In 2022, one of the most talked about words in the world is Ethereum. Especially after the rise of NFTs and the constant bombardment of talks of a metaverse future, it feels like Ethereum is everywhere. But what is Ethereum? How did it take birth, what does it do, and where is it going? Fret not; we’ll give answers to all your curiosities in this article.
Origin story: How did Ethereum come into being
A 19-year-old Russian-American named Vitalik Buterin, a coder and the co-founder of Bitcoin Magazine, ideated Ethereum in late 2013 as an alternative approach to overcome the constraints of Bitcoin and to expand the horizons of Bitcoin and blockchain development beyond financials. He visualised an automated system — which later became known as “smart contracts” — that would conduct a series of operations like verifying transactions, enforcing agreements, and more by adhering to predetermined criteria and options.
The Ethereum platform was finally launched in mid-2015 by Buterin and Joe Lubin, founder of another blockchain software company ConsenSys, with a much more robust scripting language than Bitcoin that would make all this possible.
What is Ethereum, and it’s working?
Ethereum is primarily a scalable, decentralised software platform based on blockchain technology with native cryptocurrency ether (ETH). It operates on a decentralised peer-to-peer network with a ledger shared by all the members. This ledger is open to the public, and the data is irreversible once recorded. Layers of blockchain security are used to protect the data, making it incredibly difficult to hack.
Ethereum development was different because it included a built-in programming language founded on blockchain technology that can be used to design decentralised apps (dApps) with an internal architecture similar to Bitcoin but from any industry, not just finance. These apps will automatically be open-source and secure, and free from the threat of failure, corruption, and any central authority or outside interference.
What’s more, Ethereum has a token dedicated to compensating those who maintain the blockchain. However, members can also use it to pay for material products and services if approved.
Consensus Mechanism
Currently, the consensus mechanism used by Ethereum is proof-of-work (PoW), the same one used by Bitcoin. Consensus mechanism essentially is the method blockchain technology uses to ensure that transactions are not repeated without the help of a third-party intermediary. In PoW, a limited group of users (miners) compete against one another to complete challenging mathematical calculations to validate these transactions in exchange for network rewards. However, despite its benefits, this protocol necessitates highly specialised computer software with significant processing capacity and has come under intense criticism for its excessive energy usage, among other serious drawbacks.
What gives Ethereum its value?
Ethereum’s value is, in a sense, determined by markets, just like any other asset. People purchase it daily using Bitcoin, USD, euros, yen, and other currencies. The price can change from day to day based on demand. Because it is still a developing technology, the value of Ethereum is more erratic when compared to equities like Fortune 500 stocks or other currencies like the US dollar. However, many investors believe that Ethereum’s value comes from its adaptability as a platform for running DeFi apps and producing stablecoins, which has led to a growing user base and rising transaction costs.
Approximately 118,545,259 ETH are currently in use. Ether has a token wipe system and a 4% inflation rate to compensate for its high turnover rate.
The user base and use cases of Ethereum
Even though it originated as an alternative, Ethereum quickly became a strong competitor of Bitcoin. Ethereum currently has over 1.1 million daily Ethereum transactions, which is far greater than Bitcoin.
All this popularity arises from the countless potential uses of Ethereum in various industries. Also, more than 50% of businesses now prioritise blockchain in their long-term plans, and no one is shocked.
- Real estate: Smart contracts premised on Ethereum development are used worldwide to simplify transactions, process securities and documents, accounting, etc., in the real estate sector. Digital assets are replacing even paper deeds and land titles. For instance, Sweden completely migrated its land register to the blockchain.
- Healthcare: The healthcare sector is in dire need of upgrading its record-keeping system, patient-doctor communication system, and more. New services like Healthureum are rising that use Ethereum-based smart contracts to increase the effectiveness and interoperability of medical services.
- Betting: Due to its smart contract capabilities, Ethereum has become the cryptocurrency of choice for companies that offer sports betting. It enforces payments and improves speed, security, and transparency while lowering transaction costs.
- Supply chain: Supply chain industry has been riddled with corruption, fraud, and heavy intermediaries charges and can benefit immensely from using blockchain technology. A startup, ShipChain, has started using Ethereum to provide services to businesses in the pharmaceutical, medical device, food, retail, and other sectors on a safe, centralised platform that is trackable in real-time.
- NFTs: Non-fungible tokens, aka NFTs, are a new industry, but they need special mention here. NFTs focus on tokenising unique assets, so one NFT cannot be replaced by another. Most NFTs are exclusively hosted by the Ethereum network owing to the ease of building applications there, enabling a considerable daily transaction volume.
- Metaverse: Last but not least, the proposed metaverse future will use Ethereum heavily because this new world is almost entirely formed based on NFTs, which use Ethereum the most.
Due to its smart contract capabilities, Ethereum has become the cryptocurrency of choice for companies that offer sports betting. It enforces payments and improves speed, security, and transparency while lowering transaction costs.
What’s in the future?
Despite the vast user engagement rate and extensive and varied industry integrations, Ethereum is always on the lookout for being better, like any world-shaking business. In the next chapter of Ethereum’s life, the company is coming up with a series of upgrades that will potentially make the platform much more energy-efficient, more scalable, and more secure than before. Some of these have already happened, and some more are coming out by the end of this year.
Conclusion
Since the launch of Ethereum, the network has made Billions of Dollars which is estimated to only rise after the much-awaited upgrades on the platform. The Ethereum foundation plans to take crypto closer to its initial visions. Upon the success of these upgrades, the Ethereum platform will be one of the most potent crypto businesses in the world.
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