Ethereum- The Platform Crypto
- Tanishq Wadhwani
- May 4, 2021
- 6 min read
Updated: May 5, 2021
Twitter: Open source platform to write and distribute decentralized applications.
Ethereum is the community-run technology powering the cryptocurrency, ether (ETH) and thousands of decentralized applications. It is a technology that's home to digital money, global payments, and applications. The community has built a booming digital economy, bold new ways for creators to earn online, and so much more. It's open to everyone, wherever you are in the world – all you need is the internet.
Today, billions of people can’t open bank accounts, others have their payments blocked. Ethereum's decentralized finance (DeFi) system never sleeps or discriminates. With just an internet connection, you can send, receive, borrow, earn interest, and even stream funds anywhere in the world. Ethereum isn't just for digital money. Anything you can own can be represented, traded and put to use as non-fungible tokens (NFTs). You can tokenise your art and get royalties automatically every time it's re-sold. Or use a token for something you own to take out a loan. The possibilities are growing all the time. Today, we gain access to 'free' internet services by giving up control of our personal data. Ethereum services are open by default – you just need a wallet. These are free and easy to set up, controlled by you, and work without any personal info. Ethereum and its apps are transparent and open source. You can fork code and re-use functionality others have already built. If you don't want to learn a new language you can just interact with open-sourced code using JavaScript and other existing languages.
Ethereum is the most actively used blockchain and the largest cryptocurrency when it comes to decentralized apps and smart contracts, and most of the Defi sector is built on top of it. It’s the father of the platform space and is still being developed. It is a decentralized software platform that enables Smart Contracts and Decentralized Applications (DApps) to be built and run without any downtime, fraud, control, or interference from a third party. The goal behind Ethereum is to create a decentralized suite of financial products that anyone in the world can have free access to, regardless of nationality, ethnicity, or faith. This aspect makes the implications for those in some countries more compelling, as those without state infrastructure and state identifications can get access to bank accounts, loans, insurance, or a variety of other financial products.
Ethereum is not just a platform but also a programming language (Turing complete) running on a blockchain, helping developers to build and publish distributed applications. Ethereum is an open-source computing platform and operating system. The Ethereum Virtual Machine (EVM) can execute scripts and run decentralized applications. One of the big projects around Ethereum is Microsoft’s partnership with ConsenSys which offers “Ethereum Blockchain as a Service (EBaaS) on Microsoft Azure so Enterprise clients and developers can have a single click cloud-based blockchain developer environment.
The applications on Ethereum are run on its platform-specific cryptographic token, Ether. The cryptocurrency acts as a fuel that allows smart contracts to run unlike bitcoin, which is meant to be a unit of currency on a peer-to-peer payment network. Ether’s supply is not capped like that of bitcoin and its supply schedule, often described as minimum necessary to secure the network, is determined by members of Ethereum’s community. Ether is like a vehicle for moving around on the Ethereum platform and is sought by mostly developers looking to develop and run applications inside Ethereum, or now, by investors looking to make purchases of other digital currencies using ether. It is much faster to acquire ether currency than bitcoin (about 14 or 15 seconds to bitcoin's near-uniform 10 minutes), and there are far more ether units in circulation than there is bitcoin. Ether, launched in 2015, is currently the second-largest digital currency by market cap after Bitcoin, although it lags behind the dominant cryptocurrency by a significant margin. As of January 2021, ether's market cap is roughly 19% of Bitcoin's size.
Ethereum was proposed in 2013 by programmer Vitalik Buterin. Development was crowdfunded in 2014, and the network went live on 30 July 2015, with an initial supply of 72 million coins. In 2014, Ethereum launched a pre-sale for ether which received an overwhelming response; this helped to usher in the age of the initial coin offering (ICO). According to Ethereum, it can be used to “codify, decentralize, secure and trade just about anything.” Following the attack on the DAO in 2016, Ethereum was split into Ethereum (ETH) and Ethereum Classic (ETC). As of January 2021, Ethereum (ETH) had a market cap of $138.3 billion and a per token value of $1,218.59.
In 2021 Ethereum plans to change its consensus algorithm from proof-of-work to proof-of-stake. This move will allow Ethereum's network to run itself with far less energy as well as improved transaction speed. Proof-of-stake allows network participants to “stake” their ether to the network. This process helps to secure the network and process the transactions that occur. Those who do this are rewarded ether similar to an interest account. This is an alternative to Bitcoin’s proof-of-work mechanism where miners are rewarded more Bitcoin for processing transactions.
Major Applications
1. Decentralized Finance (DeFi)
DeFi is an open and global financial system built for the internet age – an alternative to a system that's opaque, tightly controlled, and held together by decades-old infrastructure and processes. It gives you control and visibility over your money. It gives you exposure to global markets and alternatives to your local currency or banking options. DeFi products open up financial services to anyone with an internet connection and they're largely owned and maintained by their users. So far tens of billions of dollars worth of crypto has flowed through DeFi applications and it's growing every day.
2. Decentralized Autonomous Organizations (DAOs)
DAOs are an effective and safe way to work with like-minded folks around the globe. Think of them like an internet-native business that's collectively owned and managed by its members. They have built-in treasuries that no one has the authority to access without the approval of the group. Decisions are governed by proposals and voting to ensure everyone in the organisation has a voice. There's no CEO who can authorise spending based on their own whims and no chance of a dodgy CFO manipulating the books. Everything is out in the open and the rules around spending are baked into the DAO via its code.
3. Non-Fungible Tokens (NFTs)
NFTs are currently taking the digital art and collectibles world by storm. Digital artists are seeing their lives change thanks to huge sales to a new crypto-audience. And celebrities are joining in as they spot a new opportunity to connect with fans. But digital art is only one way to use NFTs. Really they can be used to represent ownership of any unique asset, like a deed for an item in the digital or physical realm. If Andy Warhol had been born in the late 90s, he probably would have minted Campbell's Soup as an NFT. It's only a matter of time before Kanye puts a run of Yeezys on Ethereum. And one day owning your car might be proved with an NFT.
Eth 2.0
What could potentially spell trouble for Ethereum is the high fees the chain is currently experiencing. Fees for smart contracts sometimes run into the hundreds of dollars, and people are desperately looking for alternatives. However, Ethereum started the lengthy process of switching to Ethereum 2.0 in December 2020.
Eth2 refers to a set of interconnected upgrades that will make Ethereum more scalable, more secure, and more sustainable via introducing staking and sharding in the current system. These upgrades are being built by multiple teams from across the Ethereum ecosystem.
While this process will take a while to complete (estimates are 2+ years), ETH will become a lot safer, faster, and more usable when it’s done. There are a lot of good developers working on this, and because of the large industry built on Ethereum, there is every incentive to make this project a success. While it’s always a gamble to invest in a product that is still being developed, Ethereum’s broad backing and the fact that it’s the base layer for so many blockchains gives it a strong position in the long run.
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