Ethereum is a blockchain platform that allows you to create dApps with the help of smart contract technology. Ether is a native currency of the Ethereum blockchain that is currently ranked number two crypto asset (after Bitcoin) in terms of market cap. The platform is used as a ground for many notable crypto projects, especially when it comes to financial services. The DeFi sector, NFTs (non-fungible tokens), smart contracts and many other vital features use the Ethereum network as a pillar that provides developers with all the necessary tools for building blockchain-based products.
Here is how Ethereum manages to deploy a number of extra functionalities to the blockchain - Ethereum Virtual Machine. This is a decentralized virtual machine that adds an extra layer between the executing code and the executing machine. The EVM makes it possible to use the resources of network participants regardless of location. In turn, the developers use this computing power to create smart contracts and dApps.
Other important pieces of the puzzle are the multiple upgrades that Ethereum went through. The history from the genesis block to the cryptocurrency we have now presented itself in several stages:
- The Beacon chain - the coordination mechanism for the proof-of-stake blockchain;
- The Merge - transition from the mainnet system and the new Beacon chain;
- Shard chains - the division of the network’s load across 64 new chains.
In August 2021, Ethereum underwent a major change that has been dubbed the ‘London upgrade’. The hard fork is governed by the Ethereum Improvement Protocol 1559 or EIP-1559, which is an open auction for new blocks.
How Is the Ethereum Network Secured?
Like most cryptocurrencies, network security and block creation are ensured by the process of mining. Prior to major upgrades, Ethereum relied on the proof-of-work consensus mechanism, first introduced by Bitcoin. Now, ETH is moving to proof-of-stake.
PoS is not about the hardware and how much computing power a node can offer. Instead, it delegates the network’s control to the owners of the token. The more tokens you hold (i.e., the more stake), the bigger the chances to create a block and receive block rewards.
Users who stake their coins are called validators. As the name suggests, they ensure the validity of transactions by storing and processing data. The minimum requirement to become a full validator is 32 ETH. However, since that amounts to a hefty sum of money, developers also made provisions for users with smaller capital. The launchpad is available on the website and describes the staking process in great detail.
PoS offers several major benefits in comparison to PoW:
- More energy-efficient - Does not require as much power;
- Easier for beginners - Lower barriers to entry mining, including reduced hardware requirements;
- More decentralization - Creates more nodes participating in the network;
- Larger scale - Support for shard chains.
What Makes Ethereum Unique?
Ethereum and Bitcoin have been the best-performing mainstream crypto investments for a while. But if you want to understand what makes Ethereum special, it’s not fair to compare it to BTC. People buy Bitcoin and Ethereum for completely different reasons. It’s better to look at Ethereum as its own entity and analyze its features without tying it to any other crypto.
Ethereum’s white paper talks about alternative blockchain applications. So, it was always meant to be more than a store of value. Ether is programmable and doubles as a fuel to run programs on the Ethereum blockchain in addition to being a cryptocurrency.
You can hold Ethereum’s token and just wait until it appreciates or you can:
- Pay transaction fees;
- Pay for products and services;
- Lend it;
- Use it as collateral for open finance applications;
- Purchase Ethereum-based tokens, collectibles, in-game items, and other non-fungible tokens.
The Ethereum Foundation
This is a non-profit organization that promotes talent and accelerates relevant research projects together with committed individuals, companies, and foundations. A few other crypto projects have their own research bodies now, but it was Ethereum that set the trend.
The Ethereum community is a hub for thousands of users, developers, designers, HODLers, and enthusiasts. This vibrant, diverse community helps people discover everything there is to know about the project and blockchain technology in general.