Cryptocurrency was introduced to completely change the outlook of the finance system with the banks and bring something new; leaving users in control of their of their money. Of course this was not achieved easily and has met a lot of backlash from the governments of the world but it is fair to say crypto is achieving what it was meant for and this is just the beginning. Bitcoin was the first to actualize this dream by coming out and allowing the people to save and invest their monies somewhere else. Somewhere other than the centralized banking system and hiding it under pillows and in some cases burying them in the ground.
Bitcoin is the mother of cryptocurrencies having given birth to the cryptocurrency world and allowing others to follow suite. Now, there are thousands of crypto projects with a lot being released everyday. These cryptos are in different categories which you can chose to invest in. So, when bitcoin was released and the masses started to use it, it was realized that it had some shortcomings. That is natural for any new project and something of that magnitude was bound to have a few problems that would need working on. Crypto enthusiasts realized it and started to think of ways they could contribute and solve these problems.
In 2013, one of such enthusiasts found a way. It was decided that another crypto project was going to released which would address some of these shortcomings. Of course, it was not going to be easy because building a blockchain is not an easy task and costs a lot of money. This crypto enthusiast knew this though and decided to partner with a few others to build this crypto. They started the works of the project and to raise money for the project, the held a crowdfunding event. It was in the form of a pre sale where they gave the currency of the new project to the investors of the project for investing in the project. The crypto project Ethereum was born; Ethereum 1.0.
Ethereum had one answer for bitcoin and that was smart contracts. Smart contracts would solve a number of the bitcoin shortcomings and would in turn change cryptocurrencies even further. Ethereum had the vision of building a place or a space where different developers would be able to use the blockchain to build several other projects on the Ethereum blockchains. This would act like an app store or google play store where you could come and found several applications that would help bridge the gap in crypto. The applications would be known as decentralized applications (dApps).
What Is Ethereum
Ethereum is the second largest crypto project and has always looked like the next crypto to gain very huge increase in price or value like bitcoin has. There are a lot of arguments as to what Ethereum is because of its great importance to crypto. Mostly, when you hear bitcoin, the what you hear next is Ethereum. The native coin of Ethereum is Ether which allows users to carry out different use cases on the blockchain. Ethereum is a blockchain that like bitcoin promotes decentralization. That said, it is a decentralized blockchain network.
On the Ethereum blockchain, the native currency Ether (ETH) is used to carry out transactions, take part in governance and to perform a host of other functions like staking. Ethereum has more use cases than bitcoin as it allows users to play games, trade their cryptocurrencies and have a connection to the developing NFT world. From this, you can already see how much Ethereum is contributing to crypto and the financial world.
Ethereum is the embodiment of web3.0 because it has allowed for several of dApps and social media to be developed on it. Socios.com is an example of one of such social media. Ethereum supports decentralized exchanges (DEX) and decentralized finance (DeFi). A lot of people already consider the Ethereum blockchain the future of web3 and they would not be wrong to do so.
Vitalik Buterin
Vitalik Buterin is the co founder of the Ethereum network. I mentioned earlier the cost of starting a crypto project is not cheap and so Vitalik Buterin sort for the partnership of sorts from co founders Charles Hoskinson, Anthony Di Iorio, Jeffery Wickle, Amir Chetrit and Gavin Woodto introduce Ethereum. You do not hear of these names again because they all left when they realised when who we hear about as the founder of the network, Vitalik Buterin announced that the foundation they established primarily to continue the developments of the Ethereum network was going to run as a non profit. The group before leaving hosted the pre sale event that led to an investment of more than $18M for the project.
The main aim of the Ethereum network was to address the cons of bitcoin and also provide a platform for developers who could not start their own blockchain projects to build on the Ethereum network. This dream started to come to life in the year 2016, 3 years after the release of Ethereum when developers started using Ethereum to build their own projects. The blockchain is open source so it makes it easier. However, there needed to be a system where users would vote and decided the kind of changes and additions they wanted done to the network. That led to the introduction of DAO. This way, the users who held Ether could engage in governance and vote for the projects they wanted. The projects that had the most votes would be the ones the network would allow develop.
Functions of Ethereum
Ethereum was released to do more and one of such it is done is introducing decentralized finance (Defi) and decentralized apps (dApps). These dApps run on the Ethereum network which helps to give Ethereum more use cases. The more these are used, the more the Ethereum network is known. With these dApps, there is no need for third parties because smart contracts are used to carry out the transactions. These smart contracts are codes or algorithms that execute the transactions once the terms set for the transactions have been met. The parties involved in the transaction set up terms for the transaction and the smart contracts execute them. The smart contracts are self executing and immutable. They are permanent in the sense that once the transaction has been carried out, it cannot be reversed. They are safe too.
Real life uses of the Ethereum network is by artists. Artists have their work on the Ethereum network as NFTS which quite frankly, has caught the attention of a lot of people. It was discussed almost all the time last year and still making waves this year. It is amazing how much people are willing to pay for NFTs. NFTs are worth so much and their markets run on the Ethereum blockchain network. NFTs are valued because when you hold one, you are the only one that holds it proving rarity.
The Ethereum blockchain has also allowed for several games to have these NFTs feature where the players can buy rare guns and other stuff. Purchasing these items help them to make more money by selling them. Some of these NFTS serve as bragging rights as well proving that say a player has beaten the final boss or has reached a difficult level.
Proof Of Stake Consensus Mechanism And How Ethereum Works
Bitcoin uses the Proof of Work (POW) consensus mechanism which consumes too much energy and resources. The Ethereum network works with the Proof of Stake (POS) mechanism. POS does not use up a lot of energy and so is eco - friendly. Unlike the mining process of btc and POW, Ethereum does what is called "attestation".
To be able to have the chance to validate blocks, you must stake about 32ETH if you are working alone. If you are a team though, you can stake lesser amounts each and join a validation pool to validate blocks and confirm transactions. The validators attests or confirm that the transaction is valid in the "attestation process" . It does not stop there though, that block of transaction is sent to a "committee" where another verification is done and it is voted to prove that it is valid. So, if a validator approved it and the committee disapproves the block, that validator is punished and does not earn any rewards.
The Ethereum network just like bitcoin has a blockchain which means it is on several of computers interconnected. One computer could be in Ghana while another is in the Bahamas. It helps with the security feature of the blockchain and does not allow for changing what is on the blockchain.
The rewards the validators get come from the gas fees and transaction fees users are charged for using the blockchain to carry out transactions. The gas fees are a thing of concern these days because they can get quite high.
Pros And Cons Of Ethereum
Ethereum is decentralized. Unlike other social media like twitter that can ban or block your account, social media built on Ethereum does not do that.
Ethereum puts the power in the hands if the people to decide the kind of updates they want done to the network. That is why to take part in governance, you should get some ETH and stake it to have more say.
Anyone who wants to take control of the network will need to have at least 51% control which is difficult to do. It is near impossible.
The availability of smart contracts gets rid of the third parties and allows for better and safer transactions.
Scalability is still an issue. It takes quite a while to process a transaction and with so many users using the network, it is somehow difficult.
The gas fees charged are expensive. The fees have began increasing making it difficult to carry out transactions on the network. Users might start looking at other alternatives if this persists.
How To Get ETH
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ETH is a good investment choice considering it is the most valued after BTC. At the time of writing, it was valued at $1878.47 with a market cap of $226,073,711,338.514 and market dominance of $. This is not in any way financial advice as I do not currently hold any ETH myself but I believe it is one of the cryptocurrencies to watch.
ETH like bitcoin and other cryptocurrencies can be purchased from crypto exchanges like binance, huobi,bitfinex, kukoin, among others. You can also earn it as rewards for validating transactions on the network.
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The Ethereum blockchain network is only going to increase in users and with the constant development of dApps and DEX, it stands to reason there is more to come.
Thank you.
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