Like Bitcoin, Ethereum is a network running on blockchain technology. However, unlike Bitcoin, the Ethereum network is arguably more complex, allowing users to build and release decentralized applications and smart contracts. This has led to a large number of projects being built on the Ethereum blockchain.
Miners receive the digital asset Ether, or ETH, as a reward for adding blocks to the Ethereum blockchain. ETH also refers to “gas” — the cost set by miners required to perform a network transaction. There is currently no limit set for the supply of Ether tokens to be mined.
Overview for Fast-Readers
- Ethereum is the brainchild of Russian-Canadian programmer Vitalik Buterin.
- Unlike Bitcoin, the network stands out for its variety of use cases, e.g. smart contacts.
- Ethereum’s ecosystem is largely responsible for the boom in decentralized finance projects, or DeFi, in 2020.
Who created Ethereum?
Russian-Canadian programmer Vitalik Buterin first wrote the white paper for Ethereum in 2013, later collaborating with a team of people including Charles Hoskinson, Mihai Alisie, Anthony Di Iorio, Gavin Wood, and Joe Lubin to publicly announce the project the following year. Though this group of founders helped develop the ecosystem, many other projects have stepped up to release their own smart contracts on the Ethereum blockchain.
When was Ethereum created?
The Ethereum network originally went live with 72 million premined tokens on July 20, 2015.
What is the purpose of Ethereum?
Crypto users can send and receive ETH through crypto exchange like other digital assets, and the token is the second largest cryptocurrency by market capitalization. Ethereum’s creators designed the network so developers would have the ability to create decentralized applications and services largely without them censoring or leaking data.
Why do people buy Ether?
Ether is the gas fueling the Ethereum blockchain, allowing users to make transactions and execute smart contracts, whereas ERC-20 refers to tokens that are designed for the Ethereum blockchain. Essentially, smart contract projects on the blockchain issue ERC-20 tokens which fall within a set of standards set up by the protocol so they can be traded with other Ethereum users.
How does Ethereum work?
Many have referred to Ethereum as “the world computer,” in that the network is highly decentralized, run by thousands of nodes on volunteers’ computers across the world. These nodes help enforce the consensus rules set by the Ethereum founders, allowing the network to operate and for users to make transactions and set up smart contracts.
Ethereum and Smart Contracts
Ethereum’s smart contract applications allow two or more parties to enter into an agreement with any transactions recorded on the blockchain. The digital contract — not exclusive to Ethereum — is enforced by the blockchain, which requires both parties abide by the terms and conditions set at the time the smart contract was created.
Though smart contracts can be handled on other blockchains, Ethereum was created specifically to let developers launch their own smart contract projects. In 2020, decentralized finance spurred adoption in the Ethereum ecosystem, with billions in total value locked across popular projects.
Ethereum and Decentralized Applications
Decentralized applications, or Dapps, combine an Ethereum smart contract with the project’s own user interface. Because the blockchain was created with the intention of making it simpler for developers to create Dapps, the hundreds if not thousands that exist today have a variety of use cases including social media and online gaming.
What does the future of Ethereum look like?
Ethereum has already taken major steps to transition the blockchain to what many have said is a possible solution to its existing scalability problem, Ethereum 2.0. The blockchain will introduce a proof-of-stake consensus to the network, which will allow users to earn rewards for validating ETH 2.0 blocks.
The platform is currently supported by the Ethereum Foundation, a non-profit organization that provides grants in addition to “non-financial support” to projects in an effort to accelerate the Ethereum ecosystem. Going into the 2020s users may see greater reliance on the blockchain as decentralized finance applications continue to grow and new use cases become available.
Summary
The Ethereum blockchain has been active for more than five years and shows few signs of slowing down going into the 2020s. While the network has some similarities with Bitcoin, it stands out for its variety of use cases including smart contracts and decentralized finance projects. These have led to a large number of projects being built on the blockchain since it went live in 2015.
