologies.
Ethereum is a decentralized blockchain network using Ethereum, where users can trade non-fungible tokens (NFT), benefit from the holding, use and storage of non-fungible tokens (NFT), and cryptocurrency trading. You can play games, use social media and more.
Currently a Proof of Work (PoW) blockchain, we are moving to Proof of Stake (PoS) with Ethereum 2.0 for scalability and a more environmentally friendly approach.
Many see Ethereum as the next stop on the internet. If a centralized platform like the Apple App Store represents Web 2.0, a decentralized user management network like Ethereum is Web 3.0. This “new generation Web” supports, for example, decentralized applications (DApps), decentralized finance (DeFi) and decentralized exchanges (DEX).
All are automated and reliable versions of traditional and widely used Internet and financial usage. DeFi already has billions of total value trapped in the project and is expected to grow further.
History of Ethereum
Ethereum has not always been the second largest blockchain project in the world. Vitalik Buterin actually co-created a project to address Bitcoin’s shortcomings. Buterin published a white paper on Ethereum in 2013 that details smart contracts (automatic and immutable “what if” statements) that enable the development of distributed applications. DApp development already exists in the blockchain space, but the platform is not interoperable. Buterin wants Ethereum to integrate them. For him, integrating the way DApp works and interacts is the only way to stay engaged.
Thus Ethereum 1.0 was born. Think of it like the Apple App Store. Space for tens of thousands of different apps, all following the same set of rules, only this set of rules is hard-coded into the network and enforced autonomously, allowing developers to enforce their own rules in the DApp … central part for Apple to modify and apply the rules. Instead, the power rests in the hands of those who act as a community.
How does Ethereum work?
Like Bitcoin, the Ethereum network exists on thousands of computers around the world, with users participating as “nodes” rather than centralized servers. This decentralizes the network and makes it less vulnerable to attacks, making it essentially less likely to crash. If one computer crashes, it’s okay because thousands of other computers are blocking the network.
Ethereum is essentially a single distributed system that runs computers called Ethereum virtual machines (EVMs). Each node contains a copy of this computer. That is, you need to validate all dialogues so that everyone can update their copy.
Ethereum vs Bitcoin
Bitcoin is the most common cryptocurrency, but the Ethereum community has the ambition to expand its projects. Money means digital money, which serves its purpose wisely. However, Bitcoin has its limits. This is a POW network that is struggling to expand, and some believe that the network is of value similar to gold. Bitcoin also has a strict limit of 21 million coins, which makes this argument possible even further. Meanwhile,
Ethereum aims to surpass today’s internet infrastructure. We plan to automate many processes that still require intermediaries, such as using the app store and working with fund managers. ETH is used as a way to interact with the network, not as a way to transfer funds, but it is possible.
What has been achieved with Ethereum?
Decentralized finance is perhaps the greatest achievement of the Ethereum network. DApps capable of performing many functions in the ecosystem will appear around 2019–2020 and become more and more popular. The more DApps used, the more Ethereum networks will be used. The Ethereum DeFi scene is the biggest scene in the market, and successful DApps have brought more recognition to the platform over the years.
For example, artists make millions of dollars putting their work on the blockchain through non-fungible tokens (NFTs). You may be wondering why you buy digital art when you can take screenshots. Collectors want the property, that’s why. NFT also retains proof of ownership and acts as a form of secure storage. It’s basically an all-in-one for collectors, so it’s not hard to find attractive.
This is exactly why you want the original “Mona Lisa” to be just a copy, even if the copy is indistinguishable from the original. NFTs also represent objects and accessories that can be used in online games. Players can decorate their homes and characters with the artist’s unique assets, providing advertisers with another source of income.
Advantages of Ethereum
In addition to decentralization and anonymity, Ethereum has many other advantages, including the absence of censorship. For example, if someone tweets something offensive, Twitter can choose to delete it and punish the user. However, on Ethereum-based social media platforms, this can only happen if the community votes. In this way, users with different points of view can discuss as they see fit and each can decide what to say and what not to say.
Community requests also prevent bad guys from being hacked. Attackers have to check 51% of the network to make changes, which is next to impossible. Much safer than a simple server that could be compromised.
Then there are the smart contracts that automate many of the steps that central government takes on the traditional web. For example, Upwork freelancers need to use the platform to find clients and set up payment contracts. Upwork’s business model uses a fixed percentage of each contract to pay for things like staff and server costs. With Web 3.0, customers can easily create smart contracts that “when a job is delivered in X hours, the money is released.” The rules are codified in a contract and once written, neither party can tamper with them.
Ether redemption has never been easier. Companies like PayPal and its subsidiary Venmo support fiat to cryptocurrency purchases directly within the app. Given the millions of customers on each platform, they are forced to join as soon as possible.