Ethereum, the second largest cryptocurrency (virtual currency) in terms of market capitalization after Bitcoin, is one of the major altcoins that are attracting attention on exchanges around the world. This article explains the features of Ethereum.
|Current price (May 2021)||$2,672.97|
|Market Cap (May 2021)||$309,534,098,082|
|Date of Launch||July 2015|
What is Ethereum?
Ethereum is the second largest virtual currency by market capitalization (May 2021).
Ethereum, also known as “ETH”, can be found on many domestic and international exchanges, and has the following features
- A development platform that uses smart contracts
- No upper limit on issuance and no halving
- Can be used for ICO
The following is a detailed explanation of each.
Features of Ethereum
Development platform using smart contracts (DApps)
The term Ethereum does not refer to the cryptocurrency itself. Ethereum essentially refers to decentralized applications (DApps). Dapps is an acronym for decentralized applications.
Bitcoin is intended to operate as a currency, and the transaction information of the currency is registered on the blockchain. On the other hand, Ethereum, which is a Dapps, can record and execute various application programs (called smart contracts) in addition to basic cryptocurrency transaction information such as “when, who, to whom, and how much was paid” in the blockchain.
This smart contract is known to be applicable to transactions in many businesses, and is expected to be a very scalable system, as it can be used to make important written contracts between companies and to buy and sell services.
In other words, since all kinds of applications can be developed and executed through the Ethereum platform, it functions as a new infrastructure that utilizes cryptocurrency. The common currency used on this platform is the so-called Ether, which is circulated on cryptocurrency exchanges. The fact that the main currency is a development platform is the reason why Ethereum is different from many other cryptocurrencies.
No Issue Limit and Halving
Bitcoin and other cryptocurrencies have an issuance cap and are designed from the beginning to be scarce. In addition, cryptocurrencies with an issuance cap have a half-life for mining, and there is a mechanism to gradually limit the amount of cryptocurrency mined.
Ethereum, on the other hand, is characterized as a cryptocurrency without an issuance limit. Since there is no upper limit to its issuance, it also has no half-life (no decrease in mining rewards). Since there is no upper limit, miners who have been mining Ethereum for a long time will have a reason to continue mining, so it is expected that there will be a stable supply in the future.
Vitalik Buterin, the creator of Ethereum, has said that there is no particular reason why he did not put an issuance cap on Ethereum.
Therefore, depending on the demands of users and changes in the cryptocurrency environment, a new limit may be set in the future.
Ethereum was invented by Vitalik Buterin
Ethereum is a cryptocurrency invented by Vitalik Buterin, a Canadian who was 19 years old at the time. Vitalik Buterin had an early interest in cryptocurrency and contributed to the industry by founding Bitcoin Magazine, a magazine about Bitcoin.
In 2013, an Ethereum whitepaper was published, and the following year in 2014, an Ethereum prototype was delivered.
It can be used for ICO
The Ethereum mechanism has also attracted attention for its applicability to ICOs, a method of fundraising using cryptocurrency.
Ethereum is capable of issuing its own currency (token) called ERC20.
When there was no ERC20, the specifications of the token had to be changed according to the wallet or exchange. Since it was basically impossible to send a currency that was not supported by a wallet or exchange, creating a new currency was a very time-consuming process.
However, now that ERC20 has been provided as a standard for new currencies, a variety of currencies can use the same interface. This is one of the features that made it possible to circulate many currencies using Ethereum’s ERC20 as a base.
Features of Smart Contracts and Dapps
The advantage of Dapps that use smart contracts is that all transactions can be executed programmatically, so the cost is low, and the content of transactions and contracts is always protected, reducing the risk of fraud such as currency theft.
In addition, it has the following features
- De-centralized style of operation without the need for a central administrator
- Free and open for anyone to use and refer to (high transparency)
- Secure through blockchain
- It is a very easy-to-use online development platform
Ethereum mining method
As of March 2020, Ethereum’s mining method is called Proof of Work (PoW).
PoW is a system in which newly issued cryptocurrency is distributed as a reward to the person who is the first to complete the calculations and verifications required to write the cryptocurrency into the blockchain at the time of remittance. Basically, it is a meritocratic mining method, with the advantage going to the person who has the highest specs for the computer used for mining. Electricity is very expensive, but some companies use supercomputer-class computing power to mine.
However, Vitalik Buterin has proposed that Ethereum will move to “Proof of Stake (PoS)” in the future, citing this PoW, which requires huge amounts of electricity, as a problem. PoS is a method of determining rewards for mining that takes into account the amount of currency a miner holds and how long they have held it. If PoS is introduced in the future, the situation where only a few miners monopolize the rewards will change.
History of Ethereum
The DAO Hack
Ethereum experienced an incident called “The DAO Hack” on June 17, 2016, where funds raised for the DAO were stolen by hackers.
The incident, in which approximately 3.6 million ETH were hacked, shook the entire cryptocurrency industry as it targeted a vulnerability in a highly secure smart contract.
The birth of Ethereum Classic through a hard fork
After THE DAO attack, Ethereum decided to discard the hackers’ crime by replicating the blockchain and develop as a new Ethereum.
However, since the rule that the blockchain cannot be tampered with, which is the basis of decentralization without an administrator, was broken, more and more people distrusted Ethereum.
As a result, many people continue to use the Ethereum before it was replicated, and the old Ethereum remains in the cryptocurrency market as “Ethereum Classic” today.
The hard fork (split) into Ethereum and Ethereum Classic is also an important part of the history of Ethereum.
Ethereum has been undergoing gradual system updates.
There are 4 updates:
With the Serenity update, which will improve the performance of the network, Ethereum has become a complete system.