While the rest of the world is raving about Bitcoin, Ethereum is silently but continuously making progress in becoming the most reliable and efficient crypto token in the market.
As Bitcoin’s most prominent competitor, Ethereum is ranked second in terms of market capitalisation. Not only that, but Ethereum also has a set of unique features such as smart contracts and dApps that’s proving to be beneficial to crypto users.
There is so much potential in Ethereum’s growth as its developers continue to roll out different updates to make it a secure, energy-efficient and innovative cryptocurrency. This, in turn, can lead to Bitcoin’s usurpation as the top cryptocurrency in the future.
So, what exactly makes Ethereum a promising cryptocurrency? Below is the essential information you need to know about Ethereum basics and why investing in it is a great move for you.
A brief history of Ethereum
At just 17 years old, Ethereum founder Vitalik Buterin was already interested in the concept of blockchain technology. As a programmer, he began to envision a platform that improved on the limitations of Bitcoin.
This led to his white paper proposal in 2013 that ultimately became Ethereum using the general scripting language, a programming language that aims to be used for building and designing a plethora of application domains.
In 2014, Vitalik Buterin and Ethereum’s co-founders Gavin Wood, Mihai Alisie, Anthony Di Iorio, Joe Lubin, and Charles Hoskinson announced a launch of a crowdfunding campaign for the distribution of Ether tokens to investors.
Raising $18 million, it led to the first live release of Ethereum which was known as the Frontier in 2015.
Ever since the crowdfunding success, the platform has been growing with over a hundred developers working on the technology to make it better like the integration of smart contracts and Proof-of-Stake (POS) protocol.
Ethereum basics: How it works
Ethereum is a decentralised and open-source blockchain that does not store any information in a central location. Instead, it copies information and spreads it across a number of computers. Every time a new block is put into a blockchain, each computer on a particular network updates the blockchain to reflect the change of the added blocks of transactions.
Moreover, Ethereum is a digital asset you can use for transactions in a peer to peer system. It also gives life to the blockchain and different applications. Learn more about it below:
Blockchain technology
Ethereum’s blockchain technology is a decentralised public ledger that verifies and records transactions. When blocks are carried out to a blockchain, a substantial amount of computing time and power called ‘gas’ is required to trade blocks of information.
As an incentive, Ether tokens are given to miners who build and validate these blocks. Moreover, users in this network can publicly create, monetise and use applications like MetaMask and Ethereum Name Service.
DApps
Ethereum’s blockchain is based on Bitcoin’s protocol except for a few differences such as more features aside from its main function as a currency. Outside of ETH, the Ethereum blockchain is also a platform that developers use to build new programs like dApps.
DApps, also known as decentralised applications, are similar to regular apps but run on a decentralised system. It is popularised by distributed ledger technology such as the Ethereum blockchain for data storage and app logic.
Smart contracts
Smart contracts are self-executing contracts with terms of agreements between a buyer and seller that are directly written into streams of codes. They are programs that run on the Ethereum blockchain.
In a sense, smart contracts are like Ethereum accounts. This means that they work like real accounts in other financial services like banks where a balance is maintained and transactions can be sent over to other accounts in the network.
Smart contracts then interact with different user accounts by yielding transactions that execute a specific function. They can also define the terms and conditions like any other regular contract and are automatically enforceable through code.
Ethereum: The Bitcoin killer
Ethereum is the second largest cryptocurrency next to Bitcoin in terms of market capitalisation. Although Bitcoin’s prices may be ahead of Ethereum, it experienced larger growth from 2020 to the present.
In just a span of 6 months, BTC increased by 374% while ETH grew by 533%. The table below will show you the progress of how Ethereum gained traction in this period:
| Cryptocurrency | October 2020 | April 20, 2021 |
| BTC | $11,913 | $56,483 |
| ETH | $368 | $2,332 |
Additionally, the automated blockchain transactions provide users with no wait times during the long clearance and confirmation processes. This allows for cheaper fees in contrast to some of its competitors, especially Bitcoin.
In terms of technological innovation, Ethereum’s blockchain changed in 2019 after shifting to a new algorithm called the Proof-of-Stake or POS that is more energy-efficient than the previous Proof-of-Work or POW algorithm.
POS is an algorithm that improves the decentralised features of Ethereum. Instead of a miner that creates and validates transactions, this algorithm will use a single wallet to do all the transactions’ validation.
Moreover, rather than taking into account the computing background of crypto users, they just have to stake their own ETH to become validators. They are then chosen at random and the stakes they placed are given to miners as incentives.
The transition to POS also made Ethereum energy efficient since it uses less mining energy but the benefits don’t stop there. In terms of scalability, Ethereum adopted the process of sharding. This allows Ethereum’s chain to break up into smaller groups that make it easier to run a node.
Considering that its technology is far more flexible and efficient, Ethereum can experience further market growth in the future as more and more crypto users take advantage of its features and benefits. With this, it’s quite possible that it will be Bitcoin’s killer.
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