What is Ethereum?

2021/04/27 08:45:24

The world of cryptocurrency has come a long way since its inception. The crypto community moves fast to make cryptocurrency a mainstream solution for different problems. There have been a plethora of use cases for cryptocurrency, and that is indicative of the fact that the crypto space is constantly developing, expanding and growing unprecedentedly.

Vitalik Buterin is a visionary that saw that Bitcoin could be more than just a digital store of value or means of facilitating payments and economic independence; he saw that the underlying blockchain technology could be harnessed to deliver more solutions than Bitcoin allowed. Buterin did not want to alter Bitcoin’s operations and functionality, but rather went to the drawing board with his team and created another amazing cryptocurrency project: “Ethererum”.

Ethereum started operations on July 30, 2015, and quickly became one of the top cryptocurrencies. At the moment, ETH is the second most valuable currency on the market. It was created to function as an open-source decentralized platform that facilitates blockchain computing, smart contracts, as well as powers the creation of different decentralized protocols.

Ethereum’s blockchain came with better ways to execute, secure, and store computational data and records. Over time, the reputation of the platform has experienced unprecedented growth and acceptance. Ethereum is capitalizing on the decentralization capabilities of the blockchain network to create amazing decentralized solutions to different problems.

Basically, Ethereum is a blockchain-based technology that allows users to transfer data to each other, but also a powerful platform that enables creation of decentralized applications (DApps) and solutions that can be used by anyone and everyone, without any interference of central authorities or third parties.

While Bitcoin is used strictly for making payments and storing value, Ethereum is not limited to payments, but also functions as a marketplace to facilitate the creation of decentralized applications where the users’ private data is safe and secure, and where there is no censorship of content.

It would be wrong to define Ethereum as a cryptocurrency or to confuse it with Ether, the native cryptocurrency of the Ethereum system.

Ethereum Protocols and Use Cases

It is amazing to know that Ethereum is a combination of different protocols that bring meaning to the platform used for the creation of DApps. At the centre of it all is the EVM (Ethereum Virtual Machine) whose function is the execution of complex algorithmic codes, meaning we can call it “Turing Complete”. The platform provides blockchain developers with the tools they need to create and run applications, based on programming languages like Solidity, Python, JavaScript, and more.

While Ethereum’s ecosystem may sound a bit complicated, it all boils down to what gets created on its blockchain. There are, however, several terms that are used quite often, and that you should know the meaning of, namely:

Decentralized Applications (DApps)

Traditional applications are called centralized because they have a central authority governing people’s private data and content. This is why we hear reports about the leaks of private data of users of popular traditional applications. DApps function differently, because their decentralization takes away the presence of a central authority to control activities on the app. Rather, the users are in full control of their data and content, and exchange of data and value happens on a peer-to-peer network without interference of any intermediaries or third parties.

DApps come in different forms and types and are present in almost every single sector of the economy.

Decentralized Exchanges (DEX)

These are the decentralized versions of the traditional crypto exchanges where the exchange holds people’s funds and may charge them for the safekeeping of the people’s funds. On DEXes, the users are in full control of their funds and can decide how they want to use their funds, as the transactions happen on a person-to-person basis.

Decentralized Finance (DeFi)

This is one use case that is causing disruptions in the Fintech industry, both within and outside the crypto community. DeFi provides users with a more transparent financial system that gives more control over their funds, as well as provide them with new and profitable ways to invest their cryptocurrency without the usual interference that is experienced with traditional finance systems. DeFi seeks to provide users with the crypto equivalent of traditional finance investment opportunities without the hassles of traditional banking and finance. It unlocks new possibilities for the users, but also removes all the intermediaries.

Non-fungible Tokens (NFTs)

This is another amazing service on the Ethereum blockchain that has already made some people millionaires. NFTs provide users and content creators with a way to have unique items represented as digital assets that can be used to prove ownership, traded, or used for other purposes including the creation of amazing opportunities for artists and unique content creators. Some artists have used NFTs to sell their artworks, and have made a lot of money from it. NFTs could also be used to distribute royalties from the sold art.

Interestingly, the NFT market is moving like wildfire, because of the amazing opportunities that it provides to users.

Decentralized Autonomous Organizations (DAOs)

This is a proven way that many crypto communities have been created in order to drive the mainstream adoption of cryptocurrency. DAOs facilitate collaborations and partnerships needed to create online communities needed to share goals and distribute pooled funds.

Conclusion

At about $2,559 per ETH, and a market cap of $295.53 billion, ETH is one of the most successful cryptocurrencies on the market, and still continues to grow. The most recent news on Ethereum mainly deals with the move to Serenity - the final post-development phase of Ethereum. The change in the concept of ether mining from proof-of-work to proof-of-stake in order to reduce the electricity costs of this process is also a recurring topic.

If you want to know more about Ethereum 2.0, or want to read more use cases, head over to Ethereum 2.0 to get to know more.