Ethereum: The Ether Of Cryptocurrencies

Ethereum: The Ether Of Cryptocurrencies

Why has Ethereum become a hot topic in cryptocurrencies in the last few years? Well, Ethereum is a venture unlike many others, and this article will tell you why.

Just as the archaic physics definition of Ether refers to the rarefied, invisible substance permeating the universe, Ethereum aims to be a similar kind of force with cryptocurrencies. The project boasts some impressive achievements, such as being the most actively used blockchain worldwide.

For the last several years, Ethereum has consistently been the second-most traded digital coin behind Bitcoin, dominating 19% of the entire crypto market cap. The project currently dominates the decentralized finance (DeFi) space with several exchanges and other DeFi applications running on its platform.

Lastly, at least 800 cryptocurrencies, including the likes of Chainlink, and USD Coin, were created using the Ethereum network as ERC20 tokens; at least 40 are in the top 100 of most traded coins.

Ethereum was one of the first distinct projects expanding the capabilities of cryptocurrencies beyond just being a medium of exchange; this is what makes it special. At the time of writing, one ETH costs about $3460 and continues to be the topic of discussion in financial media.

History of Ethereum

Ethereum has eight co-founders, which is a strangely long list. However, the man most often associated with the coin and frequently in the spotlight is the Canadian-Russian programmer, Vitalik Buterin. 

Another important figure is British computer scientist Gavin Wood, credited for contributing to several of the intricate programming languages.

Buterin developed an interest in blockchain technology in 2011 when he was only 17. He co-founded the Bitcoin Magazine in May 2012. Ever since the spark he received in his late teens, he imagined a cryptocurrency beyond just being a payment method like Bitcoin. 

More specifically, Buterin had a vision for application development, which is reflected thoroughly in the whitepaper he authored in 2013 entitled ‘A Next-Generation Smart Contract and Decentralized Application Platform.’

At the North American Bitcoin Conference in January 2014, a bunch of developers got together with Buterin, and this marks probably the first public event mentioning Ethereum. For roughly the next five to six months, the co-founders rigorously worked on developing the venture.

From July to August of the same year, the programmers launched an initial coin offering (ICO) through the Ethereum Foundation non-profit, reportedly raising at least $18 million. As with many ICOs at the time, participants in this crowdfunding paid with BTC to receive ETH.

The Ethereum network officially went live on the 30th of July 2015.

How does Ethereum work?

For the layman, the mechanics behind Ethereum can be a bit confusing. Fortunately, the model in which it operates is comprehendible, and many other projects exist like it. Ethereum is an open-source blockchain for creating decentralized applications (dApps) and smart contracts.

Ether (ETH) is the native cryptocurrency on the platform paying developers for computer power and transaction fees and is the only accepted payment form. It seems common nowadays to erroneously refer to Ethereum as the cryptocurrency itself. 

The Ethereum Foundation once described Ethereum as a platform for ‘global, decentralized money and new kinds of applications.’ Users can purchase ETH at countless exchanges and wallets.

As with numerous blockchains, the network utilizes a consensus mechanism. In this case, proof-of-work, which is essentially mining, is used to confirm transactions across about 5300 nodes globally. 

Ethereum is currently moving to its long-awaited Ethereum 2.0 phase, where it will migrate to proof-of-stake. Nonetheless, each block forms roughly every 15 and 20 seconds, and the present reward for miners is 2 ETH. 

Interestingly, there is presently no hard cap on how much ETH will ever exist, with the circulating supply being about 115.9 million at this time. Ethereum 2.0 is predicted to decrease the issuance rate from about 5% to less than a percent every year.

Final word

With daily transactions reaching a peak of 1.7 million in May 2021, the Ethereum network is busier than it’s ever been before. Many argue Ethereum is far more critical than Bitcoin because of its incredible ability to create dApps. 

Still, for any good investment, there are some concerns as well. So, let’s look at the pros and cons of investing in Ethereum.

Pros

Cons 

Gas fees don’t only pose problems for ordinary users but also investors. For instance, if one decided to invest in Ethereum or any Ethereum-based token, these exorbitant costs are likely to pose a challenge should they choose to sell their investment back to fiat or another coin.