What Is Ethereum (ETH)? The Cryptocurrency & Blockchain

Ethereum Blockchain

Ethereum Blockchain is a permissionless, open-source, and decentralized Blockchain network with smart contract functionality. The platform creates a peer-to-peer network that securely executes and verifies application code, allowing users to facilitate transactions with one another without relying on a central authority, such as banks or brokerages. Transaction records are secure, transparent, immutable, verifiable, and distributed across the entire network, granting users complete ownership and access to the ledger and its records.

The native currency of the Ethereum Blockchain is known as “ether” or “ETH” which, after bitcoin, is the second cryptocurrency in market capitalization among other cryptocurrencies. On the Ethereum Blockchain, Ether is used to sign and process transactions. It is used for any payment associated with any transaction on assets or functions of the blockchain, such as ERC-20 tokens. Ether is also used to pay for gas fees when minting Non-Fungible Tokens (NFTs) on Ethereum-based marketplaces, e.g, OpeanSea.io.

The Ethereum Blockchain was conceived in 2013 by a Canadian-Russian programmer named Vitalik Buterin, and its whitepaper was published in November of that year. Following Buterin’s initiatives, additional minds jumped in to assist in bringing the project to fruition. Vitalik Buterin, Gavin Wood (creator of Polkadot (DOT) and Kusama), Charles Hoskinson, Joseph Lubin, and Anthony Di Lorio are Ethereum co-founders. The Ethereum blockchain was fully developed in 2014 and went live on July 30, 2015.

The Ethereum blockchain provides a flexible platform for people to create decentralized applications (dapps) using the native solidity scripting language and the Ethereum Virtual Machine (EVM). The ecosystem is extremely rich because it hosts a significant amount of functionality for developers and business owners to deploy permanent and immutable decentralized applications and other types of projects that make significant adjustments to the Bitcoin network’s shortcomings.

Ethereum is a major player in the cryptocurrency market, as indicated by its market capitalization, market dominance percentage, and the wide range of technologies and solutions built on the Ethereum blockchain by numerous businesses and entities. It enables anyone to create ERC-20 tokens and decentralized finance (defi) platforms to exchange assets with ease. It also enables the development of non-fungible tokens (ERC-721) in the form of collectibles, virtual real estate, digital arts, and sports memorabilia, among other things.

How are transactions processed on the Ethereum Blockchain?

Unlike Bitcoin, which uses the Proof-of-work (PoW) consensus algorithm to process and validate transactions, the Ethereum blockchain uses a more adaptable mechanism known as Proof-of-stake (PoS). Proof-of-stake (POS) is a consensus algorithm that blockchain networks use to achieve distributed consensus. On the Ethereum blockchain, proof-of-stake requires users to stake their ETH to become a validator in the network for ordering transactions and creating new blocks, and earning rewards in return.

Proof-of-stake cones with several improvements to the Bitcoin network’s proof-of-work mechanism. It is more energy-efficient, faster, simpler to use, completely decentralized, and a better way to solve cryptographic problems.

Aside from the Ethereum blockchain’s proof-of-stake mechanism, several mechanisms are being developed by existing and emerging blockchain projects. Each cryptocurrency project selects the best mechanism that is compatible with its mission and goals.

The Proof-of-Reserve mechanism used by CRD Network is one of the most notable ones. This refers to the procedure by which an entity proves ownership rights to both crypto and non-crypto assets.

The CRD Network uses an aggregated proof-of-physical-asset-reserves service that allows them to connect a single source of truth to a single public key, which is tied to a single individual. That is, this digital proof of physical asset reserves system offers complete transparency while removing the need for middlemen between the origination and securitization of loans. It establishes that a user or a group of users has been linked to a specific asset. This is crucial in the crypto sector since it identifies who owns a particular cryptocurrency, Non-fungible Tokens, and other Defi assets.

Closing thoughts:

These characteristics have drawn attention to the ecosystem and aided in its rapid expansion. Developers and business owners are usually encouraged to deploy their projects on the Ethereum blockchain due to its vast user base.

However, the complete anonymity of the network’s users has caused many users to lose their funds. Because decentralized finance is not regulated nor KYC-based, it attracts a large number of rogue actors who may engage in acts that are harmful to others. As a result, a few projects like the CRD Network that was mentioned earlier have begun to develop a system that will allow users’ identities to be confirmed across decentralized applications. All existing Defi projects will benefit from this by ensuring that all of their participants are as safe as possible by limiting money laundering and other related crimes to the bare minimum.