In the world of crypto, Ethereum may just take the cake for its innovative developments. Ethereum has been extremely influential in the expansion of DeFi – providing a foundation for decentralized apps (dApps) and other revolutionary growth in crypto.
But what sets it apart from other cryptocurrencies?
What is Ethereum?
Ether (ETH) is like the fuel for the Ethereum network. It’s what allows users to pay fees to execute smart contracts and dApps on Ethereum. Without ETH, all these important functions wouldn’t be possible.
ETH also supports decentralized finance (DeFi), enabling lending, trading, and more without the middlemen. Some people hold ETH long-term as an investment, while others use it more actively on the Ethereum network.
Why Was Ethereum Invented?
Although Bitcoin has been a pioneering cryptocurrency, it has had some limitations, such as slow transactions and high fees – Ethereum aimed to solve this and allow for new features on top of that.
Ethereum’s creator, Vitalik Buterin, envisioned a blockchain platform that could support more than just peer-to-peer transactions – he wanted to create a platform where developers could build dApps, resistant to censorship and manipulation.
Ethereum was created to push the boundaries of blockchain technology – and it did just that.
Ethereum's Founders and Developers
Ethereum’s Founder: Vitalik Buterin first learned about Bitcoin from his dad in 2011 at age 17. Though initially skeptical, he researched more, co-founded Bitcoin Magazine in 2011 and published Ethereum’s whitepaper in 2013 by the age of 19.
Co-Founder: Gavin Wood, a British computer scientist from Microsoft Research, created Ethereum’s Solidity language and technical specifications. He served as CTO until leaving to start Polkadot and Parity Technologies in 2016.
Other early contributors include:
Mihai Alisie - Vitalik's early crypto collaborator. Co-founded Bitcoin Magazine. Helped launch Ethereum Foundation.
Jeffrey Wilcke - Core Ethereum developer. Left after community disagreements.
Joseph Lubin - Founded ConsenSys to support Ethereum dapps.
Ethereum Tokenomics:
Ethereum is one of the biggest cryptocurrencies out there, ranking second in terms of market value. It's like a digital playground for developers because it's a decentralized system with its own cryptocurrency. You use Ether to cover transaction costs and to reward folks who help keep the Ethereum network running smoothly.
Token Supply:
ETH has an uncapped supply.
72 million ETH were sold in the initial coin offering (ICO) in 2014.
New ETH are created through block rewards and transaction fees.
Token Allocation:
Public Sale:
The Ethereum Foundation conducted a public sale of ETH from July 22 to September 9, 2014.
60 million ETH were sold, representing 80% of the initial 72 million ETH offered.
These ETH were unlocked after the Genesis Block launch on July 31, 2015.
The initial price was set at 1 BTC = 2,000 ETH from July 31, 2015 to August 5, 2019, before increasing linearly to 1 BTC = 1337 ETH.
Approximately 31,000 BTC were raised in this round, equivalent to $18.3 million.
Remaining 20% of ETH Allocation:
3 million ETH were allocated to a long-term investment (identity unknown).
6 million ETH were distributed to 85 pre-sale investors.
The remaining 3 million ETH were reserved for the development team, allowing them to purchase ETH at the crowdsale price.
Use Cases of ETH:
1. Network Operations:
Gas Fees: ETH powers transactions on the Ethereum network.
Staking: Users can stake ETH to secure the network and earn rewards.
2. Decentralized Finance (DeFi):
Collateral: ETH is used as collateral in DeFi protocols for borrowing and lending.
Liquidity Provision: ETH can be used to provide liquidity and earn rewards in DeFi.
3. Non-Fungible Tokens (NFTs):
NFT Purchases: ETH is the primary currency for purchasing NFTs on Ethereum-based marketplaces.
NFT Minting: ETH is used to create NFTs, representing unique digital assets.
4. Investment and Store of Value:
Investment: ETH is a popular investment for its potential growth.
Store of Value: ETH offers an alternative asset class for long-term value storage.
How do Ethereum's smart contracts work?
Ethereum is famous for its smart contracts, which are kind of like digital agreements, with the terms being coded directly into computer code. These smart contracts live on Ethereum's blockchain, a transparent and tamper-proof system that ensures agreements are carried out without any interference, fraud, or control from outside parties.
Think of smart contracts like vending machines. You put in the required Ether (ETH), and the contract automatically executes the transaction as agreed upon. This automation cuts out the need for middlemen, making transactions faster and cheaper.
Once certain conditions are met, smart contracts can automatically fulfill their agreements, changing how industries like finance, real estate, and law operate.
What are some real-world applications of Ethereum?
Ethereum shines brightest in the world of decentralized finance (DeFi). With its decentralized nature, transparency, automation, and immutability, Ethereum is a versatile platform with applications across diverse industries such as banking, crowdfunding, and decentralized web storage.
Let's take a look at some companies making active use of Ethereum's capabilities:
Take-Two: In August 2023, the Grand Theft Auto video game company announced they are developing Sugartown - a Web3 game built on Ethereum. Sugartown's storyline involves three farming animals who accidentally open a deep hole connecting their world to Sugartown, allowing whimsical creatures called Ora to invade the city. With creativity, Ora transformed Sugartown into a vibrant destination full of fun activities and entertainment.
ING: The Dutch bank is involved in several Ethereum-based projects. For example, Komgo aims to optimize trade documentation. ING is also part of Fnality, a utility settlement coin payment association, and is working on Bamboo, bilateral letters of credit.
TD Ameritrade: As a brokerage firm, TD Ameritrade embraced Ethereum by supporting ErisX, a CFTC-regulated spot exchange to advance Ethereum smart contracts. Additionally, the company enables clients to trade Ethereum futures contracts through this platform.
Conclusion
Ethereum works as a powerhouse for dApps and smart contracts, all fueled by its native currency, Ether (ETH).
The shift from Proof of Work (PoW) to Proof of Stake (PoS) through The Merge shows Ethereum's dedication to growth and sustainability – opening doors for more DeFi innovations. Even though Ethereum faces challenges like scaling issues and competition, it's constantly growing and attracting new users.
As Ethereum keeps pushing boundaries with fresh tech advancements, its influence on finance and digital realms won’t slow down any time soon.
Looking ahead, what do you think the future holds for Ethereum in this fast-changing landscape?
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