In response to the question of what is Ethereum, briefly, it should be said that, this currency is a blockchain-based network.
Because everyone knows blockchain these days by the name of Bitcoin. The impression has been created that this token is also a digital currency.
But this is not the case. Ethereum is a platform for running decentralized applications and smart contracts without the involvement of intermediaries.
In fact, Bitcoin has been trying to eliminate financial intermediaries. But the blockchain has set its goal in decentralizing everything and removing taste controls in the web world.
If you also intend to buy Ethereum and invest in this cryptocurrency, we recommend continue with us because we will answer this question in this article.
Let’s dive in and explore together:
- What is Ethereum digital currency?
- Why was Ethereum created?
- Ethereum and Global Systems
- History of Ethereum
- Introduction of Ethereum features
- Comparing Bitcoin (BTC) and Ethereum (ETH)
- What are the uses of Ethereum?
- Extraction methods
- What is gas?
- What is Ethereum Classic?
- The fate of Ethereum after merge
- What is the future of Ethereum?
What is Ethereum digital currency?
As we said, eth is a free and public system based on blockchain technology, which has its own browser, programming language and payment system.
This currency has no single and central controller and thousands of computer systems voluntarily control it in all corners of the world.
These users are called nodes or ties and they are responsible for network security.
In this currency, there is no record of data on a central and confidential server. All the information in the network is fully distributed among the nodes and each node has a copy of all the blockchain data.
Ether, abbreviated as ETH. It is a cryptocurrency that is used to pay transaction fees in the network.
In fact, Ether is the fuel of the network. This cryptocurrency is used to incentivize nodes to continue to voluntarily confirm transactions, create blocks, and maintain network security.
In general, in response to the question of what is the Ethereum currency, it can be said that the network is completely autonomous and no person, organization or institution is in charge of managing and controlling it.
The way to buy ETH is also not particularly complicated and you can trade this currency by opening an account in a secure exchange.
Why was Ethereum created?
After answering the question of what is eth, it is better to talk about the reason for its creation.
In today’s world, our personal information, passwords and financial information are stored on other people’s computers. That too by servers such as Amazon, Facebook and Google.
Even the information of this article is stored on the servers of another company. These companies have developed their own specialized teams to store and secure information and pay the costs related to the time of work and doing it.
Therefore, using these companies has many benefits.
But along with this facility, there are also disadvantages. As we know and have learned, a hacker or governments can access your files without your knowledge, which is certainly not what you want.
They do this by hacking or attacking a third part, which means they can steal, expose, or change your information.
Brian Behlendorf, the creator of the apache web server, has taken a number of steps to call this type of design, in fact, “the cardinal sin of the Internet.”
Behlendorf and like minded people believe that the Internet should always be decentralized.
In order to decentralize the Internet, there has been a leap in technology called Blockchain, and Ethereum is trying to decentralize the Internet in the structure of this network.
While Bitcoin tries to change the online banking and payment system, this currency aims to eliminate third parties (intermediaries) using blockchain.
The internet third party is the one who do the work of storing information, transferring money and registering complex financial instruments. Joseph Lubin, one of its developers, said:
Ethereum was created so that we don’t need banks and other similar institutions to solve our life’s affairs.
Ethereum and Global Systems
In short, this currency wants to become a global computer in order to make the current “client-server” model more decentralized and popular.
With this currency, servers and clouds are moved by thousands of users, so-called nodes, which are made up of volunteers from all over the world.
This is the meaning of a universal computer. The vision is to provide such functionality to any people anywhere in the world.
If we take a simple tour of the app stores, we can see a variety of colored squares that offer everything from banking to fitness apps to messaging apps.
These programs require the company itself or a third party to store bank card information and other personal information.
The selection of the program by us is also managed and controlled by a third party.
Just like Apple and Google are responsible for the specific apps we can download and protect them.
If all the issues mentioned about this currency are realized, it will return the control of the information in this type of service to the owner of the information and the rights to the author.
In this token, the goal is that an independent entity no longer has control over our writings and no one can suddenly interrupt a program on their behalf and take our writings! Only the user can change the information.
In other words, every time we make an edit and save it or delete or add our entries, the same nodes in the network will record these changes.
History of Ethereum
The history of Ethereum is tied to Vitalik Buterin. In 2013, Vitalik Buterin sent the Ethereum white paper to his friends to express their opinions and criticisms regarding his theory.
But he did not receive a reply. He made his theory public in 2014 and launched its blockchain in 2015.
Mihai Alisie, Anthony Di Iorio and Charles Hoskinson along with Vitalik Buterin and Joseph Lubin were the founders of this network.
Buterin tried to improve the Bitcoin blockchain and implement smart contracts without intermediaries and decentralized applications in his blockchain.
After some time, he unveiled the native cryptocurrency “Ether”. Vitalik said in one of his interviews that he plans to keep Ethereum as a blockchain-related platform, focus on its technical issues and build a new future for it by improving its security.
Introduction of Ethereum features
Due to the absence of a third party to manage and monitor it, network data cannot be changed or deleted under any circumstances. The smallest change in this platform must be approved by all its members.
The distribution of information among all users or nodes and the public nature of the data eliminates the possibility of any censorship and fraud in this system.
Due to the absence of a server and a central institution, people’s information is stored on their own personal system.
This non-aggregation of data greatly reduces the possibility of hacking and data theft. To hack its network, it is necessary to have access to half of the nodes, which is very expensive for hackers and practically impossible.
The use of encryption system has also increased the level of network security and has eliminated the possibility of forgery and fraud in this platform.
This currency is unstoppable, always active, and always being online is one of the important features of this network.
Comparing Bitcoin (BTC) and Ethereum (ETH)
Bitcoin and Ethereum despite the similarities they have with each other, also include fundamental differences. Next, we will examine the difference between Bitcoin and Ethereum and their similarities.
Similarities
- Both of these systems are based on blockchain technology and operate in a decentralized manner.
- Both use a peer-to-peer (P2P) payment system to transfer currency and data.
- Both coins are a public network that users can operate on their platform without the need to obtain permission.
- Each has its own blockchain.
- Transactions, deals and contracts are carried out on the platform of both blockchains without intermediaries and intermediary costs.
- Security is very high due to encryption in both networks.
- Transactions in both networks are non-stop and irreversible.
Differences
- The Bitcoin blockchain is just a Bitcoin cryptocurrency ownership tracking system and a global instant payment system.
- Ethereum is a platform for running thousands of decentralized applications and contracts.
- Block creation in Ethereum is once every 14 seconds. This process takes place in the Bitcoin blockchain every 10 minutes.
- In the Bitcoin network, 7 transactions are done every second. Meanwhile, 16 transactions are recorded every second on the Ethereum platform.
- Due to the rudimentary nature of the scripts, it is not possible to perform a smart contract on the Bitcoin network (this is possible on Ethereum).
- The value of Bitcoin coins and Ethereum ethers is different.
- Bitcoin is supplied with a certain number of 21 million. While Ether cryptocurrency has no supply limit.
- Ethereum uses the proof-of-stake algorithm to reach consensus after merge update. Therefore, it no longer supports the proof-of-work consensus process and cannot be extracted.
What are the uses of Ethereum?
This token has various uses, the most important of which will be discussed below.
Making decentralized software
Programmers and web developers can implement decentralized applications (DApps).
Decentralized in the sense that the authority of the program and the information of its users is not in the hands of any person or organization, and there is no way to censor data in these applications.
Not being in the possession of a person and not having a centralized institution has caused that the information of the users of this network is not stored on the server of any person or organization and they are safe from hacking and information theft.
When using programs such as YouTube, Twitter and other social networks, your personal information, writings, photos and videos are stored on the central server of that program.
In this situation, with any security threat against the collection servers, your information is also at risk.
Also, you have seen many times that these programs have deleted content that they did not like or asked you to change it. Decentralization of information will also solve these problems for users.
Implementation of smart contracts
Smart Contracts, which are carried out on the blockchain platform of this cryptocurrency, are actually a string of code. These codes include the conditions before and during the contract and all the provisions of this document and the conditions for its performance.
These coding can be used to plan and determine the framework of various things such as stock exchange, currency, content or anything else of value.
Smart contracts operate automatically and cannot be changed or stopped in any way after being concluded.
In other words, these contracts have a complete and accurate performance guarantee. Also, it is not possible to have any intermediary as a third person in this type of contract.
All network nodes also receive a copy of this contract on their system. These contracts are written in Solidity programming language.
Imagine that blockchain is a real estate agency and you have entered it to rent a house. In this company, it is only you and the landlord, and no one is present to register the transaction. With your agreement, the landlord asks a programmer to record the complete conditions of the contract by codes on a system. If you also accept all those conditions at the time of registering the codes, the contract will start fully and accurately.
You should note that this contract cannot be terminated under any circumstances and at any time except for the designated time.
Also, none of the parties to the contract will be able to make the slightest change in this document after the start of implementation. You should not pay any fees for registering it and transferring money between you and the landlord.
Extraction methods
Before Merge big update, to mine Ethereum, miners were placed in a competitive space to create blocks. They had to solve complex mathematical equations through their system’s GPU or mining devices, and in this way a new block was created. Miners were rewarded for this process.
But after the Merge update, Ethereum no longer supports the Proof of Work algorithm. In fact, currently, in order to confirm transactions and build blocks, users must stake some Ethereum currency and in this way help the network work and get rewarded with some Ether cryptocurrency.
What is gas?
Transaction fees in the Gas network are paid with Ether. The amount of Ether that is paid for the transaction is called Gas Limit and the fee paid for Gas Limit is called Gas Price.
Ethereum Gas is a concept related to the Ethereum blockchain platform.
In Ethereum, transactions and execution of contracts are done based on calculations and the amount of consumed resources. These resources include time, computing power and memory.
Therefore, when a person wants to make a transaction or execute a contract, he has to pay some amount of required resources as “gas”.
Each operation in Ethereum has a gas fee, which is paid as a reward to nodes to process transactions and contracts on the network. The amount of gas is determined based on the complexity and volume of the desired operation.
Therefore, transactions and contracts with higher gas have higher priority in the network than other operations and are processed faster.
The amount of gas is measured in “gwei” (gwei), which is a small unit of the Ethereum coin. People can specify the amount of gas when sending a transaction.
A higher amount of gas increases the speed of transaction processing, but it also brings more cost in paying gas. Currently, the average gas payment for executing a transaction in the network is 17 gwei.
In addition, you can use the etherscan site to know the amount of gas at different hours of the day and night.
What is Ethereum Classic?
After its launch in 2016, Ethereum was able to operate according to its predetermined plans. But in 2016, a project named DAO was introduced, which introduced its goal to create a revolution in the network.
The DAO was a decentralized investment fund that was managed and operated by its investors. The DAO worked by giving the buyers tokens that they could use to vote in the fund.
The reception of this project was much more than expected and it attracted about 168 million dollars of initial capital at the very beginning.
Everything was going well, but on June 17, 2016, an unknown hacker exploited a security bug in the DAO code and transferred more than $50 million eth to his account.
This incident was almost a disaster and had many negative effects. But one of the rules included in the DAO contract gave developers about a month to come up with a solution.
According to this law, the Ethereum transfer request was made after 28 days. There were two ways for the developers: Hard Fork and Soft Fork.
Fork is one of the commonly used terms of digital currencies, which is simply called a software update.
In fact, the programmer helps to improve and update the previous program with the changes he makes in a project, this phenomenon is called fork.
A fork in the field of digital currencies happens when there is a certain problem in the network or there are problems in the rules.
Initially, the idea was to soft fork eth to get rid of this problem, but the developers proved that the soft fork will put the network at risk of DDoS attacks, and therefore it is not a good option.
So the only solution left was to hard fork Ethereum. After the hard fork, this currency was renamed to Ethereum Classic with the symbol ETC before the hard fork in the exchanges, and the new currency took the name of Ethereum.
In very simple terms, Ethereum Classic is Ethereum on the old blockchain.
The fate of Ethereum after merge
The developers decided to make new changes in the blockchain with the aim of increasing the speed of transaction approval and also reducing fees.
The purpose of these changes or rather hard fork was to migrate from POW to POS. In the blockchain update known as Ethereum 2 (its original name is Serenity), miners are no longer able to mine eth.
This fork, which was carried out under the supervision of Vitalik Buterin, Tim Biko and all the main members of the project, was a complex and important process for the Ethereum network.
After merge update, some users who disagreed with the fork continued to operate on the main blockchain called EthereumPoW. This blockchain still supports the proof-of-work process, and miners mine the network’s native coin, ETHW, by confirming transactions.
The Ethereum development team has a specific roadmap to reach Ethereum 2 and complete Ethereum updates, which will bring this cryptocurrency step by step closer to the realization of Ethereum 2.
In fact, merge update was the first step in reaching Ethereum 2, and Surge, Verge, Purge and Splurge updates remain. By implementing all these steps, all features of Ethereum, including smart contracts and sharding, will be implemented on Ethereum 2 and the network will experience a complete migration.
What is the future of Ethereum?
What is the Ethereum currency? Ethereum is one of the famous cryptocurrencies that has always been in the spotlight.
Many analysts consider the future bright and consider it a suitable option for long-term investment. But you should note that any investment in cryptocurrencies should be done with thorough research.
Unfortunately, many people enter this field without having enough knowledge and under the influence of others, who end up suffering heavy losses.
We recommend you to use analysis tools to predict the market situation and the future of Ethereum currency.