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What is Ethereum (ETH)?


In the world of cryptocurrencies, Ethereum is a very important player. Many people have heard of the term "Ethereum." It is the second largest cryptocurrency network by market capitalization.Layer 1It is a virtual currency.

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ETH (Ethereum) Market Information

Six Key Phases Shaping Ethereum’s Future

The 2024 roadmap, released by Ethereum co-founder Vitalik Buterin, focuses on six major phases:

  1. The Merge: This phase, completed in September 2022, moved Ethereum from a Proof-of-Work (PoW) to a Proof-of-Stake (PoS) consensus mechanism. The transition aims to make PoS a simpler and more robust implementation.
  2. The Surge: This phase, currently underway, focuses on enhancing the scalability of the network, including through data sharding to increase transaction processing speeds and reduce transaction costs.
  3. The Scourge: The purpose of this phase is to address security vulnerabilities and improve the robustness of the network. This includes exploring new consensus mechanisms and strengthening the security of smart contracts.
  4. The Verge: We will strive to simplify the user experience and enhance developer tools, including simplifying the Ethereum interface and improving the development process for applications such as dApps.
  5. The PurgeImprove overall efficiency by removing obsolete code and streamlining unnecessary code, streamlining your network and reducing security risks associated with obsolete code.
  6. The SplurgeInvesting in research and development to explore new technologies and potential advancements for Ethereum, including exploring privacy-enhancing solutions such as zk-SNARKs and rollups.

A return to the cyberpunk spirit

Buterin stressed the importance of recapturing Ethereum's original cyberpunk vision, a vision focused on decentralized applications, privacy protection and peer-to-peer communication that had become overshadowed by financial applications such as DeFi.

The integration of privacy-enhancing techniques such as rollups, zero-knowledge proofs, and more are a step towards reviving this cypherpunk spirit. These advancements will enable developers to create more private and censorship-resistant applications on Ethereum.

Through these phases, Ethereum will evolve into a more robust, scalable and efficient network, and by returning to its cypherpunk foundational principles, it is hoped that it will become a force for positive change in the digital world.Reference site 1 Reference site 2 Reference site 3

The origins and mechanics of Ethereum

Ethereum is an open-source software platform developed in 2015 that utilizes blockchain technology. The platform allows developers to build and deploy decentralized applications (DApps) and smart contracts, which remove the middleman from transactions, making them more efficient and secure. For example, it is used in services such as housing contracts and money transfers.

Ethereum Revenue Structure

Ethereum revenue is associated with actions and transactions on the network. When a user makes a transaction, they must pay a transaction fee (gas fee) to miners and validators. This fee is the source of Ethereum revenue, and most of it is burned within the network, with the rest being distributed as rewards to miners. Miners also earn ETH as a reward for performing validation work on the network.

Applications of Ethereum

The Ethereum network is not limited to simply transactions using ETH. By using smart contracts, it is designed to automatically execute contracts when certain conditions are met. This ensures transparency and efficiency. Also, DApps are computer programs that run on the blockchain and are not managed or governed by a single organization. For this reason, they are characterized by high security and reliability.

What are Ethereum smart contracts?

Ethereum smart contracts are self-executing agreements recorded on the blockchain. They are written in code and are used for a wide variety of applications, including insurance, supply chains, real estate, and gaming. To receive tokens in Ethereum, you need to send ETH to a smart contract, which will send you the corresponding tokens in return. It is important to note that the tokens are not ETH per se, but are created according to a standard called ERC-20.

Token types and their uses

Tokens can be broadly divided into utility tokens and security tokens. Utility tokens are intended for use in DApps and product promotion, while security tokens have the nature of an investment target. Security tokens must comply with strict regulations, whereas utility tokens do not.

Diverse Applications of DApps

DApps, written in the Ethereum-specific coding language Solidity, are known for their versatility. These include non-treasury tokens (NFTs), ICOs, decentralized finance (DeFi), games, social networks, DAOs, exchanges, etc. DApps are not controlled by a centralized organization, so they do not require intermediaries.

Representative examples of DApps

  • USDC: A cryptocurrency with a stable value pegged to the US Dollar, used to protect against inflation and for fast international transfers.
  • Bored Ape Yacht Club (Bayce): A popular NFT that is a highly valuable digital collectible that gives its owner access to certain memberships and events.
  • Metaverse and Play-to-Earn DApps: For example, Decentraland and Axie Infinity offer virtual land and characters, establishing player ownership.
  • DAO: A decentralized network that makes collective decisions and is characterized by transparent funding and decision-making.
  • Filecoin: A decentralized file storage protocol for cost-effective data storage.
  • Uniswap: A decentralized exchange that allows users to trade ERC-20 tokens without a middleman.
  • AAVE: Provides instant crypto loans using ETH or wBTC as collateral.
  • MakerDAO: You can borrow a stablecoin called DAI by using ETH as collateral.

History of the Ethereum Network

Vitalik Buterin, an early investor in Bitcoin, developed Ethereum, believing that blockchain technology could be used for purposes other than digital currency. However, in 2016, a major security incident occurred, leading to the blockchain splitting. Since then, Ethereum has grown into the foundation that supports many tokens and DApps.

Ethereum’s Future Outlook

Ethereum is currently undergoing two major upgrades, "The Merge" and "Sharding", to improve the scalability of the network, reduce power consumption, and increase the speed and security of transactions. Ethereum is moving from Proof of Work to Proof of Stake, which makes transaction validation more efficient. Sharding expands the capacity of the network, allowing more transactions.

Advantages of Ethereum

Ethereum is an innovative decentralized network that allows peer-to-peer transactions. It eliminates the need for intermediaries and is available online 24/XNUMX. Transactions on the blockchain protect privacy and make the platform easily accessible to everyone.

Smart contracts do not assume trust and execute transactions automatically based on the behavior of code, allowing things like crypto funds to provide returns to investors automatically, eliminating the need for third parties to be involved.

Drawbacks of Ethereum

The current Proof of Work consensus requires a lot of energy, but a future Merge upgrade will transition to the more energy-efficient Proof of Stake. Smart contracts are publicly available, which means they are at risk of being exploited.

Also, network congestion can lead to high transaction fees, which can be costly. Layer 2 solutions and sharding upgrades are underway to solve this.

Comparison of Bitcoin and Ethereum

Ethereum and Bitcoin are both decentralized digital currencies and have similarities in payment methods and wallet storage. However, ETH is primarily used to operate smart contracts and DApps, and is a faster, more versatile network. Currently, Ethereum is planning to move from PoW to PoS, which will change the transaction validation process.

Conclusion

The Ethereum network continues to thrive and is on its own unique path apart from Bitcoin. The cryptocurrency world is volatile and Ethereum is no exception, but its innovation and promise show a lot of potential.

Links

ETH official website

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