What is Ethereum?
Ethereum is a decentralized computing platform. It can be compared to a computer or laptop, but it does not run on one device. It runs simultaneously on thousands of machines all over the globe, so it doesn’t have a single owner.
Like Bitcoin, Ethereum allows you to send digital money. But Ethereum can do a lot more than that. You can create your code and interact with other users’ applications. Ethereum is flexible enough to allow you to launch all kinds of complex programs.
The main idea behind Ethereum is for developers to create and launch code that runs on a distributed network rather than on a central server. These applications are theoretically inaccessible or blocked.
What is ETH (ether)?
Ethereum is the protocol, but the cryptocurrency created by this protocol is simply ETH.
The ETH mining
Mining is the process of adding transactions to an Ethereum blockchain block. Ethereum uses a proof-of-work blockchain, but Ethereum 2.0 will use proof-of-stake (PoS). This is for scaling and to be more eco-friendly.
Ethereum miners are computer programs that execute the software. They use their processing power and time to process transactions and create blocks. Participants in the network must agree on how transactions are sequenced in decentralized systems such as Ethereum. This is done by miners who generate blocks by solving difficult computational problems.
How Ethereum blockchain works
It could be described as a state machine. This means that you can have a snapshot at any time of all account balances and smart contract status. Certain actions can cause the state update, which means that all nodes will update their snapshots to reflect the changes.
Smart contracts running on Ethereum are triggered either by transactions from users or other contracts. Every node on the network records the output of every transaction sent by a user to a contract. The Ethereum Virtual Machine (EVM) converts smart contracts into instructions that the computer can understand.
Mining is used to update the state. Mining uses a Proof of Work algorithm similar to Bitcoin’s.
The Pros of Ethereum
Ethereum offers many other benefits, such as anonymity and decentralization. Facebook can punish users who post offensive content. This can only happen on an Ethereum-based social networking platform if the community votes in favor. This allows users to share their opinions and the community can decide what should be or shouldn’t.
If they do not meet the community’s requirements, bad actors can’t take control. Someone with bad intentions must control 51% to make a difference. In most cases, this is impossible. This is safer than accessing a server.
Many of these steps can be automated using smart contracts, in addition to those that are performed by web experts. For example, Fiver requires freelancers to use the platform to find clients and set up payment arrangements. Fiver makes money by taking a percentage from every contract. On Web 3.0, a person can create a smart agreement that states, “If the work is turned in by X times, the funds shall not be released.” Both parties can’t alter the rules once the contract has been written.
The Cons of Ethereum
While it sounds like an ideal platform, Ethereum still faces key problems.
Scalability is the most important. Buterin saw Ethereum be the web with millions of users communicating at once. But due to the PoW consensus algorithm, such interaction is limited by block validation times and gas fees. Problems with decentralization could also exist. It can also be a problem. One example is Visa, which is a central entity that handles all transactions and has perfected them.
The second is accessibility. The second is accessibility. Ethereum is expensive and difficult to use for new users at the time this article was written. Some platforms require specific wallets. This means that one needs to transfer ETH from their existing wallet into the required wallet. This is not an easy step and is not recommended for beginners.
PayPal has now added crypto support to its platform. However, users can only hold it there. The platform must be integrated with DeFi and DApps to increase accessibility.
The platform has a lot of documentation, which can help you attract more users. But, it is important to simplify the process of using Ethereum.
Applications using Ethereum
Decentralized Finance (DeFi)
DeFi is a network that combines financial applications with blockchain networks. It’s different than existing financial networks in that it is open-source and programmable. Additionally, there is no central authority and developers can offer new models for investing, trading, lending, and payments. Using distributed systems and smart contracts, customers can quickly create decentralized financial apps that are secure and reliable. Companies like DeFi offer products that enable peer-to-peer lending and borrowing, as well as earning interest on crypto holdings. They also allow trading via decentralized exchanges. Uniswap and Sushiswap are some of the most popular DeFi platforms.
Learn more about DeFi with this article.
Non-Fungible Tokens (NFTs)
NFTs, which are digital tokens that can be used to prove the provenance of digital assets that are rare and unique, are unique and indivisible. Artists can use NFTs to tokenize their work and to ensure that it is their own. The blockchain network records and maintains ownership information. NFTs are also becoming more popular in the gaming industry due to their interoperability with other gaming platforms. Gods Unchained, a card game, gives players full ownership over their in-game items by using NFTs. The blockchain network keeps track of ownership information. Because they are interoperable with other gaming platforms, NFTs are becoming increasingly popular in the gaming sector.
Learn more about NFT with this article.
If you feel like a deep dive into the core Ethereum stuff, here is a literal book for you: “Mastering Ethereum”.