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About Ethereum
- Ethereum is a decentralized open-source blockchain system that features its own cryptocurrency, Ether.
- Ethereum was first described in a 2013 whitepaper by Vitalik Buterin.
- The Ethereum Foundation officially launched the blockchain on July 30, 2015.
Founders of Ethereum
- Vitalik Buterin: authored the original white paper and still works on improving the platform.
- Gavin Wood: coded the first technical implementation of Ethereum and proposed the native programming language Solidity.
- Other co-founders: Anthony Di Iorio, Charles Hoskinson, Mihai Alisie
About Ethereum: The Pioneering Smart Contract Platform
Ethereum (ETH): A Pioneering Blockchain Platform
Ethereum is a decentralized, open-source blockchain ecosystem that boasts its own cryptocurrency, Ether (ETH). Notably, it serves as a robust platform for a multitude of other cryptocurrencies, while also facilitating the seamless execution of decentralized smart contracts.
Ethereum was first conceptualized in a seminal 2013 whitepaper by the visionary Vitalik Buterin. Buterin, in tandem with his fellow co-founders, successfully secured funding for the project through an online public crowd sale in the summer of 2014. The project team’s efforts yielded a remarkable $18.3 million in Bitcoin, with Ethereum’s ICO price pegged at $0.311, resulting in the sale of over 60 million Ether. Fast-forward to the present, and the ROI stands at an astonishing annualized rate of over 270%, effectively quadrupling one’s investment every year since the summer of 2014.
The Ethereum Foundation formally inaugurated the blockchain on July 30, 2015, under the prototype codenamed “Frontier.” Since its inception, the network has undergone several significant updates, including “Constantinople” on February 28, 2019, “Istanbul” on December 8, 2019, “Muir Glacier” on January 2, 2020, “Berlin” on April 14, 2021, and most recently, the “London” hard fork on August 5, 2021.
Ethereum’s overarching ambition is to evolve into a ubiquitous platform for decentralized applications, empowering users worldwide to craft and execute software that is impervious to censorship, downtime, and fraud.
The Visionaries Behind Ethereum: Unveiling the Founding Masters
Ethereum boasts an unprecedented eight co-founders, a distinctive characteristic that sets it apart from other crypto projects. The inaugural meeting of these visionaries took place on June 7, 2014, in Zug, Switzerland, marking the genesis of a revolutionary endeavour.
- Russian-Canadian Vitalik Buterin is arguably the most prominent figure among the Ethereum co-founders. In 2013, he penned the seminal white paper that first introduced Ethereum to the world, and he continues to contribute to the platform’s development to this day. Notably, prior to his work on ETH, Buterin co-founded and served as a writer for the esteemed Bitcoin Magazine news website.
- Gavin Wood, a British programmer of considerable renown, is often regarded as the second most pivotal co-founder of Ethereum. He is credited with coding the inaugural technical implementation of Ethereum in C++, proposing the native programming language Solidity, and serving as the inaugural chief technology officer of the Ethereum Foundation. Before his involvement with Ethereum, Wood worked as a research scientist at Microsoft, and subsequently went on to establish the Web3 Foundation.
Among the other co-founders of Ethereum are: Anthony Di Iorio, who provided crucial financial backing during the project’s nascent stages of development. Charles Hoskinson, who played a pivotal role in establishing the Swiss-based Ethereum Foundation and its legal framework. Mihai Alisie, who lent his expertise in setting up the Ethereum Foundation. Joseph Lubin, a Canadian entrepreneur, who, like Di Iorio, contributed significantly to Ethereum’s early funding and later founded ConsenSys, an incubator for ETH-based startups. Amir Chetrit, who was an early co-founder of Ethereum, but parted ways with the project in its early development phase.
Ethereum’s Distinctive Characteristics: A Pioneer in Blockchain Innovation
Ethereum has trailblazed the concept of a blockchain-based smart contract platform, revolutionizing the way agreements are executed online. Smart contracts, essentially self-executing computer programs, automate the enforcement of agreements between multiple parties on the internet, thereby mitigating the need for intermediaries and consequently reducing transaction costs while enhancing the reliability of transactions.
Ethereum’s pioneering innovation lies in designing a platform that enables the execution of smart contracts via blockchain technology, thereby amplifying the inherent benefits of smart contract technology. According to co-founder Gavin Wood, Ethereum’s blockchain was conceived as a global, decentralized “world computer,” theoretically capable of rendering any program more resilient, censorship-resistant, and fraud-proof by deploying it on a globally distributed network of public nodes.
Beyond its smart contract capabilities, Ethereum’s blockchain has also enabled the creation of other cryptocurrencies, known as “tokens,” through its ERC-20 compatibility standard. Notably, this has been the most prevalent use case for the ETH platform to date, with over 280,000 ERC-20-compliant tokens launched to date. In fact, more than 40 of these tokens have secured a spot among the top-100 cryptocurrencies by market capitalization, including prominent examples such as USDT, LINK, and BNB. The rise of Play2Earn games has, in turn, sparked significant interest in the ETH to PHP exchange rate.
Ethereum Name Service (ENS): A Comprehensive Guide
Ethereum Name Service, also known as ENS, is a decentralized and highly adaptable naming system built upon the Ethereum blockchain. In essence, it serves as the Web3 equivalent of DNS, or domain name service.
In its native form, a cryptocurrency address is a lengthy sequence of alphanumeric characters, specifically designed for machine readability. It may resemble this example — “0xDC25EF3F5B8A186998338A2ADA83795FBA2D695E” — which can be perplexing to decipher, and in some instances, even culminate in the unfortunate loss of funds.
ENS offers a solution to the cumbersome issue of lengthy and confusing crypto addresses by mapping human-readable names to machine-readable identifiers, including Ethereum addresses, metadata, other cryptocurrency addresses, and content hashes. Through ENS, the lengthy address can be simplified to a more intuitive format, such as “Alice.eth,” enabling the seamless receipt of various cryptocurrencies or NFTs via your ENS domain.
ENS is founded upon two Ethereum smart contracts. The first, the ENS registry, serves as a repository for three vital pieces of information: the domain owner, the designated resolver, and the caching time for all records falling under the domain’s purview. The second contract, the Resolver, facilitates the seamless translation of domain names into machine-readable addresses, and vice versa.
Notably, in addition to seamless integration with .eth names, ENS also boasts compatibility with a wide range of popular DNS names, including .com, .org, .io, .app, and several others.
The Enigmatic Concept of an “Ethereum Killer”: Unveiling the Mystery
Since its inception, Ethereum has consistently maintained its position as the second-largest cryptocurrency by market capitalization. However, like every other blockchain network, Ethereum is not without its flaws. Notably, the legacy blockchain is beset by high gas fees and a limited throughput of merely 15 to 30 transactions per second.
Notwithstanding the forthcoming solutions aimed at addressing these limitations through a series of upgrades, numerous competitors have seized this opportunity to offer cryptocurrency users more affordable and expedited transactional experiences.
The moniker “Ethereum Killer” gained prominence around 2016/2017, as alternative blockchains, such as Cardano, began to emerge on the crypto landscape. In 2018, EOS burst onto the scene, touted as the next “Ethereum killer,” and successfully raised a staggering $4.1 billion from investors, a record-breaking amount for an initial coin offering (ICO) at the time. Since then, a slew of other contenders, including Tezos, Solana, Fantom, Avalanche, and Binance Smart Chain, have surfaced as potential Ethereum killers.
Each of these blockchains adopts a distinct consensus mechanism to overcome the limitations inherent in Ethereum’s proof-of-work (PoW) model. Notably, Solana leverages proof-of-history (PoH), whereas Binance Smart Chain employs a hybrid approach, combining proof-of-authority (PoA) with delegated proof-of-stake (DPoS).
Notwithstanding, none of these alternative blockchains have succeeded in supplanting Ethereum as the second-largest cryptocurrency by market capitalization. Moreover, Ethereum presently reigns as the largest blockchain for non-fungible token (NFT) trading activities.
EIP-1559: A Revolutionary Ethereum Upgrade
The EIP-1559 upgrade heralds a paradigm shift in the estimation of gas fees on the Ethereum blockchain. Prior to this upgrade, users were compelled to engage in an open auction, wherein they would bid for their transactions to be validated by a miner. This mechanism, known as a “first-price auction,” inherently favors the highest bidder.
With EIP-1559, the transaction inclusion process is streamlined through an automated bidding system, which introduces a dynamic “base fee” for transactions to be incorporated into the next block. This fee fluctuates in response to network congestion. Additionally, users seeking expedited transaction processing can opt to pay a “priority fee” to miners, thereby facilitating faster inclusion.
EIP-1559 also incorporates a novel fee-burning mechanism, whereby a portion of every transaction fee, specifically the base fee, is permanently removed from circulation. This deliberate reduction in the circulating supply of Ether is designed to potentially appreciate the token’s value over time.
Notably, a mere two months subsequent to the implementation of the London upgrade, the network had successfully eliminated in excess of $1 billion worth of Ether, a testament to the efficacy of this pivotal update.
The Circulating Supply of Ethereum (ETH): A Closer Look
In September 2021, the circulating supply of Ether (ETH) coins stood at approximately 117.5 million, with 72 million of these coins being minted in the genesis block – the inaugural block on the Ethereum blockchain. Notably, 60 million of these coins were allocated to the initial contributors who participated in the 2014 crowd sale that funded the project, while 12 million were reserved for the development fund.
The residual amount has been allocated in the form of block rewards to the miners operating on the Ethereum network. Initially, in 2015, the reward per block stood at 5 ETH, which was subsequently reduced to 3 ETH in late 2017 and further decreased to 2 ETH in early 2019. The average time required to mine an Ethereum block is approximately 13-15 seconds.
In the August 2021 Ethereum network upgrade, the London hard fork incorporated the Ethereum Improvement Protocol, EIP-1559, which revolutionized the transaction fee mechanism. By introducing a dynamic “base fee” for transactions to be included in the next block, EIP-1559 departed from the traditional first-price auction mechanism, where the highest bidder wins. Instead, users can opt to pay a “tip” or “priority fee” to miners to expedite their transactions. As the base fee adjusts in real-time according to transaction activity, this innovation mitigates the volatility of Ethereum gas fees, albeit without reducing the notoriously high prices that prevail during peak network congestion.
One of the primary distinctions between Bitcoin and Ethereum’s economic models lies in the fact that the latter is not deflationary, meaning its total supply is not capped. Ethereum’s developers rationalize this decision by avoiding a “fixed security budget” for the network. By allowing for adjustments to ETH’s issuance rate through consensus, the network can maintain the minimum necessary issuance required for adequate security.
With the advent of EIP-1559, a paradigm shift occurs, wherein the base fees associated with transactions are incinerated, thereby removing ETH from circulation. Consequently, increased network activity would precipitate a greater quantity of ETH being burned, leading to a contraction in supply, which, ceteris paribus, should precipitate an appreciation in the value of Ethereum, a prospect that has ETH holders abuzz with excitement — a potential surge in Ethereum’s value in the present day.
The Ethereum Network’s Security Mechanisms: A Robust Defense
As of August 2020, Ethereum’s security is ensured by the Ethash proof-of-work algorithm, which is rooted in the Keccak family of hash functions, a robust and reliable cryptographic framework.
Notably, plans are underway to migrate the network to a proof-of-stake algorithm, which is slated to coincide with the major Ethereum 2.0 update, launched in late 2020.
Following the successful launch of the Ethereum 2.0 Beacon Chain (Phase 0) in early December 2020, the staking process on the Ethereum 2.0 network officially commenced. In essence, staking on Ethereum involves depositing a minimum of 32 ETH to activate the validator software, thereby contributing to the network’s security by storing data, processing transactions, and adding new blocks to the blockchain. As of mid-September 2021, the current Ethereum price for 32 Ether is approximately $116,029. Currently, Ethereum validators can earn a return of 6% APR, equivalent to around 1.91952 ETH, or $6,960 in today’s Ethereum price. Please note that this figure is subject to change as the network continues to evolve and the number of stakers (validators) increases.
Ethereum staking rewards are governed by a distribution curve, which takes into account the participation rate and average percentage of stakers. Notably, early adopters of ETH 2.0 staking were initially rewarded with yields as high as 20%, although these returns are expected to gradually decrease, ultimately settling between 7% and 4.5% per annum.
The minimum requirement for staking in Ethereum is 32 ETH. Should you opt to stake in Ethereum 2.0, be prepared for your Ether stake to be locked on the network for an extended period, potentially spanning months or even years, until the Ethereum 2.0 upgrade is fully implemented.
Where to Acquire Ethereum (ETH): A Comprehensive Guide
Notably, as the second-largest cryptocurrency by market capitalization, Ethereum’s widespread adoption is reflected in its availability for purchase or trading in ETH pairs on virtually all prominent cryptocurrency exchanges. Some of the most significant markets include:
- Prominent exchanges, including Binance,
- Coinbase Pro,
- OKEx,
- Kraken,
- and Huobi Global,
Among the most widely traded Ethereum pairs are ETH/USD, ETH/GBP, ETH/AUD, and ETH/JPY, offering investors a diverse range of currency options.
The Ethereum London Hard Fork: A Pivotal Upgrade
The Ethereum network has been beset by exorbitant transaction fees, which frequently surge during periods of heightened demand. Notably, in May 2021, the average transaction fee on the network reached a staggering peak of $71.72.
Besides the exorbitant transaction fees, the prominent altcoin is also plagued by scalability limitations.
As previously noted, plans are underway to migrate to a proof-of-stake algorithm, thereby enhancing the platform’s scalability and introducing a plethora of innovative features. The development team has initiated the transition process to ETH 2.0, incorporating incremental upgrades, including the London hard fork, along the way.
The London upgrade was successfully deployed in August 2021, incorporating five pivotal Ethereum Improvement Proposals (EIPs): EIP-3529, EIP-3198, EIP-3541, and notably, EIP-1559 and EIP-3554.
EIP-1559 is undoubtedly the most highly anticipated and widely acclaimed upgrade among all the proposed Ethereum Improvement Proposals (EIPs).
The Dawn of Ethereum 2.0: A New Era of Blockchain Innovation
In 2022, Ethereum is poised to undergo a transformative shift to a proof-of-stake consensus mechanism with the highly anticipated Ethereum 2.0 update. This strategic transition, envisioned since the network’s inception, will introduce a novel consensus mechanism and incorporate sharding as a scalable solution. The existing Ethereum chain will evolve into the Beacon Chain, assuming the role of a settlement layer for smart contract interactions on other chains.
In the latter half of 2021, the rollout of Ethereum’s Arrow Glacier update was postponed to June 2022. In the interim, Vitalik Buterin envisions the trajectory to the network’s ultimate goal being influenced by the implementation of optimistic rollups and Zk-rollups.
In January 2022, the Ethereum Foundation made a pivotal announcement, opting to relinquish the “Ethereum 2.0” terminology in a bid to spare future users the confusion inherent in this mental model. The foundation elaborated that the erstwhile “Ethereum 1.0” would henceforth be referred to as the “execution layer,” while “Ethereum 2.0” would be rebranded as the “consensus layer.” This strategic rebranding aims to provide a more precise and accurate representation of the Ethereum roadmap.
In a recent update on the Merge’s progress, Ethereum developer Tim Beiko took to Twitter on April 13, 2022, to announce that the network is “definitely in the final chapter of PoW on Ethereum.” While no specific date was provided, Beiko hinted that the transition is expected to take place a few months after June. This development comes on the heels of the first mainnet shadow fork, which was successfully implemented on April 11, 2022, to test the transition to a proof-of-stake (PoS) consensus mechanism on Ethereum.
The Ethereum Merger: A Pioneering Leap Towards a Sustainable Future
In 2022, Ethereum rebranded its pivotal transition from proof-of-work to proof-of-stake, rechristening it from Ethereum 2.0 to The Merge. This landmark event came to fruition on September 15, 2022, following the successful consolidation of the Goerli testnet on August 11, 2022.
Delve into the intricacies of the Ethereum Merge: a comprehensive guide to everything you need to know.
The Merge heralds a transformative era for Ethereum, introducing several pivotal changes. Notably, it converges the existing proof-of-work (PoW) Ethereum mainnet with the Beacon Chain, a proof-of-stake (PoS) chain. This synergy will give rise to a novel, proof-of-stake Ethereum, comprising a consensus layer and an execution layer. The former will ensure seamless synchronization of the chain state across the network, while the latter will oversee transactions and block production.
Secondly, the Merge precipitates a substantial reduction in ETH issuance, earning it the moniker “triple halving” in a nod to the Bitcoin halving, given that it slashes ETH issuance by a staggering 90%. With over 14 million ETH already staked, there is a strong likelihood that ETH will transition into a deflationary asset following the transition. Moreover, stakers can anticipate earning an attractive annual percentage rate (APR) of between 8% and 12% based on current projections. Notably, staked ETH will not be immediately withdrawable post-Merge; instead, this functionality will only be enabled subsequent to the Shanghai upgrade, which is slated to occur 6 to 12 months later.
Debunking the myths: Uncovering the truth about Ethereum in the post-Merge era.
The Merge will not yield an increase in transaction throughput nor a reduction in gas fees, as the block production rate remains relatively consistent at 12 seconds (currently 13 seconds). Furthermore, it will not facilitate on-chain governance, with protocol changes continuing to be deliberated and decided upon off-chain by stakeholders.
Notably, the shift to PoS is anticipated to precipitate a drastic reduction in Ethereum’s annual energy consumption, plummeting from 112 TWh/yr to a mere 0.01 TWh/yr – a staggering 99.9% decrease. This significant reduction has led investors to anticipate an influx of institutional capital into a “greener” Ethereum. Conversely, Ethereum miners, operating within an industry valued at $19 billion, are seeking to promote ETHPoW, a potential hard fork of Ethereum based on proof-of-work. For a comprehensive analysis of the distinctions between these two approaches, please refer to our ETH PoS vs ETH PoW article.
The Ethereum Shanghai Upgrade: A Beacon of Optimism
The forthcoming Shanghai Upgrade, the most significant Ethereum upgrade since The Merge, is poised to introduce a pivotal milestone: the ability for ETH stakers to unstake their ETH and withdraw their accrued rewards from the Beacon Chain. As a reminder, The Merge saw the Ethereum proof-of-work chain converge with the proof-of-stake Beacon Chain, shifting the validation process from mining to staking, where validators commit 32 ETH to ensure the network’s security. Notably, stakers have been unable to unstake and withdraw their assets until the implementation of the Shanghai Upgrade.
The forthcoming Shanghai/Capella (“Shapella”) Upgrade, a highly anticipated hard fork, is poised to implement a suite of five EIPs, with the most eagerly awaited being EIP-4895, which will facilitate the long-sought enablement of withdrawals. Notably, Shanghai denotes the hard fork’s designation on the execution layer, whereas Capella represents its counterpart on the consensus layer.
On February 7, 2023, the Zhejiang testnet enabled withdrawals, followed by the successful execution of the hard fork upgrade on the Sepolia testnet on February 28. The Goerli testnet subsequently underwent the hard fork on March 15, 2023, marking the final test run preceding the mainnet upgrade, anticipated to take place later in March 2023. This milestone will unlock over 17.5 million ETH, making them available for withdrawal.
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