What is Ethereum? Definition
First, let's go back to the launch date of this
cryptocurrency, namely in 2013. At the time, the Canadian of Russian origin
Vitalik Buterin presented the Ethereum network project via a Whitepaper.
A year later, the blockchain platform was born thanks
to the project's crowdfunding of 30,000 bitcoins. Note that the first version
was called "Frontier" before
becoming Ethereum. At 19, the young developer already wanted to
transform the Internet and the financial market.
On this project, Buterin benefited from the
assistance of renowned programmers, including:
Dr.
Gavin Wood
Charles
Hoskinson
Anthony
DiLorio
and
Mihai Alisie
More concretely, Ethereum is akin to a decentralized
blockchain platform that allows programmers to create smart contracts.
Considered a global computer project, Ethereum
facilitates the creation of several Dapps (decentralized applications) for
different fields such as real estate, insurance, cloud computing, entertainment
or even finance.
It also issues its crypto-currency, known under the
famous name of Ether, abbreviated ETH, which has been very successful since its
launch phase.
Ethereum 2.0: towards the transition to Proof of Stake?
The transition to 2.0 was announced a few months ago,
but a date has been set this time. The blockchain will finally move from proof
of work to proof of stake.
The goal? Reduce the
congestion of the network and better secure transactions on the blockchain.
If, from the technical point of view, this already
guarantees better performance, the main advantage of this update is from the
ecological point of view.
Indeed, the proof of work used so far is very
energy-intensive. This means that once Ethereum goes into Proof of Stake, the
environmental impact will be less if not zero.
One update per phase
Aiming to evolve the Ethereum network, the Ethereum
2.0 update was launched in December 2020. In detail, it is broken down into
three very distinct phases and focuses on very specific improvements.
The
Beacon Chain announces the transition from proof of work to proof of stake.
The
Shards Chains or the sharding phase (fragmentation of the chains) improve the
capacity and scalability of Ethereum.
The
Docker is the replacement phase of the current smart contract execution engine
on the Ethereum network. This update will notably improve the performance of
Ethereum.
Interestingly, following disagreements between miners
and developers in 2021, the Ethereum team reviewed the entire launch program.
In particular, they prioritized Phase 2 over Phase 1
and implemented a new mechanism, The Merge, which connects the first version of
Ethereum to Ethereum 2.0.
A first test was launched for the Ethereum community
in 2021 to give them an idea of the rendering. After the great success of the
test net, the developers have finally advanced a date for the deployment on the
main net.
According to a tweet from @Superphiz on January 10,
The Merge is scheduled to roll out on June 22 this year.
Here are a few things to remember for the upgrade to
Ethereum 2.0:
The
Ethereum update will not impact network user transaction fees.
Switching
to proof of stake will not, however, solve the problems of fees on the network.
With
the deployment of Shards Chains, transaction fees are expected to drop
gradually.
To
reduce fees, the Ethereum team recommends the use of second-layer solutions.
How does Ethereum work?
Like Bitcoin, Ethereum uses Blockchain technology for
its transactions.
Its operation is similar to that of a network of
computers which justifies the existence of a "supercomputer". More
clearly, Ethereum is regulated by the blockchain, which makes it possible to
manage payments and all transactions on the network. This means that merchants
can adopt it as a method of payment to buy goods and services in the same way
as money in a traditional bank account.
The ETH protocol makes it possible to create smart contracts. The particularity here is that these are neither
censored nor controlled by third parties. It seems important to emphasize that
this software aims to automate blockchain transactions. Thus, we can say
goodbye to the manual execution of trades.
Like other cryptocurrencies, Ether can be used for
trading, mining or storage in wallets. Failing to buy it to accomplish the
applications, you can do it to resell it on the financial market to earn
profits. It all depends on the price variation of tokens in the crypto market,
but the risk of losing money is quite low.
The Ethereum Blockchain Explained
The blockchain is a regularly updated public ledger
that helps prevent false transactions without resorting to a bank. Perceived as
a storage technology, it constitutes an unfalsifiable and public accounting
book. It keeps the history of transactions made in Ethereum. Miners validate
exchanges through "Proof-of-Work" to resolve algorithmic issues.
The user of the Ethereum blockchain must be able to
verify transactions to their wallet. This is possible thanks to the
peer-to-peer network. Several computers record the current state of the
blockchain and make it public worldwide.
All network nodes work together and guarantee the
security of the blockchain, eliminating any risks in the process. They need to
trust each other to produce a consensus algorithm. In other words, the
participating nodes work according to the rules of the consensus mechanism to
keep the network synchronized. In short, the blockchain is a database that
ensures good traceability of the Ethereum platform.
Smart
Contracts ExplainedSimilar to Bitcoin's blockchain, Ethereum allows you to view
a shared record of all transaction history. However, the main difference
between BTC and ETH lies in smart contracts or Smart Contracts.
Although it sounds complicated, the term smart
contracts is easier than you might think. It is a computer mechanism that uses
smart contract technology to remove go-betweens and escrow services in an
Ethereum blockchain.
In other words, Smart Contract technology allows
credible transactions to be carried out without third parties.