A Sneak Peek Into Ethereum
A lot of people wonder if Bitcoin is considered the future of money, then what about Ethereum? Well, this seems to be a natural question for a newbie who has just started to understand the world of cryptocurrency.
It is probably because Ethereum and its native Ether (ETH) cryptocurrency are always seen next to Bitcoin everywhere, be it on exchanges or in the news. However, it would not be appropriate to consider Ethereum as the direct competition for Bitcoin as it has different goals, characteristics, and even a tech base.
It is pertinent to mention that Ethereum is a decentralized blockchain network which is supported by the Ether token that allows the users to process transactions, achieve interest in their holdings via staking, use and store the NFTs, trade cryptocurrencies, enjoy games, and use social media among the others.
A lot of people believe that Ethereum is the next step of the internet. They say that if a centralized platform like the tech giant Apple’s App Store is said to be the representative of Web 2.0, then a decentralized, user-powered network such as Ethereum should be considered Web 3.0. It is worth mentioning that the “next-generation web” assists decentralized applications (DApps), decentralized finance (DeFi), and decentralized exchanges (DEXs).
In the meanwhile, let’s have a look at the history of Ethereum, how it works, and how to buy Ethereum.
History of Ethereum
First things first, the Ethereum network wasn’t always the second-largest blockchain network in the world. Vitalik Buterin was the one who co-created the project to respond to the shortcomings of Bitcoin. In 2013, Buterin published a whitepaper on the Ethereum network in which he mentioned the details of the smart contracts that enabled the development of decentralized applications.
Unifying Decentralized Application Development: The Creation of Ethereum
While decentralized application development was already there in the world of blockchain, the platforms weren’t consistent. Therefore, Buterin pitched for Ethereum in an order to unify them as for him, unifying the way decentralized applications process and interact was the only way to maintain the adoption.
Thereafter, Ethereum 1.0 was established. Just have a look at Apple’s App Store, it is one place with tens of thousands of different applications, following the same ruleset which is fitted well into the network and is enforced automatically.
Ethereum Foundation and Presale of Tokens: Funding Present and Future Development
This also enabled the developers to enforce their own rules within the decentralized applications. With this, there is no central command while, on the other hand, the tech giants like Apple have been changing and bringing on board new regulations.
Indeed, the establishment of such a huge network would never be cheap. Therefore, Vitalik Buterin and his co-founders Gavin Wood, Jeffrey Wilcke, Charles Hoskinson, Mihai Alisie, Anthony Di Iorio, and Amir Chetrit, organized a presale of tokens to raise $18,439,086 in Ether. This was aimed to fund the present and future developments of Ethereum.
Continuing the hard work with an aim to maintain and develop the network, the group founded the Ethereum Foundation in Switzerland, and later, Buterin announced that the foundation would be a nonprofit. However, this announcement led to the ouster of several co-founders.
The DAO and the Hard Fork: A Crucial Software Update for Ethereum
For a long period of time, the developers came to Ethereum with several indigenous decentralized ideas. In 2016, The DAO was founded which was a democratic group that voted on the changes and proposals of the network. Similarly, the organization was supported by a smart contract and eliminated the need for a CEO indicating power over Ethereum.
However, all the hard work was hampered when some unknown hacker stole $40 million from the funds In an order to reverse the hacker’s theft, the DAO voted in favour of a “hard fork” Ethereum, separating ways from the old network and upgrading to a new protocol; in other words, a crucial software update. This upgraded network retained the title of Ethereum. However, the original network is known as Ethereum Classic.
How does Ethereum work?
Just like Bitcoin, the Ethereum network is having thousands of users across the world. The users have been participating as “nodes” which makes the network decentralized and secures it from cyber-attacks.
Understanding Ethereum’s Decentralized Network
With Ethereum, the elimination of one computer won’t affect it as there are thousands of others holding the network up.
Ethereum is, notably, a single decentralized system that has been working as Ethereum Virtual Machine (EVM). Each node is having a copy of that computer which means any interaction should have to be verified so that everyone can be able to update their copy.
Otherwise, any interaction on the network is considered a “transaction” and is stored within the blocks on the blockchain-based Ethereum. Meanwhile, the miners verify these blocks before allowing them into the network. The minders act as the transaction history or, you can also say a digital ledger.
The Role of Miners in Verifying Transactions on Ethereum
The process of mining is also known as a proof-of-work (PoW) consensus method where each and every block is identified with a unique 64-digit code. The miners find the code, prove that it’s unique, and get rewarded in ETH for their efforts.
Besides, all the transactions on Ethereum are made public and the miners show the completed blocks to the rest of the network, thereby confirming the change. It adds the blocks to the copy of the ledger of all the participants. It is pertinent to mention that the confirmed blocks can never be edited or tampered with. These have also been working as a perfect history of all the transactions on the network.
Notably, each transaction is having a gas fee that has to be paid by the user in an order to process the said transaction and the said fee is paid to the miner who has been validating the transaction and making sure that the network is secured.
Unfortunately, several people believe that the gas fees on the Ethereum network can be high on the basis of activity on the network. In the meanwhile, the congestion of the network has been one of the key problems which are being addressed in Ethereum 2.0
Challenges and Solutions for Ethereum’s Gas Fees and Network Congestion
Ethereum 2.0 is said to be a completely upgraded version. However, if you want to interact with Ethereum, you would be required to have cryptocurrency stored in your wallet. The wallet connects to the decentralized application and also acts as a passport for the Ethereum ecosystem.
With this, an individual can buy items, play games, lend some money and do anything that they do on the traditional internet. However, only the traditional web is made available for free to the users.
Please note that Cryptocurrency takes the place of data, thereby, providing users with the freedom to browse and interact anonymously. It also means the use of decentralized applications is non-discriminatory.
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