Ethereum (ETH) is an open-source, decentralized blockchain network representing the second generation of blockchain technology built upon Bitcoin's foundation. While sharing similarities with Bitcoin, Ethereum introduces significant improvements by supporting digital payments with its native currency Ether (ETH) and serving as a software platform for creating decentralized applications (DApps) and smart contracts.
With its current ETH price, Ethereum holds the position as the second-largest cryptocurrency by market capitalization, trailing only Bitcoin. The introduction of smart contracts revolutionized the digital currency industry, enabling users and developers to explore unprecedented possibilities.
The Ethereum network is designed as a global computer accessible to anyone. It empowers users with full control over their digital assets while providing access to traditionally centralized tools and services.
For instance, on Ethereum, anyone can collateralize cryptocurrencies to obtain instant loans—a process managed entirely by smart contracts without intermediaries. This exemplifies Ethereum's capability to eliminate third-party dependencies while ensuring transparency and security.
Beyond financial applications, Ethereum operates on a distributed network of public nodes worldwide, making programs resistant to censorship and fraud.
Decentralized Governance
In alignment with decentralized ownership principles, Ethereum allows community members to submit governance proposals for collective improvement. ETH holders then vote on these proposals, ensuring community accountability in ongoing development.
Ethereum's blockchain technology and smart contracts have spawned multibillion-dollar industries, including DeFi, play-to-earn blockchain gaming, and NFTs. Today, the Ethereum ecosystem hosts over 2,900 projects, processing upwards of $11 trillion in value.
Key Features of ETH:
- Native Token: ETH is used for transaction fees (GAS) and as a medium of exchange for digital assets like NFTs.
- Post-Merge Utility: After Ethereum’s transition to proof-of-stake (PoS), ETH is staked to secure the network and validate new blocks.
Ethereum's Operational Model
Initially launched in 2015, Ethereum employed a proof-of-work (PoW) consensus mechanism, where miners competed to solve complex equations and earn ETH rewards for producing new blocks.
Ethereum’s architecture is account-based, comprising:
- Externally Owned Accounts: Controlled by users via private keys.
- Contract Accounts: Managed by smart contract code.
Both account types can hold, send, and receive ETH and interact with smart contracts.
Ethereum Virtual Machine (EVM)
The EVM is Ethereum’s core computational engine, functioning as a distributed state machine that maintains the network’s entire operational structure. It enables the execution of smart contracts and DApps across thousands of nodes.
Use Cases:
- Smart Contracts: Enable decentralized applications like crypto wallets, DEXs, and DeFi protocols.
- Token Standards: ERC-20 (fungible tokens) and ERC-721 (NFTs) have fueled billion-dollar projects.
The Ethereum Merge
To address scalability and high GAS fees, Ethereum transitioned from PoW to PoS via the Ethereum Merge—a multi-year upgrade concluding in 2022.
Phases of the Merge:
- Phase 0 (Beacon Chain): Launched in December 2020, introducing PoS consensus.
- Phase 1 (The Merge): Combined PoW mainnet with the Beacon Chain in Q3/Q4 2022.
- Phase 2 (Sharding): Expected by 2023–2024, splitting network load across 64 shard chains for scalability.
Benefits of PoS:
- Energy Efficiency: Reduces Ethereum’s carbon footprint by 99%.
- Security: Validators stake ETH to participate, enhancing network integrity.
ETH Price & Tokenomics
Initial Distribution:
- 2014 ICO: 60M ETH sold at ~$0.31 per ETH.
- Current Circulating Supply: ~122M ETH (inflationary via block rewards).
Block Rewards:
- 2015: 5 ETH per block.
- 2017: Reduced to 3 ETH per block (EIP-649).
Founding Team
Ethereum was conceptualized by Vitalik Buterin in 2013 and co-founded by eight innovators, including:
- Gavin Wood (CTO): Created Solidity and Polkadot.
- Charles Hoskinson: Later founded Cardano.
FAQs
1. What is Ethereum’s primary use case?
Ethereum enables smart contracts and DApps, powering industries like DeFi and NFTs.
2. How does PoS differ from PoW?
PoS replaces miners with validators who stake ETH, reducing energy use and increasing scalability.
3. What was the ETH ICO price?
~$0.31 during Ethereum’s 2014 public sale.