Most people associate blockchain technology with cryptocurrencies and enabling crypto asset transfers. It’s not an unexpected phenomenon as digital tokens are in fact the foremost application of the blockchain. However, when it comes to all this technology actually offers, cryptocurrencies are only the tip of the iceberg. Precious few of the blockchain-based platforms in existence embody this as well as Ethereum, the famed “mother of dApps.”
In crypto circles and among blockchain enthusiasts, Ethereum is a household name. One of two major reasons for this is its status as the greatest rival of the pioneer cryptocurrency; Bitcoin. The other reason is the sheer amount of value contained within the Ethereum blockchain.
The pioneer cryptocurrency, Bitcoin, was created as an answer to the failings of a financial system. The network’s existence inspired the emergence of other platforms that made use of its underlying concepts. Ethereum was one of those, however, its creators had other plans beyond just financial transactions.
Ethereum co-founder Vitalik Buterin became interested in blockchain technology in 2011. The 17-year-old Russian-Canadian programmer started out as a Bitcoin fan, even co-founding Bitcoin Magazine. However, Buterin began to explore the idea of a platform that did more than allow users to trade cryptocurrency. Alongside 8 other colleagues, he began working to leverage the capabilities of blockchain technology to a far greater extent than Satoshi Nakamoto had managed.
Ethereum is a decentralized, open-source blockchain-based software platform. The network serves as the base layer for developers looking to create, deploy, and manage all kinds of blockchain-native applications.
These decentralized applications (commonly called dApps) are a lot like traditional applications across different sectors; games, social media platforms, financial platforms and other offerings. They have one major difference however. Through Ethereum, these apps are built on the blockchain and do not rely on a centralized company or server to operate while offering greater efficiency, security, and user autonomy.
Another one of Ethereum’s most prominent components is its native cryptocurrency ether (ETH) which acts as fuel to power activities on the network. ETH is the largest token after BTC and can be traded on crypto exchanges and similar platforms to make profit amongst other purposes. Beyond payment for on-chain actions, ether can also be used to purchase real-world goods and services where it is accepted.
A good starting point when it comes to understanding smart contracts is to think of them like real-world contracts, only digital.
Smart contracts are computer programs that are stored on the blockchain. They are pieces of code that automatically execute their function without external interference when certain conditions are met by the involved parties. A simple example of this is a trustless token swap where two people exchange cryptocurrencies without an intermediary overseeing the process.
Ethereum’s design allows it to accommodate smart contracts. It is not the only blockchain platform with this feature, however, it is the most popularly used network with smart contract functionality.
Interestingly the Bitcoin network supports smart contracts albeit at a very basic level compared to Ethereum. This is possible because Ethereum uses a far less restrictive programming language allowing developers to write all kinds of smart contracts.
Smart contracts are a core part of Ethereum as they underpin the majority of what exists on the blockchain platform.
Whether we realize it or not intermediaries are involved in our lives in several ways. For example, e-commerce platforms like Amazon and E-bay act as middlemen between manufacturers and customers, government agencies mediate between citizens and the government, and social media platforms serve as intermediaries between users.
In many cases middlemen cannot be avoided, that is undeniable. However, it also cannot be ignored that intermediaries can be invasive, particularly in the financial sector which is why decentralized finance (DeFi) exists.
Decentralized finance uses blockchain technology to connect individuals directly to one another. Besides supporting peer-to-peer transactions, DeFi also allows participants to maintain custody of their assets.
Now where does Ethereum come into this? DeFi offerings are available as products and services across a wide range of platforms that make up the DeFi ecosystem. Many of the platforms run on smart contracts and are built on - you guessed it! - the Ethereum blockchain.
A DAO, that is a decentralized autonomous organization is a system of governance that utilizes blockchain technology. More specifically, a DAO is an entity that is not governed by a central body. Instead in a DAO structure, tokenholders or individuals with shares in an organization get to join the DAO and participate in decision-making. Tokens usually represent voting power and ownership stakes within the DAO; they confer the right to decide on as well as create new governance proposals.
DAOs are led according to a set of smart contract-enforced rules that detail how it will operate. Of course, these rules vary from organization to organization but the bones of the structure remain the same.
As stated earlier, decentralized autonomous organizations have smart contracts at their center and Ethereum of course provides the infrastructure for them.
Initial Coin Offerings (ICOs) are a method of raising capital for early stage crypto and blockchain projects. It’s a form of crowdfunding where the team behind the project creates a set number of its native token to sell to early investors.
ICOs allow startups to gather resources without surrendering equity. At the same supporters of the platform get early access to its digital tokens and can expect profit should the project succeed and the coin rise in value. Though not all ICOs have evolved into success stories, they are an established way for startups to raise funds. They were especially popular between 2017 and 2018 during the “ICO boom.”
One of several projects that has continued to thrive since raising funds through an ICO is Ethereum. Ethereum did not pioneer this method of fundraising but it were among the first few to adopt and utilize it successfully, doing so in 2014. The Ethereum team was able to gather $18 million which they put towards further developing the platform. Of course Ethereum succeeded and participants in its presale were definitely rewarded.
Interestingly, Ethereum’s effective ICO resulted in a sort of ripple effect as it allowed the platform to become the go-to network for ICOs. Many startups turn to Ethereum for their initial coinn sale as it supports token creation, sale and trading within a transparent and secure infrastructure.
One of Ethereum’s more mainstream applications is the creation and sale of non-fungible tokens. These NFTs are unique digital assets that cannot be exchanged with a token of equal value. This is why they are referred to as non-fungible whereas assets such as Bitcoin or Ethereum’s ether token are fungible.
NFTs lurked behind the scenes for a couple of years going all the way back to 2013 before Ethereum even appeared. The concept of NFTs was explored via Colored Coins on the Bitcoin blockchain. However, once Ethereum emerged the idea could be developed further and by 2017 they began to gain some hype as projects like CryptoPunks and CryptoKitties drew quite a bit of attention. In 2021, non-fungible tokens became famous globally as they were used to represent ownerships of artworks among other things.
A large portion of the NFTs in existence were created on the Ethereum blockchain as Ethereum’s ERC-721 and ERC-1155 token standards are the go-to for most creators looking to make non-fungible tokens. Additionally, Ethereum-based market places are the top choice for NFT sales.
Thanks to its smart contract support, Ethereum is home to a large number of blockchain-based games. Developers have built all kinds of gaming platforms on the network from those with NFT support which incoporate digital collectibles and allow players to have ownership of in-game items to play-to-earn models where users get crypto rewards or other assets for their participation. Some game developers choose to implement DAOs, native tokens and decentralized marketplaces among other features Ethereum makes possible.
Ethereum’s smart contracts allow it to bring an innovative edge to digital identity verification systems. Traditional systems are centralized meaning identity data is managed by a single entity and thus vulnerable. However, Ethereum’s decentralization allows it to bring a greater level of protection to this sensitive information. Smart contracts further enhance the security as they can be used to automate the identity verification process.
Enterprise Ethereum is a specialized version of the Ethereum blockchain that is tailored to suit businesses and private corporations. With Enterprise companies get a private, secure and controlled environment for their specific blockchain needs. The Enterprise Ethereum chains are permissioned and what this means is that users have control over and can modify the architectural components such as network size, block size, and even the gas limit.
The Enterprise Ethereum Alliance has over 200 member companies presently. In their ranks are big names like Samsung, J.P. Morgan, Mastercard, and Microsoft etcetera
With Ethereum, transactions between energy producers and consumers can be automated creating a decentralized energy grids. Grid operators can use Ethereum to monitor and optimize energy distribution, while the blockchain's transparency and trustworthiness ensure fair and secure energy transactions.
A role in supply chain management would see Ethereum increase efficiency within a model. This involves using smart contracts to automate payments, track inventory levels, or streamline logistics processes. Additionally, decentralized collaboration would be an option allowing multiple supply chain actors to securely access and update information, while smart contracts can enforce compliance with regulations and standards, leading to more efficient and synchronized supply chain operations.
The Byzantium hardfork, the Instanbul and Constantinople upgrades, the Beacon Chain launch, the London, Berlin and Altair hard forks and finally, the historic Merge; Ethereum is constantly rolling out updates that enhance its value proposition.
The platform is driven by a community of developers, validators, users, and other stakeholders who play a major role in the decision-making processes. As such, one of Ethereum’s most striking features is its ability to adapt and evolve.
The “mother of dApps” is one platform that is given to continuous development, a surefire pointer to the Ethereum ecosystem being poised uncover new use cases as it matures. The blockchain network has already moved far beyond initial applications in finance and decentralized applications and no doubt, its journey is far from over.
Who uses ethereum currency?
Ethereum is used by a wide range of individuals and entities from cryptocurrency enthusiasts, to investors, developers, and businesses. Traders often use it for trading and investment while developers build decentralized applications (DApps) on the Ethereum platform and use ETH, for various transactions within these applications.
How is Ethereum's network secured?
Ethereum employs a consensus mechanism known as Proof of Stake (PoS) to secure its network. Validators, often referred to as "stakers," lock up a certain amount of Ether (ETH) as collateral to participate in the validation process.
How do Ethereum gas fees work?
Users set a gas fee to incentivize miners or validators to include their transactions in the blockchain. The higher the gas fee, the faster the transaction is processed.
