Ethereum is a blockchain or distributed ledger technology (DLT) that allows developers to build their customizable decentralized apps (dApps). It became popular because it is a major departure from Bitcoin, the foremost crypto project. Despite the glaringly obvious dissimilarities with Bitcoin, it has the most common cryptocurrency features. For instance, it is a decentralized peer-to-peer ecosystem, meaning that nodes interact with each other without third-party interference. Another special attribute is the PoW (Proof of Work) consensus algorithm. This simply means that nodes in the network agree that certain alterations should be approved before they are. The good thing is that it keeps all activities on the ecosystem secure.
Furthermore, Ether (ETH) – sometimes called gwei – its native coin. By market capitalization, it is the second-biggest cryptocurrency. No wonder is the most actively used platform after Bitcoin. A brainchild of Russian-Canadian coder Vitalik Buterin, Ethereum became a reality in 2014. Going back in history, Buterin conceived the idea of developing a platform that allows the blockchain (and Bitcoin) to interact with it such that it can be used for other purposes (beyond finance). Well, the project would later be known as Ethereum blockchain.
Distinctive Features of Ethereum
So far, you have seen some of its common features. However, there are certain attributes that make the distributed ledger unique. These attributes contribute in no small measure to its popularity and widespread adoption today. This section will discuss them in detail.
Smart Contract: Proposed by computer scientist Nick Szabo in the 1990s, a smart contract is a set of self-executing computer programs, rules, or legal contracts written to facilitate an exchange of valuable assets between two parties. These valuable assets could be property, money, shares, etc. With the programs, there is no need for intermediaries as the programmer writes them to interact with an end-user. Think of a smart contract as the list of requirements for selling your property. Well, an interested buyer cannot haggle with you over the price of the property. The purchaser just goes ahead to buy if he/she meets all your requirements. In this case, you have eliminated real estate agents (trusted intermediaries or third parties), thus saving the buyer from paying their commission. While most coders use Solidity – a programming language similar to C++ and JavaScript – to build the self-executing contracts, some others use Vyper and Bamboo.
Decentralized applications: A dApp is a DLT-powered app that creates an open-source software ecosystem for peer-to-peer users. To break that down, they are no different from the applications that run on your computer and smartphones. However, these are special applications that run on the DLT system. It has codes that run on the backend of the network, chiefly running on open-source software. While the apps are primarily backend-oriented, some of them are built with frontend (user interface) in mind, allowing for seamless end-user interaction. They are immutable and tamperproof. Examples are Augur, Steem, Uniswap, Cryptokitties, etc. On the other hand, the Ethereum Virtual Machine (EVM) enables coders to develop dApps. It functions as a runtime compiler for those self-executing contracts. EVM is capable of executing scripts and running the decentralized apps.
Fork: As an open-source software ecosystem, a software development team may decide to fork a blockchain. If a distributed ledger undergoes forking, it means that the developers have remodeled or updated its protocols to address its inefficiencies (security, network, and stability). If it is a hard fork, a new product evolves. On the other hand, a soft fork means that the team updated its protocols, without launching a brand-new product. The DAO (Decentralized Autonomous Organization) event held in 2016 to recover some $50 million worth of Ether. This happened after the community raised $150 million through a crowdfund. Examples of Ethereum hard forks include Ethereum Classic, Atlantis, Metropolis-Constantinople, etc.
Final Words
Unlike Bitcoin, which is primarily used for financial purposes, the second-biggest blockchain has several real-world applications. For instance, it allows developers to build their projects on it. When utility projects are developed on it, they have tokens, not coins. Transactions that occur on the ecosystem are paid for in gas. In other words, gas is the fee or cost of performing transactions on the network. One can also see gas as the unit of measurement of computational effort, so it is paid for in Ether. The reason is that on-chain transactions require computational effort. Miners set the gas as determined by the supply and demand of the system’s computational power. As miners continue to solve the hashrate, it keeps the system secure. More importantly, it is a Pow platform, meaning that the system is incentivized. Therefore, the system rewards nodes that tackle the cryptographically hard puzzles. PoW is a consensus algorithm predicated on nodes reaching an agreement before changes are made to the ecosystem (validating transactions). This, in turn, averts economic attacks.
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