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What is Ethereum - All you need to know

  • Ashesh Anand
  • Sep 28, 2021
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What Is Ethereum?

 

Ethereum is a blockchain platform that has its own cryptocurrency, Ether (ETH), as well as its own programming language, Solidity.

 

Ethereum is a decentralized public ledger for validating and recording transactions as a blockchain network. Users of the network may build, publish, monetize, and utilize apps on the platform, and they can pay using Ether, the network's cryptocurrency. Insiders refer to the network's decentralized apps as "dApps."

 

(Also Read: 3 Types of Blocks in Blockchains )

 

After Bitcoin, Ethereum is considered the second most popular cryptocurrency. Unlike Bitcoin and most other virtual currencies, however, Ethereum is designed to be far more than just a medium of trade or a store of wealth. Ethereum, instead, refers to itself as a blockchain-based decentralized computer network. Let's look at what this entails in more detail.


This is the image of Ethereum's co-founder and CEO Vitalik Buterin.

Vitalik Buterin ( Co-Founder and CEO) {source}


Founders of Ethereum

 

Ethereum was created by a small group of blockchain enthusiasts in July 2015. Joe Lubin, the creator of ConsenSys, a blockchain application developer based on the Ethereum network, was among them. Vitalik Buterin, another co-founder, is credited with inventing the Ethereum idea and currently acts as the company's CEO and public face. Buterin has been dubbed "the world's youngest crypto millionaire" by some as he was born in 1994.

 

(Also Read: Digital Currency and Cryptocurrency - Types and Benefits )

 

 

Understanding Ethereum

 

Ethereum was developed to let developers construct and publish smart contracts and distributed apps (dApps) without the danger of downtime, fraud, or third-party intervention.

 

"The world's programmable blockchain," referring to itself, according to Ethereum. It differs from Bitcoin in that it is a programmable network that acts as a marketplace for financial services, games, and apps that can all be purchased using Ether money and are free of fraud, theft, and censorship.

 

The Ether coin was created with the Ethereum network in mind. However, Ether is currently accepted as a method of payment by some retailers and service providers, similar to Bitcoin. Ether is accepted by Overstock, Shopify, and CheapAir, among other online retailers.

 

(Also Read: Most stable Cryptocurrencies in 2022 )

 

 

The Ethereum Industry

 

According to Gartner Research, Ethereum's major competitors for corporations investing in a blockchain software platform include Bitcoin, Ripple, IBM, IOTA, Microsoft, Blockstream, JP Morgan, and NEO.

 

Ethereum, like all cryptocurrencies, is based on a blockchain network. A blockchain is a decentralized, distributed public ledger that verifies and records all transactions.

 

Watch this video on: What is Blockchain?



It's distributed in the sense that everyone on the Ethereum network has an identical copy of this ledger, which allows them to observe all previous transactions. 

 

It's decentralized in the sense that the network isn't run or controlled by a single organization, but rather by all of the distributed ledger owners. 

 

Cryptography is used in blockchain transactions to keep the network safe and verify transactions. People use computers to "mine," or solve complicated mathematical equations that confirm each transaction on the network and add new blocks to the system's blockchain. 

 

Participants are given cryptocurrency tokens as an incentive. These tokens are known as Ether in the Ethereum system (ETH).

 

(Also Read: Centralized and Decentralized Cryptocurrency exchanges )

 

Ether, like Bitcoin, may be used to buy and trade goods and services. Its price has also risen rapidly in recent years, making it a de facto speculative investment. 

 

However, Ethereum is unique in that users may create apps that "run" on the blockchain in the same way that software "runs" on a computer. Personal data may be stored and transferred, and complicated financial transactions can be handled using these programs.

 

In the very volatile cryptocurrency market, Ether is a challenger. Ethereum was the second-largest cryptocurrency in terms of market capitalization behind Bitcoin as of May 2021. It has a market valuation of $500 billion, according to Analytics Insight, compared to Bitcoin's $1.080 trillion.
 

Binance Coin, Dogecoin, Cardano, Tether, XRP, Internet Computer, Polkadot, and Bitcoin Cash are the other eight coins on the Top 10 list.

 

Watch this video on: What is Ethereum? Everything you need to know.




 

( Also Read: Top 10 companies adopting Bitcoins )

 


This image depicts that different applications can be developed with use cases in a broad range of services and industries ranging from Finance, Real Estate, Insurance over the Ethereum Platform.

Applications and Projects being developed on Ethereum


 

Projects based on Ethereum

 

The Ethereum platform promises to be able to "codify, decentralize, secure, and exchange just about anything." Several projects are in the works to put the notion to the test.

 

Ethereum Blockchain as a Service (EBaaS) will be available on the Microsoft Azure cloud thanks to a cooperation between Microsoft and ConsenSys. Its goal is to provide Enterprise clients and developers with a cloud-based blockchain developer environment that can be accessed with a single click.

 

Advanced Micro Devices (AMD) and ConsenSys announced a partnership in 2020 to build a network of data centers based on Ethereum's infrastructure.


 

Bitcoin vs. Ethereum

 

Bitcoin's main purpose is to serve as digital money and a store of wealth. Ether may be used as virtual money and a store of value, but the Ethereum network's decentralized nature allows users to develop and operate apps, smart contracts, and other transactions. These features are not available in Bitcoin. It is only used as a medium of exchange and a store of value.

 

(Also Read: How to mine Bitcoin? )

 

To put it another way, Ethereum aspires to be more than just a cryptocurrency. It aspires to be a platform for all types of apps that can securely store data.

 

Watch this video on: Ethereum vs Bitcoin - What sets them apart?



Despite their differences, the two are the founders of virtual currencies that have become competitors in the world of investment. And virtual currencies are exactly that: coins with no physical presence that are represented by a string of codes that may be traded at a price agreed upon by a buyer and seller.

 

Ethereum is also faster at processing transactions. “On the Bitcoin network, new blocks are verified once every 10 minutes, whereas, on the Ethereum network, new blocks are validated once every 12 seconds,” explains Gary DeWaal, chair of Katten's Financial Markets and Regulation group. And, he adds, future improvements might make Ethereum transactions even faster.

 

Finally, there is no cap on the number of possible Ether tokens, whereas Bitcoin will only issue 21 million coins.

 

( Also Read: Litecoin - Meaning and How it works )


 

Understanding Ethereum

 

The Ethereum founders were among the first to see the potential of blockchain technology for applications beyond safe virtual currency exchange. Its ETH coin was designed primarily as a payment method for apps developed on its platform.

 

(Must Read: How can Blockchain be used in Financial Services? )
 

Its security against hackers and other snoopers has offered up new options for storing sensitive data ranging from medical records to voting systems. Because of its dependency on bitcoin, programmers were able to build and promote games and commercial apps on the network.


 

Advantages of Ethereum

 

  • Existing network with large size:

 

 According to Fromm, “the merits of Ethereum include a tried-and-true network that has been tested via years of operation and billions of dollars in value moving hands.” “It boasts the greatest ecosystem in blockchain and cryptocurrency, as well as a huge and dedicated worldwide community.”

 

  • A wide range of functions are available: 

 

Ethereum may be used to conduct various sorts of financial transactions, execute smart contracts, and store data for third-party applications in addition to being utilized as a digital currency.

 

  • Constantly evolving:

 

Ethereum's developer community is always seeking new methods to enhance the network and create new applications. “Ethereum tends to be the favored blockchain network for innovative and interesting (and sometimes dangerous) decentralized apps because of its popularity,” Avital explains.

 

  • Avoids the need for middlemen:

 

 The decentralized Ethereum network promises to free users from third-party intermediates like attorneys who create and interpret contracts, banks that function as financial intermediaries, and third-party site hosting providers.



This image depicts the benefits of a decentralized network which include Immutability, Corruption, and tamper-free and secure i.e protected against hacking and fraudulent activities. Ethereum takes this a step forward making the process of creating blockchain applications even easier and efficient as instead of having to build an entirely new blockchain for each of the applications, Ethereum gives the developers liberty for the development of potentially thousands of different applications all on the same platform.

Benefits of Blockchain and How Ethereum takes it a step forward


 

Disadvantages of Ethereum

 

  • Costs of transactions are increasing:

 

The rising popularity of Ethereum has resulted in increased transaction fees. In February 2021, Ethereum transaction costs, commonly known as "gas," reached a new high of $23 per transaction, which is fantastic if you're trying to make money as a miner but less so if you're attempting to utilize the network. This is because, unlike Bitcoin, where transaction verifiers are rewarded by the network, Ethereum compels individuals involved in the transaction to pay the fee.

 

  • Inflationary potential for cryptocurrency:

 

While Ethereum has an annual limit of 18 million Ether, there is no lifetime restriction on the number of currencies that may be created. As a result, Ethereum may behave more like dollars as an investment and may not appreciate as much as Bitcoin, which has a tight lifespan restriction on the number of units.
 

  • Developers have a steep learning curve:

 

As developers move away from centralized processing and toward decentralized networks, Ethereum might be tough to grasp.

 

  • The Future is unknown:

 

 Ethereum continues to expand and improve, and Ethereum 2.0's continuing development promises additional features and increased efficiency. However, the network's big upgrade has created uncertainty for present apps and partnerships. 

 

According to DeWaal, “many more validators will be necessary for Ethereum 2.0 to function.” “The question is whether the migration will be successful. Several new aspects must be integrated!”
 

(Must Read: What is the future of Cryptocurrency? )


 

How Long Does One Ethereum Take to Mine?
 

The amount of time it takes to mine Ethereum and get Ether mining rewards is determined by the hash rate, power consumption, energy cost, and any fees paid to a mining pool and/or hosting provider. 

 

These factors have a direct influence on profitability, mining difficulty objectives, and the crypto market's overall price performance. It is predicted that mining one ETH will take 51.8 days using the default calculations of this popular Ethereum mining calculator.

 

(Also Read: Mining Pools - An economic way to mine crypto )


 

Final Words

 

According to DeWaal, there are several reasons to consider investing in the Ethereum network. “First, it has value and uses as a virtual currency; second, the Ethereum blockchain may become more appealing when it migrates to the new protocol; and third, demand for ETH may rise as more people use Ethereum distributed apps,” he adds.

 

Other than buying Ether directly, you might consider investing in firms that are developing Ethereum-based apps.

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