The next update of Ethereum 2.0 is coming nearer. But before that let’s find out more about what is Ethereum? After Bitcoin, Ethereum is frequently referred to be the second most popular cryptocurrency. Unlike Bitcoin and most other virtual currencies, however, Ethereum is meant to be far more than a means of trade or a store of wealth. Ethereum, on the other hand, refers to itself as a decentralized computer network based on blockchain technology.
The history of Ethereum
In late 2013, Vitalik Buterin, a programmer and co-founder of Bitcoin Magazine, presented Ethereum in a whitepaper with the purpose of constructing decentralized apps.
Buterin argued to the Bitcoin core developers that Bitcoin and blockchain technology may benefit from uses other than money and that a more robust language for application development was needed, which could lead to the blockchain storing real-world assets such as stocks and property.
Buterin collaborated briefly with eToro CEO Yoni Assia on the Colored Coins initiative in 2013, writing a whitepaper explaining potential use cases for blockchain technology. However, after failing to reach an agreement on how to proceed with the project, he recommended the creation of a new platform with a more robust scripting language a Turing-complete programming language that would later become Ethereum.
In January 2014, Ethereum was announced during the North American Bitcoin Conference in Miami. Gavin Wood, Charles Hoskinson, and Anthony Di Iorio (who funded the project) leased a house in Miami alongside Buterin during the conference to get a better feel of what Ethereum may become. Di Iorio summoned buddy Joseph Lubin, who summoned reporter Morgen Peck. Peck later wrote about the encounter in Wired.
Six months later, the founders reconvened in a residence in Zug, Switzerland, where Buterin informed them that the project would be run as a non-profit. At the time, Hoskinson had departed the project.
Ethereum’s founders are exceptionally numerous. Anthony Di Iorio penned: “In December 2013, Vitalik Buterin, myself, Charles Hoskinson, Mihai Alisie, and Amir Chetrit (the original 5) launched Ethereum. In early 2014, Joseph Lubin, Gavin Wood, and Jeffrey Wilcke were added as founders.” The software’s formal development began in early 2014 through a Swiss business, Ethereum Switzerland GmbH. (EthSuisse).
Following that, a Swiss non-profit foundation, the Ethereum Foundation (Stiftung Ethereum), was established. From July through August 2014, an online public crowd sale was held, with participants purchasing the Ethereum value token (Ether) with another digital currency, Bitcoin. While Ethereum’s technological advances were first praised, concerns were expressed regarding its security and scalability.
An unnamed hacker stole $50 million in Ether in 2016, raising concerns about the platform’s security. This sparked a schism in the Ethereum community, resulting in the formation of two blockchains: Ethereum (ETH) and Ethereum Classic (ETC). The price of Ether has fluctuated dramatically, yet the Ethereum currency increased by more than 13,000% in 2017. Many investors are drawn to the great growth, but the volatility makes other investors wary.
In terms of market value, Ethereum was the second biggest cryptocurrency in January 2018, after only Bitcoin. It maintains that relative status as of 2021. The US authorities detained Ethereum Foundation staffer Virgil Griffith in 2019 for presenting at a blockchain conference in North Korea. The blockchain underwent a temporary fork on August 27, 2021, as a result of clients running conflicting software versions.
What is Ethereum?
Ethereum is a blockchain that provides a significant amount of functionality for developers that use Ethereum as a foundation for their solutions. The Ethereum blockchain contains a native token known as Ether (ETH), which is used to pay for Ethereum network activities.
The coin is also traded on cryptocurrency exchanges and its value swings. Other Ethereum-based assets, such as ERC-20 tokens, need ETH as payment for fees connected with any transactions using those assets.
The Solidity programming language was used to create the Ethereum blockchain. The Ethereum Foundation, a non-profit organization, is one of the Ethereum project’s overseers.
An example transaction (between accounts A and B) involving the transfer of ethers from one wallet to another under an account-based approach operates as follows:
- Debit from account A.
- Credit to account B.
All accounts in Ethereum are converted into balances. As a result, a send activity decreases the balance of one account while increasing the balance of another.
In comparison, a UTXO transaction works as follows: an individual gives money and receives change (i.e., unspent amount).
The account model benefits include:
- Significant space savings (transactions require a single signature and produce one output)
- Increased fungibility (harder to blacklist funds)
- Simplicity (easier to build DApps)
- Constant light client reference (light clients can read information from the state tree in any specific direction)
Despite these benefits, the account approach may make double-spending and replay attacks easier.
Global State and Account Structure
Ethereum Classic is a transaction-based state system at its core. A Merkle tree, which maps account addresses and account statuses, represents the state of Ethereum at any given time.
The inclusion of a new block updates the state of Ethereum Classic. Each block contains legitimate transactions and is linked to the block before it via its header. In simpler terms, a block contains a header as well as all valid transactions that are added.
Ethereum has two types of accounts: public and private.
Externally owned accounts (EOA)
Externally owned accounts (EOA) are governed by private keys and do not have a code associated with them. Individuals utilize their private keys to perform actions.
An EOA consists just of the nonce (the number of transactions sent) and the accompanying balance (i.e., number of ethers owned by the account).
Contract accounts are managed via their contract code, which is unchangeable once deployed. Aside from nonce and balance, a contract account additionally keeps its storage hash (i.e., a hash of the Merkle Tree’s root) and code hash (i.e., the hash of the EVM code for this specific account)
EVM and Smart Contracts
Ethereum Virtual Machine (EVM)
The following is a typical process for deploying contract accounts on the Ethereum blockchain:
- The contract is written in a formal language (e.g., Solidity, Vyper).
- ABI is created after the code is compiled to bytecode.
- These are deployed onto the Ethereum blockchain via a transaction (with gas fees) after being relayed from nodes.
The Ethereum Virtual Machine (EVM) is the computer software (or computation engine) that interprets Ethereum blockchain bytecode instructions. The EVM, in particular, handles all aspects of smart-contract logic, from deployment to execution. The EVM has a simple stack-based architecture with multiple data components based on 256-bit word format:
- Program code ROM: an immutable program with the bytecode deployed for execution of the contract.
- Memory: a component to store data temporarily.
- Storage: a permanent component to store data.
An ERC-20 token is a token that implements an EIP-20-defined standardized interface. An example of Consensys’ implementation can be found here. Despite the fact that Ethereum’s token standards are fully compatible with Ethereum Classic, third-party adoption and interest has been much lower.
Auction contracts are a natural fit for an Ethereum/Ethereum Classic smart contract. For example, one can set up a blind auction in which any EOA can submit bid offers to the contract. It is won by the highest bidder. An example of an open auction implementation can be found in the Solidity documentation.
Ethereum 2.0: PoS, beacon chain, side-chains, and sharding
Ethereum 2.0 is nearing completion. The upgrade to the decentralized blockchain-based computing platform was originally scheduled for 2019, with the first phase launching on December 1, 2020.
Based on existing information, Ethereum 2.0 will introduce additional elements such as:
- Beacon Chain: It serves as a “bridge” between shard chains and the main chain (the equivalent of the present ETH 1.0 chain), providing staking incentives. The Beacon Chain will keep track of historical shard chain reference points.
- Shard Chains: Since sharding is used for scalability, each shard chain is obligated to run independently (of one another) with unique states and independent transaction histories. The principal link between shards will be recorded on the Beacon Chain.
- eWASM: Each shard is planned to have its own dedicated virtual machine called “eWASM” (i.e., Ethereum-WebAssembly Machine). It is expected to be released alongside the standard Ethereum Virtual Machine, but few specifics have been provided so far.
In terms of the future validation algorithm modification, the new PoS is built on Casper: a “PoS finality gadget.“
Economics and Supply
Ethereum’s economics is based on a three-phase model:
- Phase 0 – Initial Coin Offering (ICO): In the first part of 2015, an ICO for 60 million ethers was held. The ICO was one of the first, with monies gathered in BTC.
- Phase 1 – Proof of Work (current): reliance on the Ethash function: a function (based on Keccak) designed to prohibit ASIC participation due to memory hardiness. However, since then, ASIC devices have dominated block mining.
- Phase 2 – Proof of Stake: In the final (Serenity) phase, Ethereum blocks will be validated through staking, and validators will be rewarded.
- Token Name: Ethereum
- Ticker: $ETH
- Blockchain: Ethereum
- Token Standard:
- ERC-20 – A standard interface for fungible (interchangeable) tokens, like voting tokens, staking tokens or virtual currencies.
- ERC-721 – A standard interface for non-fungible tokens, like a deed for artwork or a song.
- ERC-777 – Allows people to build extra functionality on top of tokens such as a mixer contract for improved transaction privacy or an emergency recover function to bail you out if you lose your private keys.
- ERC-1155 – Allows for more efficient trades and bundling of transactions – thus saving costs. This token standard allows for creating both utility tokens (such as $BNB or $BAT) and Non-Fungible Tokens like CryptoPunks
- Token Type: Utility, Governance
- Total Supply: 118,468,222
- Circulating Supply: 118,468,221.87 ETH
Token Supply Distribution
The Ethereum Foundation managed the original token distribution event, which sold about 60 million ethers (80 percent of the initial 72 million ETH supply) to the public. The auction took place between July 22nd and September 2nd, 2014.
However, before the Genesis Block was launched on July 31, 2015, the Ether purchased by crowdsale investors was not usable or transferrable. The price of ether was first established at a discounted rate of 2000 ETH per BTC until August 5, 2019, before dropping linearly to a final rate of 1337 ETH per BTC on August 28, 2014.
- In the first 12 hours of the sale, 3,700 BTC were raised.
- In the first two weeks, about 25,000 BTC were raised.
- The Ethereum Foundation eventually raised approximately 31,000 BTC, or $18.3 million, as a result of the sale.
The remaining 12 million ETH (20% of the initial supply) went to the Foundation and early Ethereum contributors. The following ether was sent to the Foundation:
- 3 million were set aside for a long-term endowment.
- 6 million dollars were divided among 85 developers who donated prior to the crowdsale.
- 3 million were created as a “developer purchase program,” which allowed Ethereum developers to buy ether at crowdsale pricing.
Roadmap Business Development
Ethereum 2.0 Roadmap
The release of Ethereum 2.0 is divided into three parts:
- The Beacon Change
- The Merge
- The Shard chains
In December 2020, the Beacon Change (Phase 0), which implemented the PoS algorithm, was first launched. PoS algorithms use less energy than PoW algorithms and are used in Cardano staking. Ethereum Staking is currently being tested, it will be released in 2022
‘The merge’ is the next stage. This significant phase will see the integration of the Beacon Chain into the mainnet and the end of PoW algorithms. ‘The merger’ is expected to take place in 2021.
Shard chains will be implemented as the final upgrade planned for ETH2.0 This is scheduled for 2022. Because transactions can be split across 64 new chains, introducing sharding to Ethereum 2.0 should allow for increased scaling of Ethereum.
Ethereum co-founder Vitalik Buterin defined scalability as “even more vital than Proof-of-Stake” in a keynote speech at the Singapore University of Social Sciences.
Altair is the first upgrade for Ethereum 2.0’s Beacon Chain that has been launched on October 27, and it represents another significant step toward the complete release of ETH 2.0. The Beacon Chain augments the Ethereum network with staking and will eventually combine with the mainnet to eliminate Ethereum mining.
In conclusion, this upgrade, as detailed in EIP-2982, will introduce punitive parameters, or in-protocol penalties, for validators in order to further secure the network.
The development of Ethereum has been split across several teams and people. The list below shows some of the most prominent early-stage contributions to Ethereum development.
He wrote the first white paper describing Ethereum in 2013 and continues to work on improving the platform to this day. Buterin previously co-founded and wrote for the Bitcoin Magazine news website.
Gavin Wood, a British programmer, is arguably the second most important co-founder of ETH, having coded the first technical implementation of Ethereum in the C++ programming language, proposed Ethereum’s native programming language Solidity, and served as the Ethereum Foundation’s first chief technology officer. Wood previously worked as a research scientist at Microsoft. He then went on to found the Web3 Foundation.
Among the other Ethereum co-founders are:
- Anthony Di Iorio, who underwrote the project in its early stages.
- Charles Hoskinson, who was instrumental in establishing the Ethereum Foundation and its legal framework in Switzerland.
- Mihai Alisie, who assisted in the establishment of the Ethereum Foundation.
- Joseph Lubin, a Canadian entrepreneur who, like Di Iorio, helped fund Ethereum in its early days and later founded ConsenSys, an incubator for ETH-based startups.
- Amir Chetrit, who helped co-found Ethereum but left early in its development.
- Stephan Tual was the CCO of Ethereum and left in 2015. He is the founder of Atlas Neue and the CCO of Slock.it
- Jeffrey Wilke started the first implementation of Ethereum using the Go programming language in 2013. Despite leaving in 2017, he still is the top contributor to the go-ethereum repo.
Overview of working progress on Ethereum 2.0
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- Existing network is extensive. The pros of Ethereum include a tried-and-true network that has been tested over years of operation and billions of dollars changing hands. It has the greatest ecosystem in blockchain and cryptocurrency, as well as a vast and committed global community.
- A variety of functions are available. Ethereum can be used to perform different forms of financial transactions, execute smart contracts, and store data for third-party applications in addition to being utilized as a digital currency.
- Constant improvement. A sizable community of Ethereum developers is always seeking for new methods to improve the network and create new applications.
- Ethereum’s decentralized network promises to let users leave behind third-party intermediaries, like lawyers who write and interpret contracts, banks that are intermediaries in financial transactions or third-party web hosting services.
- Increasing transaction costs The increasing popularity of Ethereum has resulted in rising transaction prices. Ethereum transaction costs, often known as “gas,” reached a new high of $23 per transaction in February 2021. This is due to the fact that, unlike Bitcoin, where the network rewards transaction verifiers, Ethereum compels individuals involved in the transaction to pay the cost.
- Crypto inflation is a possibility. While Ethereum has an annual limit of 18 million Ether, there is no lifetime limit on the amount of currencies that can be created. This could imply that, as an investment, Ethereum will behave more like dollars and will not appreciate as much as Bitcoin, which has a strict lifespan restriction on the number of tokens that can be created.
- Developers have a steep learning curve. As developers transition from centralized processing to decentralized networks, Ethereum can be challenging to learn.
- The future is unknown. Ethereum is still evolving and improving, and the ongoing development of Ethereum 2.0 promises additional functions and increased efficiency. This large network overhaul, on the other hand, creates uncertainty for apps and agreements that are now in use.
- According to DeWaal, “many new validators will be necessary for Ethereum 2.0 to function.” “The question is, will the move be successful?” There are a lot of fresh elements that need to come together!”
Ethereum vs Bitcoin
Bitcoin’s primary purpose is to function as a virtual currency and a store of value. Although Ether can be used as a virtual currency and a store of value, the decentralized Ethereum network allows for the creation and execution of applications, smart contracts, and other transactions on the network. These functions are not available in Bitcoin. It is only used as a form of currency and a store of value.
Ethereum also has a faster transaction processing time. On the Bitcoin network, new blocks are validated every 10 minutes, whereas, on the Ethereum network, new blocks are validated every 12 seconds. Furthermore, future developments may accelerate Ethereum transactions even further.
Finally, there is no limit to the number of potential Ether tokens, whereas Bitcoin will only release 21 million coins.
Overall, Ethereum was the first to introduce the concept of a blockchain smart contract platform. Smart contracts are computer programs that automatically carry out the actions required to fulfill an agreement reached between multiple parties over the internet. They were created to eliminate the need for trusted intermediaries between contractors, lowering transaction costs while increasing transaction reliability.
The main innovation of Ethereum was the creation of a platform that allowed it to execute smart contracts using the blockchain, which reinforces the already existing benefits of smart contract technology.
According to co-founder Gavin Wood, Ethereum’s blockchain was designed as a sort of “one computer for the entire planet,” theoretically capable of making any program more robust, censorship-resistant, and less prone to fraud by running it on a globally distributed network of public nodes.
Through the use of its ERC-20 compatibility standard, Ethereum’s blockchain can host other cryptocurrencies known as “tokens” in addition to smart contracts. Indeed, this has been the most common use of the ETH platform thus far, with over 280,000 ERC-20-compliant tokens launched to date.
Over 40 of these, such as USDT, LINK, and BNB, are among the top-100 cryptocurrencies in terms of market capitalization. Since the introduction of Play2Earn games, there has been a significant increase in interest in the ETH to PHP exchange rate.
Find out more about Ethereum:
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