What is Ethereum? Ethereum Blockchain Explained
Ethereum which is misspelt as Etherium in a lot of places is an open-source decentralized blockchain network. Its cryptocurrency Ether (ETH) is the world’s second most popular cryptocurrency after bitcoin. Today in this article we are going to learn what is Ethereum.
What is Ethereum?
Ethereum is an open-source decentralized blockchain network. A blockchain network is a distributed ledger where all transactions are recorded.
Ethereum Blockchain network offers its users to create apps inside the network and monetize them using its cryptocurrency known as Ether (ETH). These applications inside the network are known as dapps. We will learn more about these further in the article.
When was Ethereum founded?
Ethereum was founded by Vitalik Buterin, Gavin Wood and Joseph Lubin. Ethereum network went live on 30th July 2015. Currently, Vitalik Buterin is the CEO of the company. Vitalik is also often referred to as the Youngest Crypto Billionaire.
The main purpose behind starting Ethereum was that there was a need for a decentralized network where people not just could buy cryptocurrency but create applications inside it and monetize them. This was done to remove the third party so people can deal directly with each other.
How Does Ethereum Work?
Like Bitcoin and all other cryptocurrencies, Ethereum works on Blockchain technology. Everyone in the Ethereum network holds an identical copy of the ledger and everyone can see all the transactions that had happened.
Ethereum is not just a decentralized payment system but a chain of computers that makes a supercomputer. Due to this, the network can never be shut down and it runs forever. Ethereum Network uses cryptography to secure transactions and networks. Miners use their computers to solve complex mathematical equations to validate the transactions and add new blocks to the chain and this continues forever in return, they get incentives in the form of ether to make the system keep running.
One thing to remember here is that Bitcoin is a cryptocurrency that runs using Blockchain technology but Ethereum is itself the Blockchain Network inside which ETH (Ether) cryptocurrency runs.
Now we are going to look at some of the terms which are used in the Ethereum network and understand what they mean.
What is Smart Contract?
Smart Contracts make Ethereum networks so popular in the market. A smart Contract is just like a normal contract but the only difference here is that they are digital. A smart Contract is a computer program that is stored inside the Blockchain. Let us take an example and understand this more clearly.
Suppose you give someone ₹5000 and you both had a contract that he would return you the money after one month. But what if after one month the person doesn’t pick up your call or doesn’t respond to you or he may say that he never took any money? Usually, these situations happen and it causes a lot of trouble and time and energy are wasted. But with Smart Contract, you write a piece of code that you will give the person ₹5000 and exactly after one month, the money will automatically come to you. You wrote this in the form of code and uploaded it to the Blockchain. Now no matter whether the other person says Yes or NO, on the exact day the money will reach back to you. This saves a lot of time.
Now, once a Smart Contract has been uploaded to the Blockchain, it cannot be stopped or cancelled or any changes can be made. This makes this more secure from hackers.
Smart Contract is a very revolutionary thing and they could change the way we look at physical contracts which may get lost over time.
Smart Contracts could be used in many fields like Banks which could use them to issue Loans, Postal companies could use them to process payments on delivery and a lot more.
To write a Smart Contract in the Ethereum Blockchain, you need to use a programming language called Solidity.
What is Dapps?
Decentralized Applications, also known as dapps are the applications that run on the blockchain. These applications run on all the computers linked to the blockchain network instead of a single computer.
Dapps are open-source decentralized applications that are not controlled by a single authority. Let us take an example, Facebook, Google are owned and controlled by a single organization. They have full control over their applications. All the decisions are taken by the company itself.
Services like BitTorrent are not owned by a single authority. It works on a peer-to-peer basis. It is an open-source platform where people contribute and maintain the platform.
How does Ethereum make money?
Ethereum charges users transaction fees known as gas who use dapps on the platform. There is no fixed price of gas as it depends on the amount of computational power used.
Earlier the gas price was $10 but now it has increased to $23. This happens because Ethereum is gaining more popularity and more and more people are using the platform.
Will Ethereum end one day?
No, unlike Bitcoin which has a total of 21 million coins and is expected to get over by the year 2140. Ethereum on the other hand doesn’t have a lifetime limit, but it has an annual limit of 18 million Ether a year.
Advantages of Ethereum
It is not only a decentralized payment system but a network where you can run decentralized applications and monetize them.
It has a huge community around the world that is trying to make the platform better day by day.
Ethereum 2.0, also called Eth2 is the update that will make Ethereum more scalable and more secure. Their main goals are to make Ethereum more scalable and faster so that it could support up to 1000s of transactions per second, make the platform more secure and prevent hackers from attacking it and make it environment friendly.
Some of the Eth2 upgrades that they have mentioned on their official websites are:
- The Beacon Chain
- The merge
- Shard Chain
If you want to know more about it, you can check out here.
So this was all about Ethereum. I hope you have got to learn something. If you have any doubts or feedback regarding this then you can put them in the comments. Thanks for reading 😊