Cryptocurrency Ethereum-Coin ETH
Ethereum is an open-source software platform that uses Ether (ETH) as its native digital currency, allowing the creation of smart contracts and decentralized applications (DApps) without downtime, fraud, control, or third-party interference.
Ethereum, a Turing-complete, blockchain-based programming language, has helped developers build and publish decentralized assets, apps, and other services. It is currently the world’s second-largest cryptocurrency, as it is the most widely used blockchain platform.
Ethereum was first introduced in 2013 in a white paper written by Vitalik Buterin. The white paper described a blockchain network that would support smart contract creation and cryptocurrency minting without the need for a separate blockchain.
The Ethereum blockchain was launched in 2015 after an initial coin offering that raised $18.3 million in BTC. Since then, the network has undergone updates, most notably moving from a Proof-of-Work (PoW) algorithm that relies on computational power to process blocks on the blockchain to a Proof-of-Stake (PoS) algorithm to increase network scalability.
Ethereum introduced the concept of a blockchain smart contract platform that allows programmable contracts to be created. These smart contracts allow two parties to set the terms of a transaction without having to trust a third party to execute it. Anyone using these smart contracts to transact pays a network fee in the form of Ether. In addition to smart contracts, Ethereum’s blockchain can host other cryptocurrencies called ‘tokens’ using the ERC20 compatibility standard.
Ethereum’s native token, Ether or ETH, is used to pay transaction fees (or ‘gas’) for network usage. Developers can use Ethereum to run decentralized applications (DApps) and issue new crypto assets within the Ethereum network. As Ethereum becomes more widely used by developers, it has introduced more use cases such as decentralized finance (DeFi), play-to-earn games, NFT art, and more.
Ethereum is a decentralized, open-source blockchain system that features its own cryptocurrency, Ether. Ethereum acts as a platform for numerous other cryptocurrencies and decentralized smart contract execution.
Ethereum was first described in a 2013 white paper by Vitalik Buterin. Buterin, along with other co-founders, secured funding for the project in an online public crowdsale in the summer of 2014. The project team raised $18.3 million in Bitcoin, while Ethereum’s initial coin offering (ICO) price was $0.311, and over 60 million ETH were sold. At current Ethereum prices, this represents an annual return on investment (ROI) of over 270%, nearly quadrupling the investment every year since the summer of 2014.
The Ethereum Foundation officially launched the blockchain on July 30, 2015, as a prototype codenamed “Frontier.” Since then, there have been several network updates. There have been hard forks: “Constantinople” on February 28, 2019, “Istanbul” on December 8, 2019, “Muir Glacier” on January 2, 2020, “Berlin” on April 14, 2021, and most recently, “London” on August 5, 2021.
Ethereum’s own goal is to be a global platform for decentralized applications, allowing users around the world to build and run software that is resistant to censorship, downtime, and fraud.
First, Ethereum and Bitcoin have different purposes. Bitcoin was created as an alternative to fiat currency and was intended to be a medium of exchange and store of value. However, Ethereum was created to facilitate smart contracts and dApps.
Second, the Ethereum and Bitcoin networks differ in several ways, including block times, consensus algorithms, and energy intensity. Ethereum uses a proof-of-stake consensus mechanism, while Bitcoin uses proof-of-work, and while Ethereum transactions can contain executable code, Bitcoin transactions are only used to record transaction information. Finally, Bitcoin has a limit of 21 million coins, while ETH has no set limit.
How much will the price of ETH go up? Experts predict that the price of ETH could soar to $15,000 by 2030, $4,500 by 2022, $5,000 by 2023, and $10,000 by 2025.
As of December 2022, the circulating supply is over 122 million.
ETH can be bought on cryptocurrency exchanges or, depending on your location, directly using a wallet. This includes the Crypto.com app and the Crypto.com DeFi wallet.
Ethereum is a blockchain-based network that allows users to make transactions, earn interest on their holdings, and deploy decentralized applications. Transactions are sent from one Ethereum account to another and are signed with the sender’s private key. When a transaction triggers a smart contract, the Ethereum Virtual Machine (EVM) executes the command on all nodes in the network.
To prevent network congestion, ETH is used as a fee and incentive for users to contribute resources and validate transactions. Transactions must include a gas limit and a fee that the sender is willing to pay to a network validator to include the transaction on the blockchain.
There are a variety of cryptocurrency wallets that can securely store ETH. These include software wallets like the Crypto.com DeFi Wallet and hardware wallets that resemble USB flash drives.
Ethereum has a total of eight co-founders, which is unusually high for a cryptocurrency project. They first met on June 7, 2014 in Zug, Switzerland.
Russian-Canadian Vitalik Buterin is probably the best known of this group. He wrote the original white paper describing Ethereum in 2013 and continues to work on improving the platform to this day. Prior to ETH, Buterin co-founded and wrote articles for the Bitcoin Magazine news website.
Gavin Wood, a British programmer, is probably the second most important co-founder of ETH. He coded the first technical implementation of Ethereum in the C++ programming language, proposed Solidity, Ethereum’s primary programming language, and was the first Chief Technology Officer of the Ethereum Foundation. Prior to Ethereum, Wood was a research scientist at Microsoft. He later founded the Web3 Foundation.
Among other co-founders of Ethereum are: – Anthony Di Iorio, who backed the project during its early development phase. – Charles Hoskinson, who played a key role in establishing the Swiss-based Ethereum Foundation and its legal framework. – Mihai Alisie, who helped found the Ethereum Foundation. – Canadian entrepreneur Joseph Lubin, like Di Iorio, funded the early stages of Ethereum and later founded ConsenSys, an incubator for ETH-based startups. – Amir Chetrit, who helped co-found Ethereum but left it early in its development.
Ethereum pioneered the concept of a blockchain smart contract platform. Smart contracts are computer programs that automatically execute the tasks necessary to fulfill a contract between multiple parties on the Internet. They are designed to reduce the need for trusted intermediaries between contracting parties, reduce transaction costs, and increase transaction reliability.
Ethereum’s main innovation was designing a platform that could execute smart contracts using the blockchain, further enhancing the existing benefits of smart contract technology. Ethereum’s blockchain is designed to be “one computer for the planet,” according to co-founder Gavin Wood, and theoretically makes all programs more robust, censorship-resistant, and less vulnerable to fraud by running on a globally distributed network of public nodes.
In addition to smart contracts, the Ethereum blockchain can also host other cryptocurrencies, called “tokens,” using the ERC-20 compatible standard. In fact, this has been the most commonly used method on the ETH platform to date. To date, over 280,000 ERC-20 compatible tokens have been launched. Over 40 of these are in the top 100 cryptocurrencies by market cap (e.g. USDT, LINK, BNB). Since the introduction of the Play2Earn game, there has been a significant increase in interest in the ETH vs PHP price.
The Ethereum Name Service (ENS) is a decentralized and scalable naming system based on the Ethereum blockchain. It is basically the Web3 version of DNS, and stands for Domain Name Service.
In its original form, cryptocurrency addresses consist of long strings of numbers and letters designed to be readable by computers. It can look like “0xDC25EF3F5B8A186998338A2ADA83795FBA2D695E” and can sometimes be confusing to read and in some cases can even lead to loss of funds.
ENS solves the problem of long and confusing cryptocurrency addresses by assigning human-readable names to machine-readable identifiers such as Ethereum addresses, metadata, other cryptocurrency addresses, and content hashes. With ENS, the long address above can be as simple as “Alice.eth” and you can receive any type of cryptocurrency or NFT through your ENS domain.
ENS is based on two Ethereum smart contracts. The first is the ENS registry, which records three important pieces of information: the domain owner, the resolver for the domain, and the caching time for all records under the domain. The second smart contract is the resolver, which translates domain names into machine-readable addresses and vice versa.
It’s worth adding that in addition to integrating with .eth names, ENS also supports the most popular DNS names, including .com, .org, .io, .app, etc.
Ethereum has maintained its position as the second largest cryptocurrency by market cap since its launch. However, like all other blockchain networks in existence, Ethereum is not perfect. Notably, this legacy blockchain suffers from high gas fees and low throughput of 15-30 transactions per second.
While plans to address these shortcomings are already underway through several upgrades, many competitors have taken advantage of this delay to offer cryptocurrency users cheaper and faster transactions.
The term “Ethereum Killer” emerged around 2016/2017 when alternative blockchains like Cardano entered the cryptocurrency market. In 2018, EOS debuted as the next “Ethereum Killer”, raising $4.1 billion from investors, the largest amount ever raised by an ICO. Since then, other blockchains such as Tezos, Solana, Fantom, Avalanche, and Binance Smart Chain have emerged as Ethereum Killers.
Each of these blockchains uses different consensus models to address Ethereum’s PoW-driven limitations. For example, Solana uses Proof of History (PoH), while Binance Smart Chain uses both Proof of Authority (PoA) and Delegated Proof of Stake (DPoS).
However, none of these alternative blockchains have managed to overtake Ethereum, the second-largest cryptocurrency by market cap. Ethereum is also currently the largest blockchain for NFT trading activity.
The EIP-1559 upgrade introduces a mechanism that changes the way gas fees are estimated on the Ethereum blockchain. Before the upgrade, users had to participate in a public auction to have their transactions picked up by miners. This process is known as a “first-price auction,” and as expected, the highest bidder wins.
With EIP-1559, this process is handled by an automated bidding system, and there is a set “base fee” for transactions to be included in the next block. This fee varies depending on how congested the network is. Users who want to speed up their transactions can also pay miners a “priority fee” for faster inclusion.
EIP-1559 also introduces a fee burn mechanism. A portion of all transaction fees (base fees) are burned and removed from circulation. This is intended to reduce the supply of ether in circulation and potentially increase the value of the token over time.
Interestingly, in less than two months since the London Upgrade was implemented, the network has burned $1 billion worth of ether.
As of September 2021, there were approximately 117.5 million ETH coins in circulation, 72 million of which were issued in the genesis block, the first block on the Ethereum blockchain. Of these 72 million, 60 million were allocated to early contributors in the 2014 crowdsale who funded the project, while 12 million were given to the development fund.
The remaining amount was issued to miners on the Ethereum network in the form of block rewards. The original reward in 2015 was 5 ETH per block, but was later reduced to 3 ETH in late 2017 and 2 ETH in early 2019. The average time it takes to mine an Ethereum block is approximately 13–15 seconds.
In the August 2021 Ethereum network upgrade, the London hard fork included Ethereum Improvement Protocol EIP-1559. Instead of a first-price auction mechanism where the highest bidder wins, EIP-1559 introduces a “base fee” for transactions to be included in the next block. Users who want their transactions to be prioritized can pay a “tip” or “priority fee” to the miner. The base fee is dynamically adjusted based on transaction activity, which reduces the volatility of Ethereum gas fees, but does not reduce the notoriously high prices during peak network congestion.
One of the key differences between the Bitcoin and Ethereum economies is that the latter is not deflationary. That is, the total supply is not limited. Ethereum developers justify this by not wanting to have a “fixed security budget” on the network. The issuance rate of ETH can be adjusted by consensus, so the network can maintain the minimum issuance necessary for adequate security.
However, with the introduction of EIP-1559, the base fee used for transactions will be burned, removing ETH from circulation. This means that as activity on the network increases, more ETH will be burned, and as supply decreases, the price of Ethereum will rise. All things being equal, this has the potential to make Ethereum deflationary, which is what ETH holders are hoping for. There is a chance that the price of Ethereum will rise today.
As of August 2020, Ethereum is secured by the Ethash proof-of-work algorithm, which belongs to the Keccak hash function family.
However, there are plans to transition the network to a proof-of-stake algorithm, which is linked to the major Ethereum 2.0 update that was released in late 2020.
Staking on the Ethereum 2.0 network became possible after the Ethereum 2.0 Beacon Chain (Phase 0) was released in early December 2020. Ethereum staking involves depositing ETH (32 ETH is required to activate the validator software) into Ethereum 2.0 and sending it to the deposit contract to store data, process transactions, and add new blocks to the blockchain, helping secure the network. At the time of writing this in mid-September 2021, the current Ethereum price for 32 Ether was around $116,029. The current amount that an Ethereum validator earns is a 6% annual yield, which is around 1.91952 ETH, or $6,960 in today’s Ethereum price. This number will change as the network develops and the number of stakers (validators) increases.
Ethereum staking rewards are determined by the distribution curve (average percentage of participation and stakers). Some ETH 2.0 staking rewards were 20% for early stakers, but will decrease to 7% to 4.5% per year.
The minimum requirement for an Ethereum stake is 32 ETH. If you decide to stake on Ethereum 2.0, this means that your Ethereum stake will be locked on the network for months, if not years, until the Ethereum 2.0 upgrade is complete.
Given that Ethereum is the second largest cryptocurrency after Bitcoin, you can buy Ethereum or use ETH trading pairs on almost every major cryptocurrency exchange. Some of the largest markets include:
Binance
Coinbase Pro
OKEx
Kraken
Huobi Global
Popular Ethereum price pairs include: ETH/USD, ETH/GBP, ETH/AUD, and ETH/JPY.
The Ethereum network has struggled with high transaction fees, often spiked during high demand seasons. In May 2021, the average transaction fee on the network peaked at $71.72.
In addition to high transaction costs, major altcoins also struggle with scalability issues.
As mentioned, there are plans to transition to a proof-of-stake algorithm to increase the scalability of the platform and add several new features. The development team has already started the process of transitioning to ETH 2.0, implementing several upgrades along the way, including the London hard fork.
The London upgrade was launched in August 2021. It included five Ethereum Improvement Proposals (EIPs): EIP-3529, EIP-3198, EIP-3541, and most notably EIP-1559 and EIP-3554.
EIP-1559 is arguably the most popular upgrade of all EIPs.
In 2022, Ethereum plans to transition to proof-of-stake with the Ethereum 2.0 update. This transition has been on the Ethereum roadmap since the network launched and will introduce a new consensus mechanism and sharding as a scaling solution. The current Ethereum chain will become a beacon chain, acting as a settlement layer for smart contract interactions on other chains.
In late 2021, Ethereum’s Arrow Glacier update was delayed until June 2022. Until then, Vitalik Buterin expects the path to the network’s final stage to be shaped by optimistic rollups and Zk rollups.
In January 2022, the Ethereum Foundation announced that it had decided to remove the term “Ethereum 2.0” “so that all future users do not have to navigate this confusing mental model.” He went on to explain that the previously mentioned “Ethereum 1.0” term would be referred to as the “execution layer” and “Ethereum 2.0” would be referred to as the “consensus layer”. This is ultimately intended to provide a more accurate version of the Ethereum roadmap.
On April 13, 2022, Ethereum developer Tim Beiko tweeted an update on the progress of the Merge, stating that “we are definitely entering the final chapter of PoW on Ethereum.” He also said that users can expect it to happen in the coming months, possibly in June, but did not provide an exact date. This followed the first mainnet shadow fork to test the transition from Proof of Stake on Ethereum, which was successfully implemented on April 11, 2022.
In 2022, Ethereum renamed its transition from Proof of Work to Proof of Stake from Ethereum 2.0 to The Merge. The Merge was launched on September 15, 2022, following the successful merge of the Goerli testnet on August 11, 2022.
Read: Everything You Ever Wanted to Know About the Ethereum Merge
The Merge implements several important changes to Ethereum. First, it merges the existing PoW Ethereum mainnet with the Beacon Chain, a PoS chain. The merge of the two chains creates a new Proof-of-Stake Ethereum, which consists of a consensus layer and an execution layer. The consensus layer synchronizes the chain state across the network, while the execution layer handles transactions and block creation.
Second, the Merge significantly reduces ETH issuance. This is called the “triple halving” in homage to the Bitcoin halving, and the Merge will reduce ETH issuance by 90%. With over 14 million ETH already staked, there is a very good chance that ETH will be deflationary after the transition. In addition, stakers are expected to earn between 8% and 12% APR according to current estimates. Staked ETH will not be withdrawable immediately after the Merge and will only be activated after the Shanghai Upgrade, which is estimated to be 6-12 months later.
Learn more about common misconceptions about Ethereum after the Merge.
The Merge will not increase transaction throughput or reduce gas fees, as the block generation speed will remain roughly the same at 12 seconds (currently 13 seconds). It will also not activate on-chain governance, as protocol changes will still be discussed and decided off-chain by stakeholders.
Importantly, the transition to PoS is expected to reduce Ethereum’s annual energy consumption from 112 TWh/year to 0.01 TWh/year. That’s a 99.9% reduction. This reduction has led investors to expect institutional money to flow into “greener” Ethereum. On the other hand, in an industry estimated to be worth $19 billion, Ethereum miners are keen to champion ETHPoW, a potential hard fork of Ethereum based on proof-of-work. The ETH PoS vs. ETH PoW article explains the key differences.
The Shanghai upgrade, the biggest Ethereum upgrade since the merge, allows ETH stakers to unstake their ETH and withdraw their ETH rewards from the beacon chain. During the merge, the Ethereum proof-of-work chain merged with the proof-of-stake beacon chain. Instead of mining, validators stake 32 ETH to secure the network. However, stakers cannot unstake and withdraw their stake until the Shanghai upgrade.
The Shanghai/Capella (“Shapella”) upgrade is a hard fork that implements five EIPs, the most anticipated of which is EIP-4895, which enables withdrawals. Shanghai is the name of the hard fork at the execution layer, while Capella is the name of the consensus layer.
On February 7, 2023, withdrawals were made available on the Zhejiang testnet, and on February 28, a hard fork upgrade was successfully executed on the Sepolia testnet. On March 15, 2023, a hard fork was executed on the Goerli testnet, which is the final test run before the mainnet upgrade, which is scheduled to be executed sometime in March 2023. Over 17.5 million ETH will be available for withdrawals.
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