Ethereum is an open-source blockchain platform that uses a decentralized public ledger to verify and record transactions. The decentralized applications created on the blockchain platform are also called dApps. These dApps can then be published and applied by users. Ethereum users pay fees in the form of "gas fees" so that they can use the dApps. The gas transaction fees are highly variable because this is determined by the amount of computing power required on the Ethereum network to perform actions. For several years Ethereum has been the second cryptocurrency in terms of market value, behind Bitcoin.
Ethereum is a technology for building apps and organizations, holding assets, conducting transactions and to communicate without control from a central authority. With Ethereum, you control what personal data you share across their network. Ethereum's crypto currency is Ether, which you can use to pay for a number of things on the Ethereum network.
A cryptocurrency can be used to send funds to anyone around the world without intermediaries such as banks or credit card companies. With cryptocurrency, sender and receiver are connected without a central authority. No one can tell you what services you may take. The name cryptocurrency comes from cryptography, which is used to keep your money safe. Ethereum has a blockchain network. This is a database of transactions that is updated in a chain and shared across different computers in their network. When a new set of transactions is added to the chain it is called a block, which is where the name blockchain comes from.
Ethereum is programmable, you can use it to build decentralized applications on their network. You can build apps that use their blockchain to store data or determine what your app can do. The possibilities of this are huge. That's why a lot of innovative things are being built on the Ethereum network. Ethereum is a lot like a market of financial services, games, social networks and other apps that value your privacy and can't censor you.
Nov. 27, 2013, the white paper (see below) was published by Vitalik Buterin, the founder of Ethereum.
April 1, 2014, the yellow paper was written by Gavin Wood. It is a technical definition of the Ethereum protocol.
From June 22 to Sept. 2, 2014, you could buy Ethereum for Bitcoin.
On July 30, 2015, Frontier launched. Intended for developers and miners to become familiar with the protocol.
On September 7, 2015, Frontier Thawing was launched. Gas price was set at 51 gWei (gigaWei) and the difficulty bomb was introduced to ensure future hard fork from proof of work to proof of stake.
March 14, 2016 there was a soft fork: Homestead. A soft fork means that a blockchain creates new rules for the network that new blocks must meet without invalidating the old blocks. It was a change to the protocol and network that allowed for future upgrades.
July 20, 2016 there was a response to a DAO attack: the DAO fork. 85% voted for this soft fork, some felt that no rule had been broken and that it was part of the Ethereum protocol. They created a hard fork: Ethereum Classic. A hard fork means there are now two blockchains with their own network.
Oct. 18, 2016, the Tangerine Whistle soft fork saw the light of day in response to DDoS (distributed denial of service) attacks on the Ethereum network.
Nov. 22, 2016 was another response to DDoS attacks: Spurious Dragon. A number of additional measures against this type of attack were implemented.
October 16, 2017 Byzantium was implemented. Rewards for miners went from 5 to 3 ETH per block and layer 2 scaling was enabled with cryptographic methods.
February 28, 2019 was Constantinople's turn. Gas fees were optimized for costs when using EVM (Ethereum Virtual Machine). Assurance that the blockchain would not freeze when proof of stake was introduced made its appearance.
December 8, 2019, was the time for Istanbul. Ethereum and Zcash could now work together. Layer 2 SNARKs and STARKS. These are technical specifications related to security in authentication.
Jan. 2, 2020, the Muir Glacier fork. This slowed the difficulty bomb a bit, as it threatened to bog down the network.
Oct. 14, 2020, the strike deposit contract was implemented. Staking Ethereum became possible.
December 1, 2020 was the Beacon Chain Genesis. The beacon (broadcast) chain began producing blocks from this day forward.
April 15, 2021 was the day of the Berlin upgrade. Optimization of gas fees for certain EVM actions, more support for different transaction types.
August 5, 2021 was the London upgrade. EIP-1559 (gas fee model) and treatment of gas fee returns for the Ice Age of Ethereum (this starts when the difficulty of mining is so high that mining becomes impossible and everyone has to switch to proof of stake).
Oct. 27, 2021, the Altair upgrade. Beacon chain improvement.
Dec. 9, 2021, Arrow Glacier. The difficulty bomb was thrown back several months.
June 30, 2022, Gray Glacier, another three months off the difficulty bomb.
Sept. 6, 2022, Bellatrix, a second upgrade to the beacon chain that was on the calendar, which brought The Merge closer. The terminal total difficulty was set at 5875000000000000000000000000000, where you could therefore no longer have success at proof of work and blocks could only be added via proof of stake.
September 15, 2022, Paris, The Merge. As of block 15537383, proof of work was disabled and replaced by proof of stake.
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Banking for all. Many people in the world do not have access to financial services, such as a bank. With Ethereum, all you need is an Internet connection.
Ethereum protects your privacy. Ethereum builds an economy based on value, not surveillance.
Ethereum's peer-to-peer network allows you to move money or enter into agreements (smart contracts) without intermediaries.
If you build an app on Ethereum, you can use it to build another app that is also built on Ethereum, like Lego. Therefore, the quality of apps is increasing all the time.
Credits are exchanged only as previously contractually agreed upon. The rules cannot be changed in the interim.
No government or company controls Ethereum. Because of decentralization, it is virtually impossible to stop anyone from receiving payments or using services on Ethereum.
2970 projects have been built on Ethereum
71 million wallets have Ethereum in portfolio
50 million smart contracts have already been closed through Ethereum
$11.6 trillion in value moved through Ethereum network in 2021
About 1 million transactions today
The day of writing was 03-01-2023
Many stablecoins (cryptocurrency variant of fiat money) are built on the Ethereum network and can be transferred almost instantaneously around the world with no middleman and low transaction fees.
Ethereum can provide help in all kinds of crisis situations, such as oppression, high inflation or war. Stablecoins or Ethereum itself can then provide a solution to remain financially independent.
Artists can create all sorts of things with Ethereum. By 2021, this will have earned them $3.5 billion.
Game developers can use Ethereum to create play to earn games, where players can convert the tokens they earn in the game into real money.
The difference between Ethereum and Ether is that Ethereum is the network and Ether is the cryptocurrency you can use to pay for anything on the Ethereum network. It is usually abbreviated to ETH.
It is truly yours.You are your own bank and can manage your funds using your wallet as proof of ownership.
ETH is secured with proven cryptography.
Peer-to-peer payments are possible without third-party intervention.
Since ETH is divisible into crypto amounts up to even 0.0000000000000000000001 of 1 ETH, it is possible to buy or send even small amounts of ETH.
Anyone can use ETH, as long as you have an Internet connection and a wallet.
ETH is decentralized and global. Everything is set in protocols of technology, so no one can suddenly start printing a large amount of ETH and make your coins worth less.
You can use ETH as collateral to generate various cryptocurrency tokens on Ethereum. You can also borrow, lend and earn interest on ETH and other Ethereum-supported tokens.
ETH can be used in the DeFi (decentralized finance) market to bypass traditional financial markets. This way you no longer have to deal with banks, governments or office hours. If you cannot access traditional finance, you may not even be able to get a job. ETH then offers a solution. ETH is programmable digital money through smart contracts (smart contracts). By programming logic into payments, you have both security and control like Bitcoin and access to financial services, lending and borrowing, investing and much more.
ETH is not the only cryptocurrency on Ethereum's network. Well-known variants:
Stablecoins: which reflect the value of traditional currencies, such as the dollar, without volatility.
Governance tokens: representing voting rights in decentralized organizations.
NFT: or non fungible tokens. Non fungible things, unique, like art or game items of which there is only one. An ETH is a fungible token because each ETH is the same as another.
Shitcoins: You may also just make those on the Ethereum blockchain. Coins made to cheat you or worthless coins that have no use value.
Flash loans. Here you can make money without having any money yourself. You borrow an asset at exchange A, sell this asset at exchange B with some profit, you pay back the loan to exchange A and only the transaction costs are lost. So you can make money without having money at your disposal. The nice thing about flash loans is that you don't need collateral. If all else fails, the transaction simply doesn't go through and you have no debt.
Lossless lotteries. You buy 100 tickets with Dai and get 100plDai tokens for them. If one of your tickets wins you pocket the prize. If you don't win anything, 100 tickets still participate. You can get out at any time and just get your 100 Dai back.
Decentralized insurance. Traditional insurers are much more expensive because they have all kinds of costs and want to make a profit. With ETH DeFi, you can offer this much cheaper.
In DeFi, a smart contract replaces the financial institution in the transaction. It will always be executed as programmed. Since no one owns Ethereum or the smart contracts on it, no one can change the rules either. Anything created in Ethereum can communicate with each other. Switching between platforms with Ethereum-based coins is easy.
The layers in Ethereum DeFi:
Ethereum's blockchain with transaction history and state of accounts
Assets: ETH and other tokens
The smart contracts, which provide the functionality
The applications, which we use to manage or access smart contracts
Ethereum DeFi is open source and can be accessed, forked (modified) and renewed. Because Ethereum is the underlying network and ETH is the base currency, smart contracts can be mixed and matched to create unique combinations.
Apps built on Ethereum
Ethereum people's favorite apps:
Uniswap, a DEX (decentralized exchange).
Dark Forest, a game.
Foundation, NFT (non fungible token, or unique token) for artists.
PoolTogether, a lottery where you can't lose. Each week, the winner gets the interest on the total deposit and his money back. The rest get their money back.
Well-known apps: Aave, Compound, 1inch, Augur, Loopring, Balancer and Nexus Mutual.
Once an app is put on Ethereum, it cannot be taken off. There is no owner. Even if the app creators leave the app, it just remains functional. There is no censorship, you can log in to apps anonymously, payments are built in, it is plug and play, supported by cryptography and there is no downtime for an app. No wonder so many developers are building their app on Ethereum!
There are a few drawbacks to creating an app on Ethereum, though. If you made an app and it doesn't meet your needs it's already on the blockchain, immutable, and you have to put an app on the blockchain again, making two. So you actually have to create an app without bugs before publishing it. Furthermore, an Ethereum app is difficult to scale, the network can quickly clog up because of the low number of transactions per second that Ethereum can handle, the user of an app may find it difficult to work with Ethereum, and app creators may add another layer on top of Ethereum, requesting sensitive data and returning centralization.
An app that works with a smart contract can simplistically be thought of this way: A vending machine at the train station offers you products. You have to throw in a certain amount of money, type in the code and then your chocolate bar drops out. Vending machines are thus decentralized smart contracts. The middleman (seller in the store) is taken out of the equation in this process. If the rules are not followed, for example not enough money inserted, no sale takes place either.
The properties of dApps on the Ethereum network:
Decentralized, they all work on Ethereum
Determined, dApps perform the same function in any environment
Turing complete, dApps can perform anything if proper instructions are given
dApps are executed in an isolated environment known as the Ethereum Virtual Machine (EVM), with bugs in smart contracts not interfering with blockchain operation
Ethereum is best known for its smart contracts. But what exactly is that, a smart contract? A smart contract is a program that runs on the Ethereum blockchain. It is a combination of code (its functions) and data (its state) that resides at a specific address on the Ethereum blockchain. Smart contracts are a type of Ethereum account, which means they have a balance and can process transactions. They are run without the influence of owners or users; the functions are pre-programmed. Users can, however, trigger functions of the smart contract. Smart contracts cannot be deleted and interaction with a smart contract cannot be reversed. A smart contract makes a lot of sense. For example, for a vending machine, you could add rules like:
"When a euro is thrown into the machine."
"An existing code is populated."
"Open the drawer associated with the completed code and eject this chocolate bar."
Anyone can create a smart contract on the Ethereum network and put it on the Ethereum network. You don't need permission to do that. What you need is enough ETH in your wallet to pay the fees and you should have enough knowledge to program in a smart contract language. Ethereum works primarily with two programming languages, Solidity and Vyper. These are user-friendly for programmers. For somewhat more experienced programmers, Yul and Fe are also available. Solidity has more features and is somewhat similar to C++. Vyper is a bit simpler and is somewhat similar to Python. Rust is available for Fe.
Smart contracts are publicly available on Ethereum, like an API (Application Programming Interface). You can even use others' contracts in your own smart contract, making the possibilities huge. So you get better and more user-friendly smart contracts faster.
There are limitations to smart contracts by design. By themselves, they cannot retrieve real world info outside the blockchain, otherwise security and decentralization are compromised. With Oracles, you can bring data feeds that are off-chain (outside the blockchain) on-chain (on the blockchain) so that smart contracts can use them. For example, if someone bets 1 ETH on who wins a soccer game, this toto dApp uses an Oracle to retrieve that information from real world results at one or more websites.
The problem with Oracles is that they can generate erroneous information. A site may be hacked or not updated. Some sort of settlement should be possible in that case, allowing the suppliers of information to be held accountable for delivering it correctly. Oracles come in a number of types. For example, you have the centralized Oracles, which are based on a single point of failure. If you are going to get the information from only one source, then it is either right or wrong. That's usually not a good idea. That's why most Oracles are decentralized. For example, you can get the price of a dollar versus a euro from so many sources that you are guaranteed to provide reliable information. There are programs that measure the reliability of Oracles, such as Chainlink's Oracle Reputation, so the most reliable ones get the most requests to provide data based on their reputation. Often a stake is also used, which can be slashed (penalized) for providing unreliable information.
Oracles are very widely used in DeFi, which should work incredibly well for very good reasons, as you can imagine.
Smart contracts can be set up to require multiple signatures to execute. One advantage here is that there is no single point of failure. For example, wallets with a lot of ETH in them can be protected if one private key is lost, so you don't lose everything immediately. This is common with, for example, a DAO (decentralized autonomous organization). These often contain huge funds.
The Ethereum Virtual Machine is a single entity maintained by thousands of connected computers running an Ethereum client. The Ethereum protocol's sole purpose is to preserve the continuous, uninterrupted and immutable efficacy of this "special state machine." In it, all Ethereum accounts and smart contracts "live." Each block in the blockchain has only one canonical state, and the EVM defines what the rules are for computing a new valid state from block to block. The analogy of a distributed ledger is often used to describe blockchains like Bitcoin. It allows a decentralized currency to use fundamental tools for cryptography. The ledger keeps track of what someone can and cannot do to change it, such as prohibiting you from spending more than you got.
Ethereum has its own currency, Ether, which follows almost exactly the same rules, but also enables a much more powerful feature: smart contracts. With Ethereum, you can use the analogy of the distributed machine state. Ethereum's state is a large data structure that contains not only all accounts and balances, but also a machine state that can change from block to block according to a predetermined set of rules and execute arbitrary machine code. The specific rules to change the state from block to block are defined by the EVM.