Ethereum

Mass interest in the cryptocurrency sector is growing with time despite the lack of any regulatory standard or clear stance taken by the governments in many nations. Many new crypto tokens are being launched and the number of investors in this segment is also going up, globally. However, the popularity of some older generation cryptocurrencies remains intact. One such example is Ethereum. Hailed as the 2nd important and popular cryptocurrency, after Bitcoin, it is a favorite of seasoned crypto investors. It holds the 2nd spot after Bitcoin, as far as global market capitalization is concerned.

History of Ethereum at a glance

The root of Ethereum can be traced to 2013, a time when the Blockchain concept was nothing more than a buzzword for the mass. Vitalik Buterin devised the concept of Ethereum. He came up with a white paper later in 2013. Buterin analyzed the inherent limitations of Bitcoin and he wanted to create a Blockchain platform with enhanced functionality. In January 2014, at the Miami Bitcoin Conference, Ethereum was first announced and it gained traction with many developers. The first crowdfunding was over by late 2014 and $18 million was raised. The first Ethereum conference- DEVCON0 was held too.

Ethereum’s development took place in 4 stages. These were called “hard forks.” Ethereum 1.0 named Frontier was unveiled in Mid-2015. The subsequent phases were named Frontier Thawing, Homestead, Tangerine Whistle, Spurious Dragon, and Metropolis. The last one enhanced scalability, security, privacy of the Ethereum network. It was a complicated update, released in 2 steps named Byzantium and Constantinople. The Serenity stage is now in progress and it will make the transition to the proposed Ethereum 2.0 smoother. It remains to be seen when the stable and final version of Ethereum 2.0 is made available for the users.

The basics of Ethereum

Ethereum is more than another cryptocurrency platform- it is a gigantic decentralized computer network, powered by Ether, its native cryptocurrency. The transactions are recorded using cryptography for the sake of transparency and safety. The participants get rewarded with crypto tokens in similar Blockchain systems and in the case of Ethereum, Ether tokens are deployed. Much like its prominent rival Bitcoin, Ether is used for selling and buying various goods and services. 

The USP of Ethereum is that it is possible for the users to develop applications that run on its Blockchain much in the way software runs on a PC. These applications can then be deployed to execute complex financial transactions or store personal data safely. As per the Enterprise Ethereum Alliance, Ethereum is distinct as the network can execute computations as a part of its mining process. 

At the core of Ethereum lay EVM- the Ethereum Virtual Machine and you can think of it as a decentralized runtime environment. It is used for creating decentralized applications (DApps). Ether is the part of this crypto ecosystem that has relatable, real-world value.

Ether and Ethereum- the uses

Ether can be utilized as a digital currency for making safe financial transactions online. Ethereum is the Blockchain network that enables ether to be sold or exchanged. However, using this network you can do more things than buying and selling ether. It is more than just another alternative to cash. You can, for example, do complex transactions such as exchange assets for loans and acquire digital art. The transactions are stored as well as processed on the Ethereum network.

You can also utilize the Ethereum network for data storage and running decentralized applications. When you can host applications on its secure Blockchain, it feels more assuring than hosting software on servers operated by MNC tech giants like Google or Amazon. You get enhanced control over your data. There is nothing like a central authority monitoring your data and activities 24×7. 

Another usage of Ether and Ethereum is smart contracts, also known as self-executing contracts. In this case, two parties agree on the delivery of services or goods and no lawyer is needed for contract execution. If the contract conditions are met, it gets automatically executed, minus errors. The apt party receives an amount of ether eventually. There is no downtime or censorship involved.

Using the EVM, a lot of useful things can be created. It is not only good for making e-commerce apps or doing identity verification. In fact, EVM is being used to make online games, Cloud operating systems, Messaging platforms, etc.

In recent times, Ethereum is being used for another purpose and that has made headlines. The smart contract functionality of this network is being utilized to store NFTs. The ERC-721 NFT token has become the preferred medium for dealing with NFTs or Non-fungible tokens.

How it is different from Bitcoin

Both Bitcoin and Ether serve as virtual currencies and they run on decentralized Blockchain networks. However, Ethereum differs from Bitcoin in many ways. 

• The decentralized Ethereum network offers enhanced functionalities. It enables creating and running applications and executing smart contracts along with exciting transactions on its network. Bitcoin, on the other hand, does not support smart contracts. It is being sued mostly as a worthy alternative to fiat currency.

• Compared to Bitcoin, Ethereum processes transactions much faster. While new blocks on the Bitcoin network get validated every 10 minutes, in case of the Ethereum network it is every 12 seconds. So, it means more transactions can be processed by the Ethereum Blockchain network than that of Bitcoin in the same amount of time. 

• Additionally, there is no capping amount set on the number of potential Ether but Bitcoin will have the maximum amount of 21 million coins.

• Another key difference between the two popular cryptocurrency platforms is the reward given for solving blocks. The Bitcoin reward gets halved every 4 years approx. However, Ether mining rewards have remained mostly consistent since its inception.

What are the advantages of Ethereum?

• A well-conceived Blockchain and cryptocurrency ecosystem designed to overcome limitations of predecessors
• Ethereum is a multipurpose Blockchain network
• Ethereum development is known for its focus on innovation
• Ethereum’s decentralized network frees users from relying on any third-party intermediaries
• Ether can easily be traded for fiat currency like US dollar or commodities like gold. 

What are the drawbacks of Ethereum?

• Its popularity has led to a hike in transaction costs. In Early 2021, Ethereum transaction fees, referred as gas, touched $23 per transaction. It used to be quite low until 2019. This is hard on the users. 
• Ethereum releases 18 million Ether per year. However, lack of a lifetime limit on the potential number of Ether coins may lead to crypto inflation in future.
• Ethereum continues to improve and evolve. However, the upcoming version 2 update has made developers and users worried about app compatibility. The migration may not be butter smooth.

Should you invest in Ether?

Post its launch in 2015, Ether price has surged and crashed several times. However, in April 2021 it hit a record high, sparking interest in it all over again. Interestingly, its price surge and fall have largely coincided with that of its arch-rival, Bitcoin. However, the price surge of Ether has not been as steep and unpredictable as Bitcoin.

Investing in Ether can be useful, both for new and seasoned investors. It definitely has value and can be used as a safe virtual currency in many places. The Ethereum distributed apps are the additional factor for using this network. As it migrates to version 2, more users will get access to such apps. Apart from purchasing Ether from the crypto exchanges, you may also invest in entities that are making applications using this Blockchain network. For an investor with diversified assets, a cryptocurrency like ETH seems a good choice. 

However, it is always advisable that you talk with a crypto investment consultant before investing in any cryptocurrency, including Ether. There is always an element of volatility involved with cryptocurrencies. To be on the safe side, buying a small amount of Ether will be good. Once you get comfortable dealing with Ether you can always buy more.