Ethereum is a decentralized blockchain network that allows users to conduct transactions, receive interest on holdings via staking, play games, trade crypto, utilize as well as store NFTs, etc. Ethereum was initially described in a white paper in late 2013 by Vitalik Buterin.
Buterin aspired to enhance the blockchain application development to connect real-world assets to a blockchain. The name “Ethereum” was partly chosen owing to it containing the word “ether,” which is an imaginary, invisible medium that allows light to travel.
Experts believe that Ethereum ETH will be the internet’s next major step. Being a next-generation web, it supports dApps, or decentralized applications, DEXs, or decentralized exchanges; and DeFi, or decentralized finance.
The Merge, initially mentioned as Ethereum 2.0, is the transfer of Ethereum from Proof of Work to Proof of Stake which was completed on September 15, 2022. Ethereum’s consensus was upgraded from PoW to PoS upon integrating the Ethereum Mainnet with the Beacon Chain PoS system.
The upgrade enhanced the sustainability of Ethereum owing to lowered energy consumption. Moreover, The Merge was a component of the ongoing upgrades of the Ethereum foundation to revamp security, sustainability, and scalability.
How does Ethereum work?
Ethereum depends on node operators to process transactions that take place over the Ethereum network. The operators charge fees (gas fees) to run both the hardware and software that ease the transactions. The fees are paid in ETH, or Ether.
Just like a vast network of computers can be used, Ethereum utilizes it to support peer-to-peer transactions besides tracking the owner of Ether. Developers can develop and operate decentralized apps on the network.
The dApps link to the Ethereum blockchain with “smart contracts,” which are small programs that are stored on the Ethereum blockchain and execute on their own when specific conditions are fulfilled.
To make it easy to understand, it could be said that while the dApp acts as the front-end of the program, the smart contract performs like the backend of the program.
As dApps are based on the decentralized and open-source Ethereum network, it is impossible to control them through a single entity. When a decentralized app is added to Ethereum, taking it down is not possible, no matter if the real creator also wishes to dissolve or remove it.
The decentralized system can cause anonymity for users, who can use dApps using a fictitious name. It may also lead to less control and restrictions from third parties.
Advantages Associated with Ethereum
The major benefits of Ethereum are as follows:
Since Ethereum is decentralized, third-party cloud providers have no role in between. Peer-to-peer transactions are enabled owing to the usage of blockchain. Users can share value or store data without depending on an intermediary.
Ethereum is unhackable, just like other blockchain-dependent networks. To attempt to harm the network, hackers have to control the majority of the network nodes.
Smart contracts act as the foundation for agreement and trade on Ethereum and make sure robust contracts. This is something completely different from normal contracts that need follow-through and interpretation.
Since Ethereum is decentralized, even if a node goes down, there’s no break or pause.
Anyone can participate, as Ethereum is a permissionless blockchain.
Users have the authority to stay anonymous while using the network for exchanges. There’s no need for them to enter personal credentials in order to use an Ethereum application.
Drawbacks Associated with Ethereum
Certain disadvantages also accompany Ethereum. Some of them are:
Currently, a number of user interfaces as well as user experiences have not been optimized for users. Because understanding new DApps takes significant time, costly mistakes are bound to happen.
Smart contract sensitivity
Anyone can view smart contracts; hence, it is easy for experienced programmers to identify code that has vulnerabilities, exploit them, and cause a loss of funds.
The transaction fee has the possibility of increasing during high network activity. Especially in occasional cases where there’s immense activity on the network, Ethereum can turn out to be quite costly to use.
How to buy Ethereum
One of the crucial facts to know for those who are new to the Ethereum network is that Ethereum can’t be purchased since it is the network. Instead, it’s ether that’s meant to be bought to be used on the Ethereum network.
To buy Ether, follow the below steps:
Choose a cryptocurrency exchange
Trading platforms and crypto exchanges are used to purchase and sell various cryptocurrencies. Coinbase, Binance, and Kraken are some of the best exchanges.
Deposit fiat money
Deposit cash on the trading platform or link your bank account to have the funds required to buy Ether.
After the account has been funded, the money can be used to purchase ether at the current Ethereum price. After the coins are transferred into the account, they can be sold, held, or traded for other cryptocurrencies. While selling or trading crypt, taxes may have to be paid.
Use a wallet
Though Ether can be stored in the default digital wallet of the trading platform, there are risks to it. In case the exchange is hacked, the coins can be stolen. To stay safe, transfer coins into a cold wallet or other digital wallet that’s not connected to the internet.
Difference between Ethereum and Ether
Ethereum and Ether work together but are different. While Ethereum is the technology, Ether is the cryptocurrency. To be precise, Ether is like the fuel or cash that supports the Ethereum network. Ether must be purchased to invest in Ethereum.
The future of Ethereum
Ethereum has witnessed a boost in popularity in the last months, thanks to developers utilizing it to develop NFTs and decentralized finance projects. Since such applications are run on the public blockchain, it has prompted a huge network effect since an increase in activity pulls developers towards Ethereum.
However, certain issues, like whether or not Ethereum can compete with even agile competitors, question its long-term success.