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ETHEREUM: A BEGINNER'S GUIDE
Hey newbies! 👋
Started by a teenager, Ethereum is one of the most popular cryptocurrencies in the world, second, only to Bitcoin. It is also the second-biggest cryptocurrency by market cap. The Ethereum project was inspired by Bitcoin. The project was a successful attempt to overcome the limitations of Bitcoin as a digital currency and create other decentralized applications using one blockchain.
What is Ethereum?
Ethereum is a decentralized blockchain network with a native cryptocurrency called Ether ($ETH) that enables users to make transactions, store or buy NFTs, trade cryptocurrency, play games in the metaverse and earn interest on their holdings through staking and many others.
Ethereum has smart contract functionality which will be explained further in this article. Ethereum is also a programming language that helps developers create distributed applications.
Who created Ethereum?
Vitalik Buterin, a Canadian programmer and writer, is the co-founder of Ethereum who published the Ethereum whitepaper. He wrote the Ethereum whitepaper when he was only 19 years old. Additional founders of Ethereum include Gavin Wood, Charles Hoskinson, Anthony Di Lorio and Joseph Lubin.
When was Ethereum created? 🗓
Ethereum’s whitepaper was published in 2013 by Vitalik. In 2014, the formal development of the software began. Crowdfunding for Ethereum began in 2014. The project came online on July 30, 2015.
Why was Ethereum created?
Ethereum was created to answer or solve Bitcoin's shortcomings. It was created to improve blockchain application development so that real-world assets like stocks and property could be attached to a blockchain. 📈 Ethereum was intended as a platform to facilitate immutable, programmatic contracts and applications via its own currency. The addition of a scripting language for programming was suggested by Vitalik in 2013. 💻
How does Ethereum work?
Smart contracts — Smart contracts support Ethereum’s primary goal of creating a system that is run entirely by codes and not a third party. Smart contracts automatically take effect when specific circumstances are satisfied.
Ethereum Blockchain — The history of all transactions and every smart contract is kept here. A duplicate of the full blockchain is kept by hundreds of nodes located all over the world. A smart contract is processed by thousands of computers each time it is put into action to make sure all specified conditions are met.
Ethereum has 3 layers namely; Ethereum Virtual Machine (EVM), Ether, Gas
— Ethereum Virtual Machine (EVM)
Smart contracts are carried out via the EVM. It facilitates the conversion of smart contracts written in a language that computers cannot understand into byte code; a language computers can read. The EVM can execute at least 140 different codes with specific tasks. It is more like the bridge that creates the user interface for blockchain technology.
— Ether ($ETH)
It is the native cryptocurrency of Ethereum. It is bought and sold using the Ethereum platform. Despite it being the native token, it is not the only cryptocurrency that can be traded on the Ethereum network, it is one of many.
It is used to;
— Reward miners
— Pay for computational services and applications or innovations built on the platform
— Trade other cryptocurrencies and NFT
— Exchange with government-issued fiat-currency
— Used to operate dApps
— Gas ⛽️
Gas powers the Ethereum network. It is the unit that refers to the amount of computational effort required for completing operations on the Ethereum network.
To cover the cost of computing resources needed, each Ethereum transaction has a charge known as gas fees.
Proof-of-Work
It is a method of verifying and tracking the creation of new cryptocurrencies and transactions that take place on the Ethereum blockchain. This computational princess computing power and electricity. There is a plan to switch to a new method, proof-of-stake which will consume less computing power and electricity than proof-of-work.
Let's quickly go through this again 😅
So basically Ethereum is a decentralized system that runs a computer called EVM. Network interactions or transactions on the Ethereum network are stored within blocks on the Ethereum blockchain. Miners validate these blocks before including them in the network to serve as transaction history, this act is known as Proof-Of-Work. $ETH is rewarded to miners for their work. The ETH that these miners are paid is from Gas fees which is paid by the user initiating the transaction
Ethereum application and use cases
— Crowdfunding
— Intellectual property
— Host smart contracts and decentralized applications
— Play Ethereum-based games
— Buy and sell cryptocurrencies and exchange NFTs
Advantages of Ethereum
Decentralization
Due to the decentralized nature of Ethereum, there is no influence from outside cloud service providers. Peer-to-peer transactions are made possible through the usage of blockchain. In contrast to certain other software systems, which frequently need faith in a central authority, users can trade value or store data without the requirement for an intermediary.
Availability
Ethereum is decentralized, so if a node goes down there is no downtime. Other computer architectures rely on centralized servers, and interruptions can have an impact on performance.
Privacy
Users have the option to remain anonymous when utilizing the network for exchanges. To utilize an Ethereum application, they don’t have to input their personal information.
Security
Ethereum is made to be impossible to hack, much like any other decentralized blockchain-based network. To take advantage of the network, hackers would need to gain control over a majority of the nodes.
Drawbacks of Ethereum
Scalability
The main complaint against Ethereum to date has been its poor processing rates; at the moment, it can only handle 15 transactions per second which is quite low compared to the pressure on the network
High Gas fees
The extraordinarily high gas fees that come with Ethereum transactions are discouraging. This has been one of the top complaints of Ethereum by not only ETH users but also the entire community of crypto investors.
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