Ethereum, an independent and blockchain-based software developed by Vitalik Buterin, was introduced in the market back in 2015. Before its successful debut, it first conducted an Initial Public Offering in 2014 and had immediately gained massive market traction. What was initially developed as a platform for its own cryptocurrency called ether, it now provides various digital solutions powered by Smart Contracts and Decentralized Applications- core functions that conveniently reduce downtime, fraudulent activities, and any interference from third-party entities.
Technically, every transaction or application placed in the Ethereum platform needs ether, a virtual coin and a cryptographic unit that functions as fuel. It enables applications to run within the platform, and this has been a sought-after cryptocurrency mainly for serving two core purposes: being a tradable digital asset and its ability to monetize work. At the time of writing, it now has a market cap worth $44.7 billion, making it the second-biggest cryptocurrency in circulation up to date.
With the use of this technology, one does not have to rely on applications that used centralized methods to keep information. Facebook, Google, and online banking applications keep their user data in a small location that is very much susceptible to hacking. This would not be the problem for Ethereum as its tight blockchain technology allows a decentralized platform.
The Ethereum Blockchain
Simply put that Ethereum is its own kind of web space. Similar to a browser, it is composed of a series of servers and interconnected clouds of networks called nodes. These nodes bear lasting significance in the platform as it is where a shared database “blockchain” is stored. It takes thousands of nodes for a platform to function. Similarly, nodes have their own bearing in terms of security since the more nodes there are, the safer it is.
What is more impressive about this is users are given full control over transactions. The technology long rejected that method of storing information in computers or central servers, and then utilizes a storing mechanism wherein the entire network of nodes participates. As this is the case, nodes must reach a consensus for verification. It was only after the whole network agrees that information get to be stored in the blockchain.
As mentioned earlier, one cannot just penetrate nor hack the system that easily. It will take large resources and time to do so since it requires more than half of the nodes to force a consensus. With this type of mechanism, transactions are then secured with thick level of protection against hacking activities.
The Ethereum Blockchain was patterned from the Bitcoin Blockchain. Often called as Bitcoin 2.0, the former was more advanced and offers solutions more optimal than the latter. This is possible since Ethereum utilizes two methods.
The fundamental premise of Smart Contracts is to verify conditions before execution. Their main duty is to keep both parties’ consent, all while verifying if conditions are met. Just like how it usually works, one has to pay in order to get the purchased product. Dubbed as trustless transactions, they do not process transactions if one of the involved parties refused to consent.
Decentralized Applications, or more commonly called as dApps, are those that are run on the Ethereum server. These apps are powered by Ethereum’s own programming language called “Solidity”. The team behind Ethereum encourages developers, as their vision is to replace centralized applications in several industries including social media, e-commerce, electronic messaging, and online banking.
Ether is created through mining, just like how other cryptocurrencies are made. Participants are engaged in long tedious work of verifying and solving complex mathematical cryptographies. After a successful verification, participants are then given ether as a reward. For the Ethereum blockchain, it utilizes a mining structure called Proof-of-Work. As the name suggests, nodes are required receipts of work in order to receive the reward. While this may come favorable mainly from its promised profitability, it has a lot of downside too including large consumption of electricity.
The Future of Ethereum
With the solutions provided by Ethereum, people no longer have to engage in person-to-person transactions, which may bring an increased level of risks in one’s investment and personal information. With the help of Smart Contracts and dApps, transactions are made automated and more secured. More so, the team behind this platform is in constant development, extending their limits and still asking what is there to provide to make transactions a more convenient for its users.