What is Ethereum?
Ethereum is an open-source, decentralised blockchain that enables digital payments. It’s the second most popular cryptocurrency and is used to run various decentralised applications (dApps).
The official website classifies Ethereum as a marketplace for financial services, games, and other applications, all designed on the blockchain to run in a decentralised manner and powered by smart contracts.
Ethereum's native cryptocurrency is called Ether, represented by the symbol ETH. Ethereum has the second-largest market cap among cryptocurrencies after Bitcoin. Many investors have also called ETH digital silver after addressing Bitcoin as digital gold.
The Ethereum network is the largest ecosystem for decentralised apps and web3, especially in DeFi, NFTs, social media, and blockchain gaming. It is instrumental in driving most emerging trends in the crypto industry, all due to its smart contract functionality.
The Ethereum price also experiences considerable volatility, just like Bitcoin. However, because of its numerous applications, the ETH price can rise based not only on the crypto market sentiment, but also on Ethereum’s adoption among dApp developers and users.
Who created Ethereum?
Vitalik Buterin is arguably the face of crypto. Born in Russia but raised in Canada, the tall programmer is credited with launching Ethereum.
When was Ethereum created?
Ethereum’s white paper was published by Vitalik in late 2013, following which the first crowdsale of ETH happened in 2014 to raise funds for its initial development. The Ethereum platform’s live release occurred almost two years later, in 2015.
Following an official announcement in January 2014, Buterin started working with Dr. Gavin Wood on co-founding Ethereum. The cryptocurrency’s yellow paper was published in April 2014, discussing technical specifications for the Ethereum Virtual Machine or EVM.
The crowd sale of Ether or ETH took place between 22 July and 2 September 2014, allowing users to buy Ethereum cryptocurrency using Bitcoin. From selling around 60 million ETH, the Ethereum Foundation raised around $18 million, which was used for the blockchain network’s initial development phase.
Ethereum's mainnet launch took place in July 2015, which ushered in the era of ICOs or initial coin offerings on the blockchain. The next key event in Ethereum’s history occurred in April 2016 when decentralised venture fund The DAO was hacked, losing around $150 million from its ICO. This event led to a hard fork of the Ethereum blockchain to its current state.
How does Ethereum work?
The Ethereum protocol functions like Bitcoin, using a network of millions of nodes spread worldwide to maintain the distributed ledger and record transactions.
Nodes in the blockchain store account information of all users within the network. They also store code for smart contracts, which are programmable codes. These codes consist of rules related to unlocking coins and their transactions. In addition, nodes also contain information on the state of the smart contracts operating within the Ethereum network.
Ethereum (ETH) differs from Bitcoin in versatility. While Bitcoin was envisioned as a method to enable fast and easy digital payments, the Ethereum network offers more functionality as it is programmable. Developers have designed dApps using programmable smart contracts for decentralised finance, gaming, social media, and many more applications on Ethereum.
Ethereum has a higher user base owing to its smart contract functionality and the many dApps it supports. Ethereum is valued for its versatility and ability to execute smart contracts. One of the most powerful applications of Ethereum is in the decentralised finance (DeFi) sector.
In September 2023, Ethereum transitions to a Proof of Stake (PoS) consensus, abandoning Proof of Work. This has many intentions, including making the platform more efficient and lowering gas fees, which have exceeded hundreds of USD per transaction during peak periods.