If you’ve heard about Bitcoin, you might think it’s the only cryptocurrency worth knowing about. But there is another one that’s also making a big impact in the digital world: Ethereum. Just like Bitcoin, Ethereum is a type of digital currency, but it has evolved to be much more than that. Understanding Ethereum and its immense potentials can be exciting. Once you gain more knowledge about Ethereum, you might be motivated to dive deeper into Web3.
The Inception of Ethereum
Ethereum was created in 2015 by a young programmer named Vitalik Buterin. While Bitcoin was designed primarily as a digital currency, Vitalik envisioned something broader. He aims to build a decentralized platform where developers can build all types of applications using the same blockchain technology that powers Bitcoin. This idea gave birth to Ethereum, a cryptocurrency with a world of possibilities beyond just the utilitarian value of money.
The Rise to Popularity
Ethereum quickly gained attention because it offered something novel and powerful. It wasn’t just a currency; it is a whole ecosystem for building decentralized applications (often called dapps). These are apps that run on a network of computers instead of a single server, making them more secure and resilient. By not being attached to a centralized server system, it is thus highly unlikely that any dapps can be shut down due to a single point of failure.
Key Innovations That Arose From Ethereum
Over the years, several innovations have emerged from the Ethereum blockchain. Their respective markets are set to expand further despite some fluctuations in interest over the years. Some of these innovations are:
Decentralized Finance (DeFi)
- Ethereum has become the backbone of a new financial system called DeFi. This is the sector where traditional financial services like lending, borrowing, and trading take place. However, there are no banks or other intermediaries here. You can actively and directly conduct DeFi transactions without any middleman. DeFi is one of the Web3 sectors that is poised to expand in the coming years.
Non-Fungible Tokens (NFTs)
- Ethereum powers the booming market of NFTs, a form of digital asset that represent ownership of unique items like art, music, and collectibles. If you are skilled in utilizing AI tools to create artworks, you may also create NFTs and sell them on online marketplaces. It is believed that the NFT technology have the potential to revolutionize other sectors too such as real estate, ticketing and digital identity authentication.
Smart Contracts
- Think of smart contracts as self-executing contracts where the terms are directly written into the computer code. The computers automatically enforce and execute agreements when conditions are met. If you are one of the parties in a smart contract, you do not even need to really know who is on the other side of the deal. This makes transactions and agreements more transparent and efficient. Will we need less lawyers in the future if smart contracts enter into mainstream markets? Don’t bet against it just yet as we are now advancing into a more digitized world.
Stablecoins
- Stablecoins are designed to maintain a consistent value, in contrast to the volatile values of cryptocurrencies like Bitcoin. They achieve stability by being pegged to traditional financial assets such as the US dollar, euro, or even commodities like gold. Users who are very active in Web3 usually stack up lots of stablecoins to use it for DeFi services and purchase of goods and services.
Layer 2 Solutions
- Layer 2 (L2) solutions are technologies built on top of the Ethereum blockchain to enhance its scalability and efficiency. The primary purpose is to reduce the burden on Ethereum main network by processing transactions off-chain (as in ‘off the blockchain’). This results in faster transaction speeds and lower transaction fees.
Ethereum Price Chart
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Ethereum’s Milestones
Ethereum undergone a few significant events before it reached the stage of where they are now with a market cap of around $440 billion dollars. You can find more details about these events on Ethereum’s website and this is just a gist of the main events:
- Ethereum Virtual Machine (EVM):
In July 2015, Ethereum’s Frontier phase was launched, marking the initial release of the EVM. Imagine EVM as a big, global computer in the virtual space where thousands of computers are connected together to run programs. These programs are called “smart contracts,” and the EVM ensures all the smart contracts run smoothly all around the world. - Ethereum Classic & Ethereum:
Ethereum’s first major change and also a controversial one occurred in 2016 following the infamous DAO hack. After much deliberation, Ethereum developers reached a consensus that they will reverse the hacked transactions. Many users lost their ETH currency in this hack but they got it back through a network wide upgrade called a hard fork. As a result since then, the Ethereum blockchain split into two separate networks. This decision was controversial because a blockchain is suppose to be immutable. In this case, Ethereum arguably ‘mutated’ their blockchain. - Enterprise Ethereum Alliances (EEA):
Formed in 2017, EEA is a global community of industry experts. Blockchain leaders, adopters, innovators, developers and businesses come together to work on Ethereum as an enterprise grade technology. Some of the board members include Accenture, BlockApps, ConsenSys, Ethereum Foundation, EY, J.P. Morgan, Microsoft, and Santander (Source: Investopedia.com). - CryptoKitties:
In 2017 till around 2020, Ethereum enjoyed a NFT craze of owning high value collectibles that feature a series of digital cats with unique characteristics. These collectibles are from the blockchain game called CryptoKitties, a pioneering project that first use the Ethereum’s ERC-721 token standard. Though just a game, but it played a impactful role in shaping the imaginations around the gaming and collectibles markets. - Network Upgrades:
One of Ethereum’s notable upgrade is called ‘The Merge’. This particular upgrade in 2022 involved migrating from a ‘Proof-of-Work’ to the ‘Proof-of-Stake’ consensus mechanism. The upgrade managed to significantly reduced the network’s energy consumption by 99.95%. - Improving Scalability:
One of Ethereum’s main weak points is traffic congestion that leads to high transaction fees. This is where sharding comes in as a solution. It is a method of scaling Ethereum by splitting it into smaller pieces to ease the problem. The term ‘Danksharding’ is a layer-2 scaling solution designed to empower the blockchain to achieve its full potential. However, it will take several years to fully implement. The good news is ‘Proto-Danksharding’, an intermediate step has recently been incorporated into the network on March 2024.
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What Does The Future Hold for Ethereum?
Looking at Ethereum’s vision, its future certainly does looks exciting and promising. The roadmap lays out a plan that aims to make the network more scalable, secure and sustainable. The team also promises cheaper transaction fees and better user experience. Based on its past performance, the ETH currency is also increasingly being regarded as a digital asset that can be used as a store of value just like Bitcoin.
Remember that Ethereum is more than just another cryptocurrency. It is a platform that is transforming the way people think about finance, contracts, and digital ownership. Its ability to support a wide range of applications makes it a powerful and versatile tool that has captured the interests of a wide variety of stakeholders worldwide.
Ethereum’s potential to revolutionize multiple industries certainly makes it stand out as one of the promising technologies out there. As the digital world continues to evolve, you can be quite certain that Ethereum will continue to be a key player in shaping the future.
