What is Ethereum (ETH)?
The popularity of Ethereum (ETH) has exploded in recent years as one of the largest cryptocurrencies. Are you considering buying Ethereum? Then read more about what Ethereum is exactly, how it works and what makes it so unique in the world of blockchain.
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What is Ethereum (ETH)?
Ethereum is a decentralised network founded in 2013. It features an open-source, globally decentralised infrastructure for creating and running smart contracts. The ecosystem is powered by the use of Ether (ETH), the native cryptocurrency behind the system.
The Ethereum mainnet went live on July 30, 2015, when it used the Proof-of-Work (PoW) consensus mechanism. Later, the switch to Proof-of-Stake (PoS) was achieved through a massive upgrade in 2022.
Since then, the use of Ethereum in Decentralised Finance (DeFi), by Decentralised Applications (dApps) built on the network, has exploded. In addition, several Layer-2 solutions for scaling have been built for the network.
What makes Ethereum (ETH) unique?
Ethereum differs from its main competitor Bitcoin by using an account model to record changes. The network relies on the Ethereum Virtual Machine (EVM), which supports two types of addresses: externally owned accounts (EAOs) and smart contracts. As a result, Ethereum has become a smart contract platform that has enabled the development of various decentralised applications (dApps), including the emergence of Decentralised Finance (DeFi).
Ultimately, what makes Ethereum truly unique in the blockchain world is that it paved the way for the development of smart contract platforms. These contracts are essentially computer programs that run automatically when certain conditions are met. They are designed to remove the need for a middleman between users. This leads to lower transaction costs and higher reliability.
How does the Ethereum network work?
A smart contract is written in a tricky computer language, the most commonly used one being known as Solidity. The code is then compiled to bytecode, after which an Application Binary Interface (ABI) is created. This is the standard way smart contracts are used.
The Ethereum Virtual Machine (EVM) has a stacked architecture with multiple data components:
ROM: An immutable program containing the bytecode necessary for the execution of smart contracts.
Memory: The component where data is temporarily stored.
Storage: this facilitates the possibility to store data permanently.
The original token standard used within the Ethereum ecosystem is the ERC-20 token standard. An ERC-20 token is basically a token that applies the standard interface of the network.
More hundreds of thousands of tokens have been created on the Ethereum network. It is also possible to create non-fungible tokens (NFTs) on Ethereum. This can be done using two token standards, ERC-721 and ERC-1155.
What is the Ethereum merge?
The Ethereum merge, also known as Ethereum 2.0, is a major upgrade to the Ethereum network that was implemented in 2022. With this upgrade, the network was switched from the Proof-of-Work (PoW) consensus mechanism to Proof-of-Stake (PoS). This means that instead of solving complicated math problems to verify transactions, users now have to 'stake' ETH to become a validator on the network. The minimum staking amount is set at 32 ETH.
The Proof-of-Stake consensus mechanism ensures that blocks on the network are approved by multiple validators. Only when a certain amount of validators agree that a block is legitimate is the block closed and added. This process is more energy efficient than the Proof-of-Work mechanism used previously. In addition to the move to PoS, further elements have been added to the network during the various upgrade announcements. For example, there is the Beacon Chain, which acts as a kind of 'skeleton' for Ethereum 2.0. Shard chains have also been introduced to increase network capacity. Furthermore, the Ethereum WebAssembly Machine (eWASM) has been developed as a new virtual machine for executing smart contracts on the network. With all these developments, Ethereum 2.0 is increasingly becoming a complete smart contract platform with greater scalability and better energy efficiency.
What is the maximum supply of Ethereum (ETH) that can be made?
Originally, Ether (ETH) was created with the PoW consensus model, where miners had to compete with each other to solve tricky cryptographic puzzles. If they succeeded, they were rewarded with ETH.
Over time, Ethereum switched to PoS, requiring validators to stake tokens. As a result, Ethereum has an unlimited supply.
Unlike Bitcoin, Ethereum therefore has no hard limit. However, there is a daily limit of 1600 ETH, which is reset every 24 hours.
Who are the founders and contributors behind the Ethereum Blockchain?
The development of Ethereum was split between multiple teams and individuals, all of whom were important in their own way throughout the process.
Some of the key people behind the project include: Vitalik Buterin, Gavin Wood, Charles Hoskinson, Anthony Di Iorio, Stephan Tual, Mihai Alisie, Jeffrey Wilke, Amir Chetrit, and Joseph Lubin.