Ethereum is a technological platform to revolutionize the digital world. Ethereum aims to transform the workings of the internet entirely. If fully actualized, it will change the course of many events – including how to handle finances, store data, make contracts and establish trust.
In this article, we will attempt to answer the following questions –
- What is Ethereum?
- What is the vision of Ethereum?
- What are the various aspects of Ethereum?
- What is Ethereum mining?
- What are the use cases of Ethereum?
- What is the prominent issue faced by Ethereum?
- What is the future of Ethereum?
Hopefully, you will know all about Ethereum and its prospects by the end of this article.
But before diving into the details of Ethereum, let us first understand its predecessor – Bitcoin, and the technology it functions on – Blockchain. Furthermore, you would develop a better understanding of Ethereum and its functions by learning about Bitcoin and Blockchain.
Bitcoin – The Forerunner
Bitcoin is a digital currency that has the same function as physical money but is not governed by a single entity and does not require a middleman to complete transactions. It was introduced in 2009 by a team of programmers known as Satoshi Nakamoto, and as measured by market capitalization and popularity, it is the biggest digital currency. Also, Blockchain technology makes Bitcoin possible and keeps it running. A decentralized ledger known as blockchain is used to produce, distribute, and store it.
How is Bitcoin different?
- It is decentralized.
- It has a limited supply.
- It allows anonymous identities through pseudonyms.
- It is immutable.
- It is highly divisible.
Bitcoin was initially used as an umbrella term to refer to the following two aspects:
- The cryptocurrency – A piece of code representing some digital assets.
- The Blockchain – The underlying framework upon which the currency functions.
The Blockchain
Blockchain is a secure digital ledger that permanently records transactions. It’s used to keep track of everything from financial transactions to medical records, and it’s growing in popularity every day.
It is an encrypted list of transactions, a “chain” of blocks — distributed across multiple parties. The blocks are connected through cryptography, which means no single party can tamper with them without being detected.
What is Ethereum?
Ethereum is a decentralized blockchain platform that establishes a peer-to-peer network that securely executes and verifies application code, called smart contracts. Smart contracts allow participants to transact with each other without a trusted central authority. Moreover, transaction records are immutable, verifiable, and securely distributed across the network, giving participants full ownership and visibility into transaction data. Transactions are sent from and received by user-created Ethereum accounts. A sender must sign transactions and spend Ether, Ethereum’s native cryptocurrency, as a cost of processing transactions on the network.
What Is the Vision of Ethereum?
Ethereum’s vision is to be more scalable and secure, but also to remain decentralized. Achieving these 3 qualities is a problem known as the scalability trilemma.
What are the Various Aspects of Ethereum?
You must have realized by now that Ethereum is a multifaceted domain. It has many aspects to it, and it is through these aspects that technology functions.
For our purpose, we must consider them individually.
1. Ethereum smart contracts
A “smart contract” is simply a program that runs on the Ethereum blockchain. It’s a collection of code (its functions) and data (its state) that resides at a specific address on the Ethereum blockchain.
Smart contracts are a type of Ethereum account. This means they have a balance and can be the target of transactions. However, they’re not controlled by a user. Instead, they are deployed to the network and run as programmed. User accounts can then interact with a smart contract by submitting transactions that execute a function defined on the smart contract. Smart contracts can define rules, like a regular contract, and automatically enforce them via the code. Smart contracts cannot be deleted by default, and interactions with them are irreversible.
2. Ethereum virtual machine (EVM)
Ethereum Virtual Machine (EVM) was designed by Gavin Wood during his tenure at Ethereum. Written in C++ and using the LLVM Project compiler, EVM is a special state machine that operates continuously and whose immutable operations determine the state of each block in the Ethereum blockchain.
The EVM not only governs what nodes can or cannot do to the distributed ledger maintained by the Ethereum blockchain but also defines the specific rules of changing state from block to block. Also, the latter functionality is what enables the smart contract functionality that Ethereum has come to be known for.
3. Blockchain validation
A blockchain validator is a network node that helps process and validate transaction blocks on the platform so that they can be added to the permanent ledger of the blockchain. When using the term “validator,” some people presume the nodes validate transactions on PoS blockchains. Also, they contrast it with the term “miner,” used on PoW blockchain platforms.
Ethereum Mining
Mining is the process of creating a block of transactions to be added to the Ethereum blockchain in Ethereum’s now-deprecated proof-of-work architecture.
The word mining originates in the context of the gold analogy for cryptocurrencies. Gold or precious metals are scarce, and so are digital tokens, and the only way to increase the total volume in a proof-of-work system is through mining. In proof-of-work Ethereum, the only mode of issuance was via mining. Unlike gold or precious metals, however, Ethereum mining was also the way to secure the network by creating, verifying, publishing, and propagating blocks in the blockchain.
Mining is the lifeblood of any proof-of-work blockchain. Ethereum miners – computers running software – used their time and computation power to process transactions and produce blocks prior to the transition to proof-of-stake.
What are the Use Cases of Ethereum?
Payment Gateways
One of Ethereum’s most exciting use cases is for payments and remittances. Also, the ability to send money globally without any fee makes it a feasible option for users who need to send small amounts overseas.
ICO Platforms
One application for Ethereum’s blockchain is crowdfunding via initial coin offerings (ICOs). Besides, companies like Bancor and Storj are making it easy to launch a new digital currency or platform.
Decentralized App
These types of apps run on a P2P network without any central point of failure. Moreover, apps like MetaMask, uPort, EtherDelta, etc., can be built using the Ethereum blockchain.
Digital Identity System
There is still a long path to go before blockchain-based identity solutions are ready for prime time. Moreover, it’s becoming increasingly clear that blockchain has utility in digital identity systems.
Internet Of Things
Every day, we’re adding more and more IoT devices to our networked homes. Also, we have thermostats that control our air conditioners and furnaces, speakers that play music through Spotify, phones that talk to laptops and TVs, and watch faces.
Business On Blockchain
Some companies are already leveraging the advantages of a decentralized ledger to make their businesses more efficient. Take LO3 Energy, for example; the New York-based startup is using blockchain technology to facilitate green energy trading between neighbors. Cutting out middlemen has slashed costs and increased transparency.
What is the Prominent Issue Faced by Ethereum?
Scalability – A Hindrance to Commercial Adoption
On the point of scalability, the Ethereum blockchain is still suffering like all others. Primarily, this issue can be understood in terms of the blockchain’s capacity to support transactions per second.
On the other hand, giants like PayPal, MasterCard, and others are handling huge numbers of transactions per second (TPS). VISA, the benchmark in this regard, handles around 1,700 TPS.
On the other hand, Bitcoin has an average TPS of 4.6 while Ethereum’s maximum capacity is 15 TPS at present.
Also, reaching peak capacity does cause the network to slow down. This was seen in 2017 when participants on the Ethereum network were given the scope to “buy and breed crypto-pets.” The hype was immense, and this led to a slowdown of transaction speed on the network.
So, does this mean that this is somewhat the end of the road for Ethereum? Well, not really.
Ethereum Merge
Ethereum’s Merge Is a Proposed Change to the Cryptocurrency that would see it move from a proof-of-work to a proof-of-stake algorithm. The cryptocurrency community has widely anticipated the merger and is seen as a positive development for the coin. In this blog post, we’ll look at the merger and how it could benefit Ethereum investors.
Thus, the more these ventures are decentralized by their nature, the better positioned Ethereum will be to maintain its core values of censorship resistance and credible neutrality. While centralization risks are almost inevitable in our current technological paradigm. Also, it is important to remember that Ethereum is still the world’s most decentralized blockchain and will serve as the critical infrastructure to Web3 and the future of the internet as a public good.
Elliot Hall is a content writer and gamer. He loves to write about all sorts of things, including gaming and cryptocurrency, and technology.
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