What Is Ethereum? Introduction To ETH
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What is Ethereum?
Ethereum is an open software blockchain network originally designed by Vitalik Buterin, Gavin Wood, and Joseph Lubin. As a decentralized platform that supports smart contracts, the Ethereum Virtual Machine provides the backbone for a wide variety of distributed applications (dApps). Ether (ETH) is the cryptocurrency token that allows for transactions between participants in the Ethereum network, and it is the second-largest blockchain token by market capitalization after Bitcoin.
Introduction To Ethereum
When Bitcoin captured the world’s attention in the early 2010s, few imagined how revolutionary it actually was. Vitalik Buterin, Gavin Wood, and Joseph Lubin did, though, when they started work on The Ethereum Project in 2014.
Thinking beyond currencies, Ethereum was imagined as a decentralized blockchain-based platform that can host a variety of decentralized applications. In an increasingly cloud-based world, it’s an ideal solution that quickly gained popularity and support.
Bitcoin was targeted at consumers, but Ethereum was the first crypto project built with enterprise in mind. The Enterprise Ethereum Alliance helps forge B2B partnerships on the network with names like Samsung, Microsoft, Intel, J.P. Morgan, Cornell University, and MasterCard involved.
Ethereum’s launch changed the game and made blockchain and crypto legitimate disruptive technologies. It’s also consistently been one of the cryptos with the highest market caps. Before explaining why Ethereum is so revolutionary, let’s review the performance of Ethereum’s ETH crypto coin (also called Ether) on the market.
Breakdown of ETH Crypto Market Performance
The peak price so far of Ethereum ETH was $1,389.18 on January 14, 2018. Daily trading volume is approximately $1 billion, and it’s accepted by pretty much every exchange, ICO, and crypto platform in existence.
ETH’s summer 2014 crowdsale is one of the first and most successful ICOs of all time, raising $18,300,000 worth of BTC. It’s no longer the most successful ICO ever – that crown belongs to EOS, which raised over $4 billion, which, along with the majority of the top ICOs of all time started as dApps on the Ethereum Network.
Approximately 61 million ETH were released at launch in 2015, and over 40 million have been mined since. It’s mined using a Proof of Work (PoW) algorithm, although this may change now that ASIC ETH mining rigs are in the mix. A Proof-of-Stake change has long been discussed.
ETH is divisible to 18 decimal places, and it’s necessary to pay for transactions on the Ethereum network. Gas transactions on Ethereum don’t actually use ETH (it’s done in the Ethereum Virtual Machine), but the ETH is used to pay the transaction fees. To simplify – every transaction has a gas cost, and gas has an ETH cost.
Third-party Ethereum-based tokens use several different technical standards, called Ethereum Request for Comments (ERC). ERC-20 is the most used token, and ERC-20 compliance ensures widespread token acceptance. Ether, ironically, isn’t ERC-20 compatible and uses Wrapped Ether (WETH) to facilitate exchanges.
Ethereum also support non-fungible tokens like CryptoKitties and Ethermon using the ERC-721 standard. This allows each token to have different values, versus typical crypto and fiat currencies that are interchangeable and equal.
Not only does Ethereum host other tokens like TRC, ZIL, and ICX, but it also has several hard forks. Ethereum hard forks include Ethereum Classic (ETC), EthereumFog (ETF), Ethereum Modification (EMO), EtherZero (ETZ), EtherInc (ETI), and EtherBTC (ETHB).
Ehterscan.io is a great tool to trace ETH and other Ethereum-based tokens.
Ethereum Taps Blockchain’s Potential
As mentioned above, the biggest difference between Bitcoin and Ethereum is Bitcoin is an application of blockchain technology. On the other hand, Ethereum is a platform to host other blockchain-based apps. The cryptocurrency on Ethereum’s platform is used both to fuel transactions and as a tradeable currency to cash other tokens out to.
The secret sauce to Ethereum’s blockchain network is the smart contracts. These self-executing programs contain conditions that must be met before processing, which constitutes mining. Smart contracts are written in the Turing-complete Solidity language developed specifically for Ethereum.
By building a decentralized platform, Ethereum enables Decentralized Autonomous Organizations (DAO) and decentralized applications (dApp). Because of this, it became a popular platform for other organizations to launch ICOs, even if only the alpha and/or beta networks would actually reside on the Ethereum network. Unfortunately, The DAO venture capital fund had $50M stolen in a hack in 2016 that led to the Ethereum Classic hard fork.
The Ethereum Virtual Machine (EVM) enables other programming languages to interact with Solidity smart contracts. It’s an ingenious system that seeming thought of everything. However, this smart contract network isn’t perfect.
Ethereum promises no downtime, but CryptoKitties took it down in late 2017, forcing both Ethereum and CryptoKitties to respond and stabilize the network before people started jumping ship. It’s advertised as secure, but several hacks have plagued the Ethereum network. It’s faster than Bitcoin, but not by much.
Of course, these growing pains affect every new organization, and no technology is ever perfect. The Ethereum Project has first-mover advantage in blockchain, so it has a target on its back from competitors like NEO and EOS (the latter started on Ethereum itself). These newer projects resolve issues like bottlenecked processing speed on Ethereum.
Ethereum isn’t taking thing lying down. It’s constantly updating, and projects like Lightning and Plasma will help both Ethereum and other blockchains scale. And Ethereum is more than just one organization at this point – it’s an entire community of developers, designers, marketers, and more all working on an entire blockchain-based ecosystem.
Rise of Tokenized and Decentralized Applications
When hodlers of ETH discuss their gains, it can be a little deceiving. Sure – plenty of people made a lot of money on ETH itself, but that’s not all. Because it hosts a diverse ecosystem of dApps, many new projects on Ethereum use airdrops to launch.
ETH holders would often log into wallets to discover new, unheard of tokens, some worthless, some not.
Ethereum is built using a dual-layer blockchain. Smart contracts are stored on one, while the EVM runs on top to process transactions. The EVM layer lets developers create applications directly on the blockchain using any programming language. Of course, sidechains are a much more efficient way of doing this, as using a non-dependent chain drastically lowers processing times.
Blockchain development is a highly sought-after skill in today’s job marketplace, and Ethereum development in particular will be generating a lot of careers from young tech professionals. Here are a few of the dApps developed on Ethereum:
Ethlance – This Upwork for crypto connects freelancers with businesses without charging the steep fees that make Upwork a tough sell for experienced professionals.
Aragon – Aragon is a platform that makes building and managing DAOs and dApps much easier.
Golem – The Airbnb of computing power lets you rent out access CPU (and eventually GPU and DRAM) functions to create crowdsourced supercomputers.
Idex – Exchanging Ethereum-based tokens is made easy with this decentralized crypto token exchange.
Like Android, Windows, and other platforms before it, Ethereum’s development community will only continue to grow and evolve over time, providing tools we always wanted and/or never knew we needed.
Ethereum (ETH) Summary
Ethereum is a revolutionary blockchain project that expands the usage of cryptocurrency technology. More than just a storage of value, Ethereum’s smart contract network changed the way we see crypto and enables decentralized development on the blockchain. Ethereum is one of the most valuable cryptos in the world, and its creators are now known in mainstream culture thanks to these key features.
- Ethereum uses Ether, or ETH, to pay for transactions and store value. Other tokens can be created using a variety of tokenized standards.
- Ethereum has enterprise partnerships in technology, finance, and more. These partnerships are key to sustaining development, mining, and usage.
- Ethereum has competitors that fix many of the flaws it experienced by pioneering the industry. However, upgrades, updates, and new developments like Plasma and sharding keep Ethereum fresh.
With these pieces in place, Ethereum will be around for a long time. This isn’t to say it’s always guaranteed a spot in the crypto top 10. Competition is fierce in blockchain, but Ethereum’s strong technology and team will keep it running long after you’ve died.