Ethereum is the world’s second largest blockchain network. The invention of Bitcoin resulted in the development of blockchain technology. To put it another way, blockchain is to bitcoin what the internet is to email — a platform on which to develop apps and programs. Bitcoin is only one of several alternatives. This notion piqued people’s interest, and they began to consider what other aspects of society would benefit from decentralisation, such as voting, complex financial operations, or data storage.
Ethereum was conceived by Vitalik Buterin, co-founder of Bitcoin Magazine, in 2013 and brought to life in 2014. Ethereum is a do-it-yourself platform for decentralised applications (Dapps). If you wanted to build a decentralised software on top of Ethereum, you could use the solidity programming language.
Why Not Use Bitcoin? Why Ethereum?
Bitcoin’s blockchain is relatively limited due to its programming language C++ (Turing-complete language) and design, which emphasizes on security and decentralisation. This was done because a system like Bitcoin has very strict requirements for behavior consistency. It was done on purpose, in our opinion, with the goal of making Bitcoin exactly what it is now — digital gold. Bitcoin’s blockchain would not have worked well for complicated decentralised applications, necessitating the creation of Ethereum.
The Ethereum network is powered by thousands of separate computers, making it truly decentralised. It’s a global infrastructure for operating Dapps. The Ethereum network now hosts thousands of Dapps, such as peer-to-peer marketplaces for scarce digital goods, borrowing, lending, decentralised exchanges, NFTs (or digital art), digital advertising, algorithmic money markets, decentralised savings applications, domains, cloud storage, games, identity networks, football fan tokens, social media, and many others are among them.
Currently, there is approximately $160 billion in value locked up in decentralised finance applications on the Ethereum network. Digital art is rapidly gaining traction, with the main NFT marketplace OpenSea on the verge of exceeding $10 billion in total sales.
Ethereum’s ultimate objective is to genuinely decentralize the internet, and it has been quite effective thus far.
Is Internet Centralized?
Yes and no. In principle, it’s decentralised since anybody with access to the internet may construct and launch a website. However, in actuality, giant firms such as Amazon, Google, Facebook, Apple, Netflix, and others control the vast majority of the internet. Almost no action occurs on the internet without the involvement of a third party.
With blockchain technology such as Ethereum, we can now envision an internet that links consumers directly without the need for a centralised third party. For example, you might render Uber obsolete by linking drivers and passengers directly, or you could buy stocks/bonds/cryptocurrency assets directly through a decentralised exchange.
How Does It Work?
Smart Contracts. The Solidity programming language creates smart contracts. In real life, a contract is a set of terms, conditions, and acts. Developers may define conditions for their Dapp on Ethereum, and the Ethereum network will execute them.
Smart contracts handle all part of the contract, including enforcement, management, performance, and payment. Ethereum’s smart contracts gave us the opportunity to create any kind of token without having to launch an entirely new blockchain.
Lets look at some real world use cases:
Escrow agreements or futures can be created that are reliant on the occurrence of particular circumstances in order to be released. A smart contract, for example, may be configured to distribute cash on someone’s birthday every year. It might also be set up to distribute funds if someone acknowledges receipt of the supplied items. It might be used to enforce certain rights for digital asset holders.
Contracts are not editable or correctable. The only way to amend the contract is to persuade the whole network that a change is necessary, which is nearly impossible.
To deploy a smart contract on Ethereum, its creator must pay in Ether (Ethereum’s native money), which incentivizes individuals to run the Ethereum protocol on their computer. Furthermore, author paying Ethereum to install smart contracts guarantees that individuals create efficient code and do not waste network resources on superfluous chores.
Ethereum’s Future Potential
Ethereum was valued $0.70 pence in August 2015, with a market valuation of less than $100 million. Today, as the Ethereum network has risen in popularity, the price of one Ether is $4,300, with a market valuation of over $500 billion.
Ethereum has first mover advantage since it is available on all major exchanges. When individuals or organizations create new Dapps, they will most likely begin with Ethereum. The Ethereum network is undergoing rapid development.
One area that Ethereum still has to improve is its scalability and throughput, as well as its capacity to handle a large number of transactions rapidly and inexpensively, which is currently far from the case. This is where Ethereum 2.0 comes in, an update that would allow Ethereum to significantly grow and perform up to 100,000 transactions with minimal costs from only 13 transactions. This improvement is scheduled to take place in early 2022. At that moment, the network can profit from a further surge in active user growth, particularly in DeFi and NFTs, as the network becomes considerably faster and less expensive.
Although there are alternative smart contract blockchains available, it remains to be seen if Ethereum will win it all or a substantial portion of a very large market share, both of which are desirable. The upgrade to proof-of-stake (ETH 2.0) and making Ethereum ‘green’ as opposed to what it is presently would further incentivize institutional investment.
In 2017, we had no idea what Ethereum could achieve. Only a hunch that this may be a new internet computer. Over the last two years, two major use cases have emerged: DeFi, or decentralized finance, which lets people to do things that banks used to do, such as borrowing and lending; and NFTs, in which every artist has a piece of magical software that allows them to mint unique and scarce digital assets. We could never have created a rare digital asset before Ethereum’s NFT technology.
If we tried to value Ethereum in 2017, we would not have been able to come up with any of these since we would not have known that they would be developed and have a significant impact. So, if we look at DeFi, which has a total value locked at $160 billion, and consider that the world’s ten largest asset managers have a combined AUM of more than $40 trillion, and the top 50 asset managers have a combined AUM of more than $90 trillion (according to IPE), you could value Ethereum to the magnitude of the financial system. Assuming Ethereum’s DeFi ecosystem can capture 1% of that AUM, and considering that the network began burning thousands of coins every day following the ‘London upgrade,’ we may see the Ethereum market value rise to more than $20,000 per ETH, or more than $2.6 trillion in market value over the next five years.
DISCLAIMER: The information contained in this article is for educational purposes only and does not constitute any form of advice or recommendation by Wheatstones, and is not intended to be relied upon by users in making (or refraining from making) any investment decisions.
Join Coinmonks Telegram Channel and Youtube Channel learn about crypto trading and investing
- CoinLoan Review | YouHodler Review | BlockFi Review
- CoinFLEX Review | AEX Exchange Review | UPbit Review
- Coinbase Review| Deribit Review |FTX Review
- NGRAVE ZERO review | Phemex Review | PrimeXBT Review
- Best Blockchain Analysis Tools | Earn Bitcoin
- Crypto arbitrage Guide | How to Short Bitcoin
- Coinbase vs WazirX | Bitrue Review | Poloniex vs Bittrex
- Best Crypto Exchanges in Germany | Arbitrum: A Layer 2 Solution
- Binance Trading Bots | OKEx Review | Atani Review
- Best Crypto Trading Signals Telegram | MoonXBT Review
- How to buy Shiba(SHIB) Coin on Bitbns? | Buy Floki
- Godex.io Review | Invity Review | BitForex Review
- 10 Best Books on Crypto | 5 Best Crypto Bots in the UK
- Koinly Review | Binaryx Review | Hodlnaut vs CakeDefi
- MoonXBT vs Bybit vs Binance | Hardware Wallets