Vitalik Buterin developed it in 2013, a decentralized technology that houses
digital money, applications, and global payments. It is a community-run technology
that has built a solid booming digital economy, creating new ways to earn online for
everyone globally.
Ethereum technology is famous for holding assets, building apps and organisations,
and transacting and communicating without any intervention by a central authority.
Ethereum network has its cryptocurrency, Ether, that can be used to pay for activities
on the network.
What is Ethereum?
It is a decentralized blockchain network that executes peer-to-peer
transactions securely and verifies the application code, called smart contracts. The
transaction records are verifiable, immutable, and securely distributed across the
network, giving participants complete ownership and visibility into transaction data
sent and received by user-created Ethereum accounts. The sender must sign all
transactions to spend Ether as a cost of processing transactions on the network.
It is designed to be programmable, scalable, secure, and decentralised. It is
one of the most preferred blockchain choices for developers creating technology-
based changes in industries’ operations.
Why should you use Ethereum?
Even though the Ethereum story is still unveiling, here are a few reasons one should
use Ethereum:
- Faster and Cheaper Cross border Payments: Stablecoin is a faster yet cheaper
alternative to the global payment system. There are plenty of stablecoins built on the
Ethereum network, simplifying the process of overseas monetary transactions. An
average bank or financial institution takes a couple of business days to transfer
funds globally. However, with Ethereum-based stablecoin, one can move funds in no
time and at a fraction of the cost. Also, unlike a regular bank, there is no upper limit
or extra fees attached to the amount that can be transacted. - Hello Ether, Ethereum’s cryptocurrency: Ethereum has its native currency
called Ether (ETH). ETH is purely digital and transactional globally and instantly. The
supply of ETH is entirely decentralised and transparent, as any central authority or
company doesn’t control it. New tokens are mined (created) by miners who maintain
the network. There is a specific fee that one has to pay to use the Ethereum network.
The fee is usually a small amount of ETH, which provides a certain amount of
computational power to use the network.
What does Ethereum do?
Ethereum is a lot more than just digital money. Here is all that Ethereum does:
Bank for everyone: One may or may not have access to banking and financial
services. But with Ethereum, you only need an internet connection to access its
borrowing, lending, and savings products.
● More private: Ethereum is a value-based economy and not surveillance. One
does not need to enter personal information to use an Ethereum app.
● Censorship-resistant: Like any other blockchain network, Ethereum, too, is
entirely decentralised. This means that no central authority or government
controls Ethereum, making it impossible for anyone to stop transactions on
the network. All products are compostable: All the applications are built on the
identical blockchain, which means they share the global slate and can build
off each other (like building blocks or legos). This enables better experiences
and product creation at all times.
● P2P network: No middlemen are required. It allows you to make
agreements or move money directly with someone else without any
intermediary intervention.
Difference between Ethereum and Bitcoin
Ethereum is built on Bitcoin’s innovation and was launched in 2015. However, here
are some differences between these two crypto giants:
Ethereum is Programmable: Bitcoin and Ethereum allow you to use digital money
without banks or any other central unit. However, it is programmable,
meaning you can always build decentralised apps that use the blockchain to control
and store data on its network. It stands limitless in terms of what it can do,
making room for innovation at every step.
Ethereum is a marketplace: Bitcoin is purely a payment network. In contrast,
it is more like a marketplace that offers financial services, social networks,
games, and other apps that cannot censor you and hold your privacy in the highest
regard.
The Merge
The Merge is often called a visionary move executed on September 15th, 2022. It
represents the amalgamation of the existing execution layer of Ethereum, which is
the Mainnet, with its new proof-of-stake layer, the Beacon Chain. It has eliminated
Energy-intensive mining and secured the network using proof-of-stake ETH, making
it more scalable, sustainable, and secure.
Currently, all accounts on it are balanced through smart contracts and
secure through a proof-of-work consensus. However, Beacon Chain runs on a proof-
of-stake approach, meaning once the two systems merge, the proof-of-work
agreement will be permanently eliminated from the Ethereum network. Mining will no
longer be the process of producing new blocks, and this merger marks the shift
towards using Beacon Chain as the source of block production.
The Merge was one of the most anticipated and significant upgrades in the history of
Ethereum. It has navigated Ethereum towards a more sustainable and eco-friendly
future.
Why was the Merge essential?
The Merge was the need of the hour as it will reduce Ethereum’s energy
consumption by roughly 99.95%, which is enormous. It is because proof-of-work
consensus is highly energy-consuming, and the merge will mark the end of this
consensus in Ethereum’s network. It also sets a platform for scaling upgrades like
sharding in the future.
Use cases of Ethereum
Non-Fungible Tokens (NFTs)
NFTs are unique-indivisible digital tokens that are useful for proving the origin of rare
assets. NFTs are artworks tokenise by the artists to ensure their work stays unique
and belongs to them. The ownership information is recorded on the blockchain
network. NFTs are highly popular in the gaming industry as they allow coaction
between gaming platforms.
Ethereum’s first NFT project was CryptoKitties, which allowed customers to collect
cat collectables digitally, backed using NFTs.
Decentralised Finance (DeFi)
DeFi is a network of financial applications develop on blockchain networks. Therefore, DeFi
differs from current financial networks as they are open and programmable. They
operate without a central governing authority, allowing developers to develop new
models for investments, payments, lending, and trading. Customers can quickly build
secure decentralised applications using smart contracts. Some popular DeFi
platforms are UniSwap, Compound, Aave, and MakerDAO.
Key Takeaway!
Hence, Ethereum is moving towards a sustainable future and is here to stay. If you are new
to crypto, you must check out What is Cryptocurrency and How it Works here.