What is Ethereum and Why it is called the next Internet? Posted on by Sushant69 Ethereum is the second largest Cryptocurrency by market cap, after Bitcoin.It is basically a decentralized, open-source Blockchain with functionalities as Smart Contracts .Its native token is called Ether (Eth), which acts as a payment on the network.In simple terms.Ethereum is a public decentralized ledger, by decentralized we mean that each and every user would have a copy of the transaction rather than a centralized authority having all the data.While Bitcoin, which also runs on the same technology, blockchain, is primarily considered as a store of value, Ethereum has several use cases like you can create decentralized applications (Dapps) on the network and you can also run what is called a “Smart Contract”, Decentralized Finance (DeFI) and much more.
History & Understanding Ethereum
Ethereum was launched on the 30th of July, 2015 by a number of blockchain fanatics namely Vitalik Buterin, Joe Lubin, Gavin Wood, Charles Hoskinson and others.Vitalik Buterin, the current CEO and Co Founder, was the man behind the original concept of Ethereum.While Gavin Wood is often referred to as the preacher of putting self executing smart contracts in the blockchain.In its early stages, development of the platform was achieved with an online crowd funding , where participants bought Ether, the token with another digital currency Bitcoin.
Ethereum was created to hand its users control over their data.Its primary objective was to enable developers to create self executable smart contracts and decentralized applications without the hassle of fraud and intermediaries.So founders of Ethereum wanted it to be a platform where you can build an entire decentralized ecosystem.
What are Smart Contracts?
Smart Contracts are agreements that can self execute transactions if conditions of the same are met without the need of any intermediary or any third party, in real life cases banks and courts.The idea is not restricted to any particular platform or network.For example, In traditional contracts, a document lays the relationship between two parties, say Party A and Party B, enforceable by law.If any of the parties violate the terms of the contract, the other party can drag the violator to the court for non compliance of the agreement.A Smart Contract in this case secures the agreements in its code, so that the rules are automatically enforced without the use of any third party (Courts in this case).
Thus, we can say that smart contracts are more safe, secure and economical when compared to modern day physical contracts.Also, smart contracts are designed in such a way that, once a contract is created, it cannot be tampered or changed in the future by anybody, not even by the creator himself.
Also Read – Is this the end of Bitcoin? A Decentralized Ecosystem
Ethereum promises that its platform can help decentralize, secure and trade just about anything.In this modern day and age, users for accessing certain services, store their personal and financial data in clouds and servers of centralized companies like Facebook, PayPal , and Google .Blockchain enthusiasts believe that this is too much power in centralized hands, Hence these companies can dictate their own terms upon the user.This is the reason why there are certain rules and codes, users have to follow to keep accessing these services.The idea behind Ethereum is to change the fundamentals of how apps on the internet work today.While there would be certain rules and regulations governed by smart contracts, but one thing is for sure that there would be no discrimination among users, as the rules would be the same for all.
Evolution of Ethereum
The founders of Ethereum have a widely ambitious objective, where they see Ethereum, capable of decentralizing almost anything in the future.While it may sound a bit far fetched, but the constant evolution of the network has managed to instill some believers, that this dream can be achieved.The networks invulnerability to hackers and intruders has opened up several opportunities, where we can now see real life storage of private information’s like Public health records and entire voting systems.In March, 2018 Sierra Leone became the first country to hold 70% of its election on the blockchain technology.
Since its inception, Ethereum has undergone almost Twelve major protocol upgrades, which is the most by any cryptocurrency ever.
This shows that Ethereum has a pretty strong developers community, who are constantly working to make the platform better.With that being said, Ethereum has had its fair share of hiccups.
In 2016, a decentralized autonomous organization called DAO , developed a set of smart contracts which raised $150 Million in crowd funding’s.A precarious situation was raised when the DAO was compromised, where an unknown hacker stole $50 Million worth of DAO tokens.This particular event sparked a debate in the crypto-community and brought about a debatable “Hard Fork” , which resulted in the splitting of the network into two blockchains.Modern day Ethereum reversed from its primitive chain and Ethereum Classic kept running on the same chain.The Hard Fork created a rivalry between the two networks.
Surprisingly, NFT’s ( Non Fungible Tokens ) which have taken the world of digital art by storm, are mostly built on the Ethereum platform.
Also DeFI ( Decentralized Finance ) is one of the primary use cases of Ethereum, where it offers traditional financial instruments in a decentralized architecture, which in turn lets users earn interest or loan Eth’s without the need of banks or third parties.
Ethereum 2.0
With the widescale adoption of Ethereum and its growing supply of Eth in circulation, brought about the need to scale up the existing chain, as it was not sufficient to cater a wide range of users.Hence, a major update was announced in the form of Ethereum 2.0, by the founders.After a much awaited time, Ethereum 2.0 was announced in three phases, of which phase 0 has already began in December, 2020, and we are now awaiting phase 1 and 2.Eth2 has promised to increase the scalability of the existing platform by a process known as Sharding .With Eth2 in its full throttle, transactions currently ranging to 15 per second could rise to Tens of Thousands of transactions per second.It has also introduced a much awaited Proof of Stake consensus to its network, in consideration to the criticism of high usage of energy in mining algorithms.
Sharding refers to the splitting up of the workload into many blockchains, which run parallel to each other, so as to increase scalability, security and efficiency.
Also Read – What is an NFT and how it is transforming digital art ? Why it is called as the next Internet?
Ethereum advocates and enthusiasts believe that Eth has very high potentials and it will outperform bitcoin eventually.According to a report from Yahoo Finance , Among the top 50 companies integrating blockchain technology into their operations, 32 have signed for Ethereum as the platform, which is great news for the platform.J P Morgan, Amazon and Microsoft Azure have now all signed to Eth as their platform for decentralized operations.Certain Billionaires and Multi Billion Dollar companies believe that Ethereum could be just as big as the Internet back in the 90’s.Moreover, many including the inventors of the Internet, believe that the Internet was meant to be decentralized and Eth could play an major role in helping the Internet to become what it was meant to be in the first place.Ethereum vs Bitcoin Ethereum vs Bitcoin isn’t a fair comparison because they have very different use cases.
Now comes the big question! Who is the badder guy of the two? And the answer is this is not the right question.
Comparing Bitcoin to Ethereum, is like comparing Email with the Internet.Yes, you heard it right, Ethereum can’t be compared to Bitcoin because they simply aren’t the same thing.While both are an application of blockchain technology, Bitcoin covers only a small part of the application of the system, whereas Ethereum is in itself trying to form a platform where cryptos like Bitcoin can be built upon its network.Bitcoin’s primary use has been its store of value and a digital currency.While Eth can perform the same as Bitcoin, along with a platform to build Dapps and smart contracts.Moreover blocks on Ethereum are validated every 12 seconds, while blocks on Bitcoin are validated every 10 minutes.And the most important one is that while bitcoin has a fixed supply of 21 Million coins, Eth has no fixed supply cap, like the US dollar or any other fiat currency.Criticism
Recently, there has been a rising controversy concerning the high usage of energy for crypto mining, which has led to a sharp dip in the crypto market.
Ethereum more or less faces the same criticism as the other cryptos.Cryptocurrency is a bubble – Since the meteoric rise of cryptocurrencies, some people and experts in the financial world believe that crypto space is a bubble, which would eventually burst sooner rather than later.The sharp decline in the market in recent months have only fueled and solidified these theories further.Rising Transactional Costs – The growing popularity has also brought upon high transactional charges for its users.
Average transaction charges for Eth hit a record of $23 in February 2021, which is relatively very high for people who are trying to use the network.High Energy Usage – Like I said earlier, Ethereum and Bitcoin miners have been accused of using enormous amounts of energy, in some cases derived from fossil fuels, in the form of computational power for validating transactions, which has been termed very harmful for climate change and the environment as a whole.Opinion
I hope this was a fair and unbiased analysis and explanation of Ethereum and its potential.The crypto market recently has suffered major dips due to some uncontrollable and irrational decisions by investors.Its important to understand that, no one man controls the market until you allow him/her to.Concerns have been raised over the energy usage required for crypto mining and its important for the now founders to put out all the facts of energy consumption, not in their twitter accounts but rather in a public conference or appearance.
These are by no means any investment advice, and neither am I a financial adviser, investing in Cryptocurrencies are a very risky affair.
Do your due diligence and research before investing .Share this: .
