Many individuals learned about Bitcoin and Ethereum, another frequently mentioned emerging cryptocurrency, last year as a result of their meteoric value increases. Lots of you know about Bitcoin but what is Ethereum?
Ethereum is the second most valuable cryptocurrency in terms of market capitalization; at the time of writing, the value of all Bitcoin in existence is $143 billion, while the value of all ETH is $88 billion (please note that these numbers change quite a bit).
To put things in perspective, this means that Bitcoin is currently valued roughly at par with Unilever, whereas Ethereum is valued roughly at par with Starbucks or Walgreens Boots Alliance.
The market capitalization of Ethereum, which was founded by Vitalik Buterin and Gavin Wood in 2015, currently accounts for more than 17% of the INR 1 lakh crore global cryptocurrency market.
Between Ethereum and the original cryptocurrency, there are several definite distinctions.
Ethereum (ETH) is meant to be much more than merely a means of exchange or a store of money, in contrast to Bitcoin (BTC). Instead, Ethereum is a blockchain-based decentralized computing network. This guide is ideal for you if you want to understand what Ethereum is, how it works, and what it can be used for without delving too far into the technical abyss.
There are literally thousands of cryptocurrencies that have emerged in the previous several years, including Ethereum. Ethereum, the creation of its eight co-founders, debuted in 2015. The individual unit is known as Ether, whereas the cryptocurrency or platform is called Ethereum (2 ether, 17 ether, etc.)
Ethereum administers and tracks the currency on a decentralized computer network, often known as a distributed ledger or blockchain. A blockchain can be thought of as a continuous record of all cryptocurrency transactions that have ever occurred. The network’s computers verify the transactions and guarantee the accuracy of the data.
History of Ethereum
In 2013, Vitalik Buterin released a white paper introducing Ethereum. Buterin and Joe Lubin, who later created the blockchain software firm ConsenSys, introduced the Ethereum platform in 2015. One of the early people to understand the potential of blockchain beyond the context of cryptocurrencies is claimed to be one of Ethereum’s founders.
- After Bitcoin, Ethereum is currently the second-most popular cryptocurrency.
- The Ethereum blockchain serves as a blockchain development platform in addition to issuing the cryptocurrency Ether.
- DApps, which are applications, services, and games developed by developers and not under the control of a single entity, are hosted on Ethereum.
- It is feasible to develop one’s own ETH blockchain-based token currency.
- In November 2021, the price of Ethereum rose to its all-time high of €4.310,99.
How Does ETH Work?
The ETH blockchain is quite similar to the bitcoin blockchain, but because it uses a different programming language, developers can create applications that automate and control certain outcomes for blockchain transactions. A smart contract is the name of this program.
A smart contract, which is written in code, ensures that the conditions of a relationship are met in the same way that a regular contract does. In addition, the software automates the agreement’s execution as soon as certain conditions are satisfied, avoiding the expenditure and delay associated with manually closing a contract.
Source: Preethi Kasireddy
For instance, an ETH user may write a smart contract to transfer a friend a certain number of Ether on a specific day. As soon as the contract is finished, which occurs when the predetermined date arrives, they would enter this code into the blockchain, and the ether would then be immediately delivered to the other party.
With projects currently making progress in the fields of insurance, real estate, financial services, law, and crowdfunding, this fundamental concept may be extended to much more complicated configurations, and its potential is endless.
Additional advantages of smart contracts include the following:
- Eliminating the middleman maximizes savings and gives the user total control.
- They are duplicated, recorded, and encrypted on the open blockchain so that everyone can see market activity.
- They do away with the time and effort needed to process papers manually.
- Smart contracts are undoubtedly still a brand-new system with a few kinks to work out.
Code is interpreted literally; therefore, any mistakes made when the smart contract is generated could have unforeseen consequences that are irreversible.
What Does Ethereum Do?
Ethereum can power numerous applications with a variety of features, including:
- Currency: If a cryptocurrency wallet accepts the payment method, you can use it to transfer and receive ether or pay for products and services. Some websites, like Coinbase, even permit you to store your money in a digital wallet, theoretically making them less vulnerable to hackers.
- Smart contracts: A type of permission-less app that automatically runs when the contract terms are satisfied.
- Decentralized applications, or dApps: Runs on ETH and let users pay and receive money, play games, maintain their portfolios of investments, follow social media, and more.
- Non-fungible tokens: These tokens, which can be ETH-powered, enable creators and others to use smart contracts to sell goods directly to customers.
- Decentralized finance: Some persons can bypass centralized (government) control over transferring money or other assets by using Ethereum.
Once more, it may be more realistic to think of Ethereum as a token that supports numerous apps instead of just a cryptocurrency that enables user-to-user payments.
What Kind of Benefits Ethereum Offers?
In addition to financial transactions, Ethereum is a cutting-edge open-source blockchain technology that supports smart contracts, decentralized applications (dApps), tokenized assets, and decentralized financial services.
Like any other investment, customers may lose some of their money if the value of Ethereum decreases. Due to its exceptional performance, traditional and institutional investors have become interested in Ethereum. Its provides a number of significant advantages, like as
Large, Existing Network: The advantages of Ethereum include a tried-and-true network that has been put to the test during years of operation and through the exchange of trillions of dollars in value. It has the biggest blockchain and cryptocurrency ecosystem and a sizable and devoted global community.
Extensive Range of Functions: Ethereum can perform different types of financial transactions, carry out smart contracts, and store data for third-party applications in addition to being used as a digital currency.
Innovation: A sizable group of ETH developers is always searching for fresh approaches to enhance the network and create fresh applications. According to Avital, “ETH tends to be the chosen blockchain network for innovative and interesting (and perhaps risky) decentralized apps because of its popularity.”
Avoids Middleman: With Ethereum’s decentralized network, users will be able to do away with third-party intermediaries like banks that operate as middlemen in financial transactions, attorneys who draft and interpret contracts, and site hosting providers.
Real-World Applications of Ethereum
The potential of Ethereum as a Dapp development platform has also sparked an upsurge in ICO fundraising by entrepreneurs. Actually, a number of firms have already raised hundreds of millions of dollars to aid in the creation of their Dapps on the ETH blockchain. For instance, during its initial coin offering (ICO) in June 2017, Bancor was able to generate almost $153 million in ether, the digital currency of the Ethereum Blockchain network.
For products and apps that must operate on an open network, Ethereum’s immutability and transparency make it the perfect platform. These apps cover a wide range of topics, as we will discover in this essay, from politics and health to finance.
Voting systems are implementing Ethereum, as we’ve seen with the DAO. By preventing voting fraud, the results of polls are made known to the public, providing a fair and transparent political process.
Banking and Financial Systems
Because of its decentralized approach and the difficulty for hackers to get illegal access, Ethereum is being rapidly embraced in banking institutions. In addition, banks are adopting Ethereum as a gateway for sending money overseas and making payments because it also permits transactions on an ETH-based network.
Shipping and Transportation Industry
Implementing Ethereum in transportation makes it easier to trace freight and guards against lost or fake items. The provenance and tracking foundation needed for any asset in a normal supply chain is provided by ETH .
Moreover, Visa has just now started accepting payments and transactions of stablecoins on the Ethereum blockchain network.
The Future of Ethereum is Promising
The Ethereum blockchain has become increasingly well-known in recent months due to the development of numerous NFTs and decentralized finance projects. Advocates claim that the advent of new applications like these, which are among the first to operate on a public blockchain, has already resulted in a significant network effect as greater activity draws more and more developers to ETH.
As an entrepreneur or investor, if you are about to make the most out of this emerging technology, get our white label crypto exchange platform developed on ETH which enables you to bring your vision to life through detailed research with the assurance of success in web 3.0.