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Ethereum : A 4 Points Guide Everyone Should Read

What is Ethereum?

Ethereum is a decentralized open-source blockchain with smart contact(a transaction protocol that executes automatically)  functionality. Among cryptocurrencies, it is the second only to Bitcoin in market capitalization.

The vision of Ethereum is to create an unstoppable, censorship resistant, self-sustaining decentralized world computer. Ethereum is  built on the concepts we see with Bitcoin.

Ethereum has a public blockchain running on 15,000 computers and the token on the blockchain is called Ether, currently the second most popular cryptocurrency after Bitcoin.

Like Bitcoin, Ethereum is also a bunch of protocols written as code which run the  Etherium software which creates Ethereum transactions containing data about Ether coins recorded on Ethereum blockchain. Unlike Bitcoin, Ethereum transactions can contain more than just payment data and much more than simple payments.

History of Ethereum

Ethereum
Image by Miloslav Hamřík from Pixabay
  1. Inception and Development: Vitalik Buterin published the Ethereum whitepaper in late 2013, outlining the concept of a decentralized platform that could support the creation of decentralized applications (DApps) and smart contracts. The Ethereum Foundation was established in early 2014 to oversee the development and promotion of the platform.
  2. Ethereum’s Crowdfunding: In July 2014, Ethereum conducted an Initial Coin Offering (ICO) to fund the project’s development. Ether (ETH), the native cryptocurrency of the Ethereum network, was sold to participants in exchange for Bitcoin. This ICO raised over 31,000 BTC (equivalent to approximately $18 million at that time).
  3. Frontier Release: On July 30, 2015, Ethereum launched its first live version called Frontier. It allowed developers to start building decentralized applications on the Ethereum blockchain. This release was considered experimental and targeted primarily at developers and early adopters.
  4. Homestead and DAO Hack: In March 2016, Ethereum introduced the Homestead version, which included various improvements and stability upgrades to the platform. However, in June 2016, a significant event known as the DAO (Decentralized Autonomous Organization) hack occurred. A vulnerability in a smart contract allowed hackers to siphon off approximately one-third of the funds held in the DAO, resulting in a contentious debate about the future of Ethereum.
  5. Hard Forks: In response to the DAO hack, the Ethereum community decided to execute a hard fork to recover the stolen funds. The hard fork resulted in two separate chains: Ethereum (ETH), which continued on the new forked blockchain, and Ethereum Classic (ETC), which maintained the original blockchain without altering the transactions related to the DAO hack.
  6. Metropolis, Constantinople, and Istanbul: Following the DAO hack and the subsequent hard fork, Ethereum continued its development. In October 2017, the Metropolis upgrade was implemented, which consisted of two hard forks: Byzantium and Constantinople. These upgrades introduced various improvements, such as enhanced privacy, reduced mining rewards, and lower transaction fees. Istanbul, another hard fork, followed in December 2019, further optimizing the Ethereum network.
  7. Ethereum 2.0 and Proof of Stake: One of the most significant milestones in Ethereum’s history is the ongoing transition from the current proof-of-work (PoW) consensus mechanism to a proof-of-stake (PoS) model. This upgrade, known as Ethereum 2.0 or Eth2, aims to enhance scalability, security, and energy efficiency. The transition started in December 2020 with the launch of the Beacon Chain, which introduced PoS.
  8. The DeFi and NFT Boom: Ethereum has been instrumental in the rise of decentralized finance (DeFi) and non-fungible tokens (NFTs). DeFi applications built on Ethereum allow users to participate in various financial activities, such as lending, borrowing, and decentralized trading. NFTs, which gained significant popularity in 2021, utilize Ethereum’s smart contracts to represent unique digital assets like art, collectibles, and virtual real estate.
  9. Continued Development: Ethereum remains an active and evolving platform, with ongoing development and improvements. The Ethereum community and developers are working on future upgrades, including the implementation of shard chains to enhance scalability and the full transition to Eth2.

Also read about: Ethereum merge.

Also read about: Ethereum Gas.

Similarities between Ethereum and Bitcoin

  1. Ethereum’s  token is called Ether(ETH).  This is a  cryptocurrency that can be traded  for other cryptocurrency like BTC. ETH ownership is tracked on the Ethereum blockchain just like BTC ownership tracked on Bitcoin’s blockchain.
  2. Like Bitcoin, anyone can take Ethereum software to modify it slightly and create private networks that are not connected to the main public network. Although    the  private tokens won’t be compatible with the public tokens just like private Bitcoin networks.
  3. Like Bitcoin, the main Ethereum network is a public permissionless network. Anyone can download or write some software to connect to the network and start creating transactions, smart contracts and mining blocks.
  4. Like Bitcoin mining participants create valid blocks by spending electricity to find solutions to a mathematical challenge. Ethereum’s proof-of-work maths challenge called Ethash, works slightly different from Bitcoins and allows more common hardware to be used, which are designed to be more energy efficient and mining can be started with less capital.

Why to invest in Ethereum?

  1. Ethereum has shown significant growth since its inception, with the value of Ether (ETH) increasing substantially over time. As the second-largest cryptocurrency by market capitalization, Ethereum has proven its staying power and potential for long-term growth.
  2. Ethereum has been gaining a lot of attraction because it is on 2nd place in terms of market share, trying to catch up to Bitcoin. It’s the leading network for decentralized applications, such as non-fungible tokens(NFT) marketplaces and decentralized finance(DeFi) projects. It has a lot of potential, and the more developers are taking part on the blockchain, the better chance of Ethereum to make a long run.
  3. The recent transition to Ethereum 2.0, which includes the shift to a proof-of-stake (PoS) consensus mechanism, promises to improve the network’s scalability, security, and energy efficiency. This upgrade is attracting more users and developers to the Ethereum ecosystem, potentially increasing the value of Ether.
  4. Ethereum has a well-established infrastructure, including wallets, exchanges, and development tools, making it relatively easy for individuals and businesses to engage with the ecosystem. This infrastructure provides liquidity and accessibility, enhancing the investment potential of Ethereum.

However, it’s important to note that investing in cryptocurrencies carries risks, including price volatility, regulatory uncertainties, and technological challenges. It’s advisable to conduct thorough research, consider your risk tolerance, and seek professional advice before making any investment decisions.

Ruchi Tomar
Ruchi Tomarhttps://financiallanes.com
A full time blogger from last 1 year. experienced in content writing.
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