What is Ethereum?
Ethereum, an open-sourced, decentralized public blockchain using Proof-of-work (PoW) consensus is the second largest network for cryptocurrency based on market capitalization.
Ethereum with its own decentralized applications on its platform allows the removal of third parties that store data, transfer mortgages while keeping track of financial information.
Introduction of the whitepaper proposed during early 2013 stated that: –
“What Ethereum intends to provide is a blockchain with a built-in fully fledged Turing-complete programming language that can be used to create “contracts” that can be used to encode arbitrary state transition functions, allowing users to create any of the systems described above, as well as many others that we have not yet imagined, simply by writing up the logic in a few lines of code”.
The primary functionality of Ethereum is issuing smart contracts containing a set of protocols and penalties related to an agreement automatically allowing the issuing of digital contracts.
An excerpt from the book Token Economy by Shermin Voshmgir states:
“A smart contract is a self-enforcing piece of so ware that is managed by a P2P network of computers. Smart contracts are client rights management tools that provide a coordination and enforcement framework for agreements between network participants, without the need of traditional legal contracts. They can be used to formalize simple agreements between two parties, the bylaws of an organization, or to create tokens.”
What Is Ether?
The currency used on the ether network is “Ether” while gas is the derivative of Ether for transactions and computations fees across the network. Gwei is a denomination of the cryptocurrency ether (ETH), which is used on the Ethereum network.
Mining in the Ethereum network is done through the Ethash algorithm for faster verifiability and hash generation based on the proof of work model. It will eventually be replaced by Proof-of-stake with Casper upgrade.
History
Ethereum was developed originally to host different decentralized applications built on the blockchain. The platform allows developers to build decentralized applications by providing different tools to build decentralized apps.
Its founder Vitalik Buterin, who was 19-year-old at that time thought that Bitcoin’s scripting language was incompetent to host decentralized applications.
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Vitalik Buterin
The first experimental release of mainnet software labeled as “Frontier” was done in July 2015. In March 2016, a first major upgrade was released known as “Homestead” which was considered to be stable regarding its transaction processing, gas pricing, and security.
Around 2016, Ethereum was hard forked resulting in the new chain to become known as Ethereum. The old unforked chain came to be known as Etheruem Classic.
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With time, the majority of users- developers, miners, and businesses opted for the new hard forked Ethereum chain with the second highest market capitalization around it. The old unforked chain came to be known as Ethereum Classic.
An innovation
Ethereum’s nodes are run by volunteers from all around the world. The network is run by volunteers with their own “computational power (gas) to run the network.”
Smart contracts based on the Ethereum network helps in making business transactions cost more efficient, secure and beneficial. A smart contract allows automatic bill payment in the healthcare sector, global supply chains, ensuring music owners are paid the rightful share by settling music royalties.
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The exciting part of using Ethereum is that experts believe that the most innovative applications on the blockchain are yet to be developed. This makes it all the more promising on the prospects of Ethereum.
The innovations provided by Ethereum be it the introduction of ICOs, to smart contracts, E2C20 tokens have revolutionized the entire blockchain community.
Ethereum’s core innovation became known as “Ethereum Virtual machine”, and is “a Turing-complete software” running completely on the Ethereum network.
The highlight of the network is that any programming language can be run on the platform resulting in the creation of a vast network of decentralized applications.
Solidity is the programming language used to write smart contracts and build dapps although a new programming language Vyper is used to handle the shortcomings of Solidity.
Loopholes-DAO attack
Ethereum does receive its fair share of criticism with its scalability problems with thousands of dapps running in its network, higher gas fees, and slower transaction times.
DAO is a decentralized autonomous organization meant to act as a venture capital firm for decentralized and crypto space. The organization provided funding for anyone who would pitch their ideas to them.
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It was able to attract around $150M Ether, turning it into one of the biggest crowdfunding events of the crypto space. However, there was an infamous DAO hack during June 2016 where some unknown users were able to move $50 million dollars into a different DAO.
“In the first few hours of the attack, 3.6 million ETH were stolen, the equivalent of $70 million at the time. Once the hacker had done the damage he intended, he withdrew the attack.”
However, the loophole was not based on Ethereum but an application built on the Ethereum network. The code that was written for DAO had many flaws and a “recursive call exploit was one of them.”
The reaction to the DAO attack was a call for a hard fork.
Future
There are roughly 800 monthly active developers currently on the Ethereum blockchain according to data provided by investment firm Electric Capital.
Eric Conner, founder of information site ETHHub and product researcher at blockchain startup Gnosis said:
“I think in four years, Ethereum will be moving past the hardest parts of its ambitious goals around proof-of-stake and scaling. At that point, the network will be able to onboard more users and we’ll start to grow beyond the use cases we are seeing today.”
“I believe that ethereum will achieve the original ‘world computer’ vision within the next four years because Ethereum 2.0 will have completed its roll-out. We will have mature scaling solutions (at all layers) and we will have proper privacy solutions.” Anthony Sassano, marketing and growth lead at ethereum-based startup Set Protocol
Ethereum’s system-wide activation of the Istanbul hard fork breaks 680 smart contracts on the decentralized management platform Aragon.
Ethereum’s system-wide activation of the Istanbul hard fork caused a split of the Ropsten testnet.
The update is to ensure frictionless functioning of decentralized autonomous organizations (DAOs) and address affected smart contracts.
A call for Casper upgrade yet to come, and the proposal for “sharding” will help remove network congestion to build in the network to scale. A proof of stake model will be upgraded into Ethereum 2.0.