The realm of Blockchain is almost 15 years old. There have been ups and downs; some investors are making millions while others are losing dramatically. Ethereum is one of the crypto projects that has survived and thrived for nearly a decade in the crypto realm.
Many know the second-largest crypto network as a global network of computers. At launch, its primary mission was decentralizing the slightly centralized crypto realm.
A Brief Introduction
What is Ethereum?
First, Ethereum is the second largest cryptocurrency and blockchain ecosystem in the crypto realm.
What is a blockchain?
A blockchain network is a ledger technology designed to store details or data about transactions—mostly cryptocurrency transactions. Ethereum stands out as that type of ledger technology, leveraging open-source software to provide a home for the world’s second-largest crypto asset, Ether.
Everything is centralized in the conventional finance system, leaving everyone a slave to policies and regulations designed primarily to benefit centralized authorities. However, the goal of the dawn of Ethereum is utmost decentralization.
Ethereum, like its predecessor, Bitcoin, aimed to create a financial universe without intermediaries impacting transactions. However, Ethereum was not entirely built for finance.
Ethereum was created to provide a platform for developers to build decentralized applications such as smart contracts, non-fungible tokens, Decentralized finance, DAO, and more.
The network almost entirely relies on smart contracts, a system that eliminates intermediaries in agreements. Smart contracts are coded to function with predefined rules.
The Brief History of Development
Ethereum was proposed in late 2013 by Vitalik Buterin as a technological and financial revolution. In the same year, Mr Buterin published Ethereum’s whitepaper.
The white paper impressed many people. Vitalik Buterin was joined almost immediately by several brilliant individuals, including Charles Hoskinson, Amir Chetrit, Gavin Wood, Jeffrey Wilcke, Joseph Lubin, Anthony Di Iorio, and Mihai Alisie.
Later, in 2014, Vitalik presented his idea at a Florida-based Bitcoin conference. The founding parties raised funds through the sale of Ether in late 2014. It was later launched in 2015.
Final Stress Test Olympic and Launch: 2015
Before officially launching in July 2015, Ethereum did its last Proof of Concept on May 9 2015, with Olympic. During this Olympic testnet, developers who participated in stress testing the network, which included trying to overload it, were promised super high rewards.
The Olympic Testnet tested Ethereum’s ability to handle high traffic, including Transaction Activity, Mining Prowess, Virtual Machine Usage, and General Punishment.
Later, on July 30, the first/genesis block of the Ethereum network was mined, dawning the next big thing in the realm of crypto.
How Does Ethereum Work?
Ethereum is inherently an open-sourced system designed to provide autonomy and decentralize activities. So, how does this second-largest Blockchain operate? Well, it has a few implanted protocols, including:
Smart Contracts
The most important part of the Ethereum network is the smart contract system. But what is a smart contract?
A smart contract is a computer program designed to execute, control and document actions or events autonomously. Consider this: you want to implement an agreement. Traditionally, you would go through the processes of signing physical contracts, getting approval, etc.
In a smart contract setup, the codes are predetermined and written, and everything is executed once all the needed terms are met. The idea of making contracts smart is eliminating intermediaries.
Smart contracts defining features are:
- Automated Execution
- Decentralization and Trustlessness
Smart contracts have many applications in financial transactions, supply chain management, real estate transactions, and insurance claims.
But what benefits come with smart contracts? Well, autonomous contracts offer transparency, efficiency, and security.
Ethereum Blockchain
Another essential part of Ethereum is the Blockchain. This is the ledger storing data about activities associated with Ethereum. In the chain, you will find details of transaction history, details, accounts, smart contract codes, etc.
The Consensus Mechanism
Consensus mechanisms are critical to blockchains, which are ever-moving machines. So, what consensus mechanisms are applied in the Ethereum blockchain?
At dawn in 2015, Ethereum leveraged the most popular consensus at the time, Proof of Work. Proof of Work demanded high resource usage, including computing power and electricity to mine Ethereum.
In 2022, Ethereum migrated from PoW to Proof of Stake, a consensus demanding that network validators stake some coins before participating in network security. Since 2022, PoS has gained usage within the Ethereum realm.
According to reports, Ethereum demands that users deposit 32 ETH to qualify as network validators.
The Ethereum Virtual Machine (EVM)
The Ethereum Virtual Machine is designed to convert human language into machine language, enabling the creation of smart contracts. Ethereum designed its unique programming language called solidity, which developers primarily use in writing smart contracts. But machines cannot understand the language.
The role of the Ethereum Virtual Machine is simply converting smart contracts to machine language, specifically opcodes. EVM can run over 150 opcodes.
Ether (The Coin)
The coin Ether is native to the Ethereum chain. It is the second largest crypto asset, with a market cap of about $400 billion. Ether is the primary part of every Ethereum-based transaction, helping to settle gas charges.
When writing this article, Ethereum was trading at $3.6K, almost $1K below its all-time high of about $4.7K. With Bitcoin halving around the corner, Ether will make insane surges, probably surpassing $10K.
Ether is indeed a vital aspect of the Ethereum blockchain.
How Ethereum Differs from Bitcoin
Ethereum, as already established, is the second largest blockchain network, following the success of Bitcoin. However, the two differ vastly in the following facets:
- Purpose: The primary function of Ethereum is to provide a home for the creation of decentralized applications in the form of smart contracts. It is a place where developers can create various applications related to finance and non-finance. Contrarily, Bitcoin was created as a medium of exchange and a store of value. It is a network that provides a potent form of money.
- Consensus: Another key difference is the type of consensus. While Bitcoin uses Proof of Work, Ethereum recently adopted the Proof of stake consensus mechanism.
- Future: Both Ethereum and Bitcoin have very high potential ceilings. Ethereum’s support for smart contracts made it a hotspot for DeFI, gaming, and NFTs. In recent years, Bitcoin has been shaping up as a home for a decentralized ecosystem, supporting ordinal NFTs and BRC-20 tokens.
What are The Real-World Use Cases
As the second largest crypto network, Ethereum has earned many use cases within and outside the crypto ecosystem. Among the widespread use scenarios include:
Decentralized Finance
One of the most powerful use cases of the Ethereum blockchain is in decentralized finance. Ethereum remains the most known DeFI home as of early 2024. Ethereum enables smart contract-powered loans, decentralized exchanges, DeFI lending and general stablecoin minting.
Non-fungible tokens
NFTs are a trend that has been gaining immense traction, especially since early 2022. This class of tokens has gained use in sports, music, and general entertainment.
Smart Contracts and DApps
Decentralized applications, NFTs and DeFI are all possible within the Ethereum blockchain because of smart contract capabilities.
Digital Identity
Digital identity is gaining higher demand as the internet seemingly takes over how people interact. As such, more than ever, secure digital identity systems are needed. Ethereum provides a platform where people can enjoy a decentralized self-sovereign identity. The identity is helpful in financial services, employment, travel, voting and even healthcare.
Supply Chain Management
The management of supply chains involves planning, organizing, controlling and even tracking the movement of goods from suppliers to clients. Ethereum’s transparency and immutability provide a suitable platform where people can build permanent ledgers.
Gaming
NFTs and DeFI projects play a significant role in the revolution of the gaming realm. The blockchain universe has widely popularized the concept of play-to-earn, specifically NFTs and DeFI tokens. Games like Gods Unchained and Axie Infinity are very popular.
Healthcare Data Management
The sensitivity of health records demands that they are stored very securely to avoid any data breaches. The blockchain network can help minimize the number of people with access to such data, which is only the patient and the medical experts.
Metaverse
The Metaverse, or, as widely defined, the digital universe, Metaverse provides a platform where people can interact and even work together in the comfort of their homes. Decentraland and Sandbox are significant players in the metaverse world.
Ether as a Currency
The native token Ether remains a valid token as a medium of exchange. Various stores accept the coin for payment of goods and services.
Advantages of Ethereum
So, what are the benefits of the Ethereum network? Here are a few advantages:
- Banking for Everyone: Accessibility through an internet connection.
- Open Internet: Empowering users to control their assets and identity.
- Peer-to-Peer Network: Direct coordination and asset transfer without intermediaries.
- Censorship-Resistant: No centralized control by governments or companies.
- Commerce Guarantees: Secure transactions with predefined rules.
- Composable Products: Shared global state for building interconnected applications.
Conclusion
The Ethereum blockchain stands out as the second largest and most popular in the realm of crypto. It is not just a blockchain but an entire ecosystem, hosting a large number of small decentralized applications (DApps). These DApps are successful because of the ever-expanding blockchain network Ethereum.
Is the future promising for Ethereum?
The price predictions above indicate that Ethereum will likely have a very successful future. But how? Analysts predict that by the end of 2025, Ethereum will be nearing $10k, being among the few crypto assets to hit the mark.
So, what should you do now?
While Ethereum is might not hit 10x or 100x gains in the coming bull season, it could surprise many and hit 3x-5x gains, which means It is a good asset.
