Ethereum is the second largest cryptocurrency by market cap as of 2019. Ethereum is a special type of cryptocurrency that has a lot of innovative features and is used across industries and sectors.
The internet, as we know it today, is a centralized platform based on the server-client model. This means that all data such as websites, videos, music, articles, software and even passwords are stored on servers which are usually operated by third-party companies. Naturally, this centralized concept doesn’t reflect the idea of a free and decentralized internet. Hackers can gain control over information simply by attacking the central-points of the internet – the servers. There have already been numerous headlines of hackers stealing passwords, sensitive information or even credit cards of users by gaining access to servers operated by third-parties.
Companies can also decide to shut-down their services and restrict their users from accessing their information stored on the servers. Users are not directly in the possession of their data since everything is stored on third-party computers, and there is no guarantee that the data will not be changed, deleted or used for fraudulent activities.
While there have been many attempts to replace the existing server-client model and democratize the internet, blockchain has made the most significant progress so far. Blockchain is being increasingly utilized to decentralize the internet again, and the Ethereum blockchain plays an important role in this.
Just like Bitcoin, Ethereum is an open-source computing platform that is also based on blockchain and is also public. However, the operating system of Ethereum is based on the so called smart contracts.
The founder of Ethereum is Vitalik Buterin. The Russian-Canadian software programmer, who dropped out of the University of Waterloo and became part of the prestigious Thiel Fellowship Foundation, which granted him $100,000 to develop an innovative idea.
Buterin co-founded Bitcoin Magazine in 2013. After winning the grant from the Thiel Foundation, he went on to fully develop Ethereum and the new technology based on smart contracts.
The one thing Buterin has always argued was that Bitcoin, while truly revolutionary in design and structure, needed a scripting feature. The scripting features or rather languages allow specific programs and applications to be built on the operating system so that there are multiple uses and developments along the way. According to sources, after Butelik came up with how different Ethereum will be, his team went on to work on the project. According to Wikipedia and official sources, the actual work on Ethereum began in the beginning of 2014 through a company based in Switzerland, Ethereum Switzerland GmbH or as it is often referred to EthSwiss. Later on, the Ethereum Founded was founded. Not long after that, in the summer of 2014, the token sale (ether) began and the team raised funds to continue to work on improvements on the new technology. While Ethereum was met with enthusiasm, there were certain issues regarding the viability of the project and how scalable it could actually get.
The name of Ethereum was made up by Vitalik, who said that ether meant the invisible medium that was responsible for the light to travel and was everywhere in the universe.
Ethereum became so successful and popular that in only after three years of its creation, in 2017, the Enterprise Ethereum Alliance (EEA) was born. This Alliance includes some of the largest Fortine 500 companies, together with numerous startups and research institutes. The organization grew extremely fast starting off with just 30 members and reaching 150 just three months after its foundation, noting a CAGR of 62.4% for the three months or 400%. Some of the most well-known members of the EEA are Microsoft, BNY Mellon, Toyota Research Institute and more.
Ether is the underlying cryptocurrency that fuels the network of Ethereum.
The validation and transactions happen in the same way as they do with Bitcoin. All records are called blocks, which are interlinked with one another through the process of cryptography. The major difference between Ethereum and Bitcoin is that the transitions that occur in Ethereum are state ones, since Ethereum uses balances and accounts. States are not deposited in the blockchain, they are stored in the so called Merkle Patricia tree. Transacting with Ether requires both public and private keys which denote the addresses of the Ether.
There are some unique features when it comes to Ether’s addresses. All Ethereum addresses are made of the prefix “0x”, a specific identifier for hexadecimal.
When we compare Bitcoin and Ether, we should keep in mind that Ethereum is not the cryptocurrency, but rather Ether is. There are certain differences between the largest two cryptocurrencies by market capitalization. Some of them are:
The Ethereum Virtual Machine (EVM) is a 256-bit register stack and represents the runtime environment for Ethereum’s smart contracts. The EVM is probably the most crucial element of Ethereum, as it allows the stack to run the very same code exactly as required.
The smart codes that run on Ethereum are usually coded in different computer languages, so that they can be used for different applications and functionalities. The EVM code is used to “crunch” the smart contracts and run them on the Ethereum blockchain for completion. Some of the languages that are used for smart contracts include Serpent, Mutan, Solidity, LLL and Viper.
According to data, these smart contracts may be vulnerable since they are open to the public and are not easy to fix if there is a “bug”.
Ethereum is probably the most versatile open-source computing platform, since it is used for multiple applications and has multiple uses across sectors and industries.
Some of the most famous deployments of Ethereum include: Prediction markets, IoT, crowdfunding, online betting and gambling platforms, security data systems, online financial exchanges, social media apps etc.
As it can be seen from the historical chart from Coinmarketcap, Ethereum’s price has been climbing even more rapidly than Bitcoin’s price. At the beginning of 2015, Ethereum cost was fluctuating between $1,23 and $2. However, the rapid increase in price occurred in the spring of 2017, when Ethereum only cost around $10. From then on, the price started climbing rapidly and by July 2017, the price was already above $300. With more application and improvements on Ethereum, the price continued to skyrocket and in the very beginning of 2018, Ethereum hit its all-time high of almost $1,500. The fluctuation in price has been mainly due to concerns with security and future development. While the crypto bull market may be gone, as some analysts predict, it can be clearly seen that Bitcoin and Ethereum have a cointegration relationship when it comes to their price movements. While all altcoins go up and down with Bitcoin, more or less, Ethereum probably mimics Bitcoin’s price swings most closely. One possible explanation for that is: blockchain is the foundation for both cryptocurrencies. Blockchain has been embraced by corporations and governments, but it has also affected the price of Ethereum and Bitcoin. This is perhaps one possible reason why once Bitcoin goes down, the whole cryptocurrency market goes down as well.
The main benefits of decentralized applications are linked to the properties of Ethereum’s blockchain.
The major disadvantage is closely tied to the network’s benefits. Since smart contracts are programmed by developers, any mistake can lead to unexpected problems once the program is on the blockchain. In order to rewrite the code and improve the program, you need first to obtain a network consensus which directly opposes the network’s concept of decentralization. The process may be lengthy and burdensome.
The biggest advantage of Ethereum is the opportunity it provides to develop exciting and new apps for users. Some of these are listed below:
Ethereum, as we mentioned, is primarily used for development of apps. One of the most popular tools to join the ethereum network is through its native browser called Mist. Mist is not only a tool for writing and managing smart contracts, but also provides digital wallets for users to store ether.
If you’re using Google Chrome, the MetaMask extension may be interesting to you. It runs directly in your browser, so there is no need to install anything on your computer. MetaMask allows developers to write and run blockchain applications directly from their browser. While originally written for Chrome, the extension is now also available for Firefox and Opera. You can check more at www.metamask.io.
Another browser-ready solution is Ethereum’s Remix, which can be found at remix.ethereum.org. Just as with MetaMask, you can write and compile smart contracts directly from your browser, and run the final product. Remix also includes a handy file browser on the left-hand side of the screen, which can be used to scroll through any files you might need for your application.
Ethereum provides a complete platform to write decentralized apps on the blockchain. Unlike bitcoin, which utilizes the blockchain technology primarily to process and validate peer-to-peer bitcoin transactions, Ethereum’s network can be used in a variety of ways and new exciting DApps (decentralized apps) are being developed every day. This is why Ethereum has garnered so much attention in the last few years and has rivaled the “people’s currency” in a number of ways.
Ethereum’s main purpose is to decentralize the internet as we know it today. Volunteers across the world dedicate their computers to run DApps and smart contracts, and get paid in the form of ethers for performing these DApps. Around 5 ethers are mined every 12 seconds, which limits the total yearly supply to around 18 million ethers. Unlike bitcoin, which has a hard cap of 21 million, there is no similar restriction on the number of ethers available to mine.
Ethers, the token and cryptocurrency that fuels the Ethereum network, can be traded just like any other virtual currency on crypto exchanges. With a growing number of large companies and financial institutions joining Ethereum’s network and developing their own blockchain apps, ethers may have a long-lasting and bright future ahead.