Ethereum

Ethereum is a decentralized, open source and distributed computing platform that enables the creation of smart contracts and decentralized applications, also known as dapps, and Ethereum is its native cryptocurrency.

Features of Ethereum

• Built-in currency and payment functions.

• Users can own their data and applications will not spy on and steal users.

• Open financial systems are accessible to everyone.

• It is a network built on a neutral, open-access infrastructure that is not controlled by any company or individual.

• Rather than a centralized hub (or private company) controlling large amounts of personal data, Ethereum aims to create a more decentralized information network supported by a series of distributed nodes and Ethereum wallets.

The Development of Ethereum

The idea of Ethereum was proposed in 2013 by Vitalik Buterin, a computer programmer and writer for Bitcoin Magazine. He advocates adding more features to the Bitcoin blockchain to make it easier for developers to build applications. When his plans met resistance from the Bitcoin community, the team he founded developed the framework for Ethereum and published the Ethereum white paper. The network went live on July 30, 2015, after raising funds for the development of the Ethereum Virtual Machine.

If the Internet is compared to a vast highway, then there are almost no on- and off-ramps in the current network system. These existing channels are also subject to various tolls, which either come in the form of actual fees or require users to hand over personal or financial data.

The goal of a decentralized internet is to give people more control over their personal information, enable anti-censorship technology, and eliminate third-party costs.

The decentralized Internet replaces large, centralized gatekeepers that control the flow of information, with Internet operating infrastructure spread across the globe. In other words, a decentralized Internet provides more entrances and exits, which makes the Internet more secure and democratic.

Ethereum helps realize the vision of decentralization in two ways:

1. The first approach is to create a distributed node system, which occurs whenever a computer or miner joins the Ethereum blockchain - anyone with enough computing power can become a node, making Ethereum a node that does not require Permissioned blockchain. A node is any machine that contains a copy of the blockchain. The more nodes that exist, the more resistant Ethereum is to security holes and outages.

2. The second way Ethereum achieves digital decentralization is by leveraging the broad distribution of the network to allow developers to build decentralized applications using open source smart contracts. A smart contract is basically a computer program that executes a transaction after a set of requirements are met.

Uses for Ethereum

Ethereum has emerged in four main uses: as a platform for initial coin offerings (ICOs), as a means of creating ERC20 tokens, and as a means of creating ERC271 and its native currency, Ethereum.

ICO

Ethereum’s ICO is very similar to how a traditional company launches an initial public offering (IPO) to raise capital. In the case of an ICO, a person or group of people get together, create a website or white paper to explain a project, and then launch a coin or token sale.

ERC20 Token

An ERC20 token is a digital unit of account that is fully interchangeable with another unit of the same system. For example, the 0x protocol, built to the ERC20 standard, is building a decentralized exchange that will allow other ERC20 token projects to exchange tokens and other assets.

In addition to the infrastructure layer, the ERC20 standard also means that individual token projects can establish independent token economies. In the long run, a well-conceived and well-executed token economy will drive long-term development projects.

ERC721 Token

ERC271 tokens are non-fungible and cannot be easily converted into another token.

Having the ability to create and distribute non-fungible tokens opens up the ability to use ERC271 tokens to create collectibles or tokenize something else unique and valuable. These range from artwork to baseball card collections.

The non-fungible token model is still an emerging field, but interesting projects are being developed to explore the possibility of using ERC271 as a means of protecting digital property and rights, which could lead to applications expanding beyond any current cryptocurrency use cases.

Potential applications range from creating digital scarcity to enabling things like genetic algorithms, where a unique digital good might be paired with other unique digital goods, resulting in various offspring, whose lineage can be traced through the Ethereum blockchain Verification and traceability.

ETH

Like other blockchains, Ethereum has a native cryptocurrency called Ethereum (ETH). ETH is a digital currency.

If you've heard of Bitcoin, ETH has many of the same features. It's purely digital and can be sent instantly to anyone, anywhere in the world. The supply of ETH is not controlled by any government or company – it is decentralized and scarce. People around the world use ETH for payments, as a store of value, or as collateral.

As Ethereum grew into a massive network, more and more Ethereum wallets were created to store Ether, the currency of the Ethereum blockchain. The primary value of Ethereum is that it is the native token of the Ethereum blockchain. Just like on the Bitcoin blockchain, transactions on the Ethereum blockchain come with a price, and transaction costs on Ethereum are paid in ether. 

How Ethereum Works

The Bitcoin blockchain is much like a bank's ledger or even a checkbook. It records every transaction running on the network, and all computers on the network contribute their computing power to ensuring that the records are accurate and secure. The Ethereum blockchain is more like a computer. Although it also does the work of recording and protecting transactions, it is much more flexible than the Bitcoin blockchain. Developers can use the Ethereum blockchain to build a wide variety of tools—from logistics management software to games to the entire field of DeFi applications including lending, trading, and more.

Ethereum does all this using a "virtual machine," which is like a giant global computer made up of many independent computers running the Ethereum software. Keeping these computers running requires investments in hardware and power from participants. To cover these fees, the network uses its own native cryptocurrency, Ethereum (ETH).

Ethereum sustains the entire run. You interact with the Ethereum network by paying into the network using ETH to execute smart contracts. Therefore, fees paid in ETH are called "gas." Gas rates depend on how busy the network is. A new version of the Ethereum blockchain called Ethereum 2.0 was launched in December 2020 and is designed to increase efficiency.

Pros of Ethereum

Ethereum has many blockchain advantages, including:

• Decentralization. Ethereum is decentralized, so there is no interference from third-party providers. It uses blockchain technology to support peer-to-peer transactions. Users can exchange value or store data without the need for an intermediary, unlike some other software applications that require support from a central authority.

• Not easily paralyzed. Because Ethereum is decentralized, there will be no downtime even if one node fails. Other computing models use centralized servers that can be paralyzed if interrupted.

• privacy protection. Users can remain anonymous when conducting transactions using the network. They can use Ethereum applications without entering their personal credentials.

• High security. Like all blockchain-based decentralized networks, Ethereum is unhackable. Hackers must control a majority of network nodes to exploit the network.

• No permission is required. Ethereum is a permissionless blockchain, which means everyone can participate. This is in contrast to blockchain, which is limited to designated participants.

Risks of Ethereum

• At the same time, Ethereum also has two obvious risks:

• Resource intensive. The PoW consensus protocol currently used by Ethereum is an energy-intensive way of ensuring that network nodes agree on the state of all information recorded on the blockchain. All smart contracts are stored on all nodes of the blockchain, and each node calculates each smart contract simultaneously. Therefore, the energy required is relatively large.

• The fault is difficult to repair. PoW protocols also raise potential security issues. Vulnerabilities in smart contracts on public blockchains are visible to all and may take longer to fix than to exploit them.