Cryptocurrency Ethereum: A Comprehensive Guide

Ethereum is the second-largest cryptocurrency by market capitalization, and it's often referred to as the "Internet of Money" because of its decentralized and open-source nature.

Ethereum's creator, Vitalik Buterin, was just 19 years old when he proposed the idea for Ethereum in 2013. He was a Canadian-Russian programmer and writer who was fascinated by the potential of blockchain technology.

Ethereum's main goal is to create a decentralized platform that allows developers to build and deploy their own applications, without the need for intermediaries like banks or governments. This is achieved through the use of smart contracts, which are self-executing contracts with the terms of the agreement written directly into lines of code.

The Ethereum network uses a consensus algorithm called proof-of-work, which requires powerful computers to solve complex mathematical problems in order to validate transactions and create new blocks.

Ethereum is an open-source software platform that developers can use to create cryptocurrencies and other digital applications.

It's a decentralized global software platform powered by blockchain technology, making it a secure and scalable way to create digital applications.

The token of Ethereum, ether (ETH), is designed to pay for work done supporting the blockchain, but it can also be used to pay for tangible goods and services if accepted.

Anyone can use Ethereum to create any secured digital technology, from decentralized applications to digital currencies.

Ethereum enables developers to build and deploy decentralized applications without a centralized authority, giving participants decision-making authority.

Its native cryptocurrency, ether (ETH), is most commonly known by investors for its potential value and by developers for its use in blockchain and decentralized finance application development.

Ethereum is designed to be programmable, secure, and decentralized, making it a powerful tool for creating digital applications.

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Vitalik Buterin, the mastermind behind Ethereum, published a white paper introducing the concept in 2014. This marked the beginning of a new era in blockchain technology.

The Ethereum platform was launched in 2015 by Buterin and Joe Lubin, founder of ConsenSys. This was a significant milestone, as it brought Buterin's vision to life.

Ethereum's founders were pioneers in recognizing the full potential of blockchain technology beyond just secure virtual payments. Their innovative approach paved the way for decentralized applications and a new wave of cryptocurrency adoption.

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Ethereum was conceived by Vitalik Buterin, who published a white paper introducing it in 2014. This marked the beginning of a new era in blockchain technology.

The founders of Ethereum, led by Buterin and Joe Lubin, launched the platform in 2015. They were among the first to consider the full potential of blockchain technology beyond just enabling a secure virtual payment method.

Ethereum's genesis block was created on July 30, 2015, marking the official launch of the platform. This was made possible by a crowdsourcing campaign that sold over $18 million worth of tokens called ether.

The Ethereum platform was founded by a total of eight co-founders, a large number for a crypto project. They first met on June 7, 2014, in Zug, Switzerland.

Here are the key co-founders of Ethereum:

Since its launch, Ethereum has maintained its spot as the second-largest cryptocurrency by market capitalization.

In 2022, Ethereum's transition to proof-of-stake, previously known as Ethereum 2.0, was renamed to The Merge. This transition aimed to significantly reduce ETH issuance, dubbed the "triple halving", which would reduce ETH issuance by 90%.

The Merge merged the existing proof-of-work Ethereum mainnet with the Beacon Chain, a proof-of-stake chain. This merge formed the new proof-of-stake Ethereum, consisting of a consensus layer and an execution layer.

The consensus layer synchronizes the chain state across the network, while the execution layer handles transactions and block production. This change is expected to reduce Ethereum's annual energy consumption from 112 TWh/yr to only 0.01 TWh/yr, a 99.9% drop.

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In an effort to provide a more accurate version of the Ethereum roadmap, the Ethereum Foundation removed the "Ethereum 2.0" terminology in January 2022. The previously-referred-to terms of "Ethereum 1.0" were branded the "execution layer", while "Ethereum 2.0" will be called the "consensus layer."

Ethereum's roadmap for future plans includes four primary categories: cheaper transactions, extra security, better user experiences, and future-proofing. These changes aim to address issues with current rollups, prepare for future attacks, improve support for smart contracts, and proactively solve problems that have yet to present themselves.

Here are the four primary categories of Ethereum's roadmap for future plans:

The DAO Hack was a major crisis for the Ethereum community in 2016. It involved a security breach that allowed a hacker to drain $50 million from a venture fund called the DAO.

The DAO had collected $150 million in startup capital through a crowdfunding campaign, making it a tempting target for hackers. The hacker exploited a loophole in the DAO's business structure to funnel the money into a new account.

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The Ethereum developers were faced with a difficult decision: whether to let the hack stand or to intervene and restore the stolen funds. Some in the community argued that altering the blockchain's history would violate the decentralization principles of Ethereum.

After a long deliberation and vote, the developers decided to change the blockchain records and restore the stolen funds to the DAO investors. This decision resulted in a split within the Ethereum community.

Blockchain technology is a method of using cryptographic fundamentals to link blocks of digital records kept on a group of computers, with thousands typically involved. Each computer contains a complete record of all transactions, making the system resilient even if one computer fails.

The blockchain network is decentralized, with no governing authority controlling it, and its records are open to the public, promoting transparent recordkeeping. This transparency helps people trust the system.

Each new transaction undergoes an in-depth mathematical verification process, using cryptographic principles to prevent records from being forged or altered. In theory, anyone trying to maliciously alter a record would have to alter every occurrence of that record on every computer in the world participating on that network.

Here's a breakdown of the key components of the Ethereum blockchain:

Ethereum's blockchain technology is used to validate blocks, with miners using their computational power and resources to get the appropriate hash value by varying the nonce. The miners will vary the nonce and pass it through a hashing algorithm, producing a hash value that should be less than the predefined target as per the proof-of-work consensus.

A "killer" in the blockchain world refers to a competing blockchain that aims to surpass or replace an existing one, particularly Ethereum.

These competitors have capitalized on Ethereum's limitations, such as slow and expensive transactions, to offer cheaper and faster alternatives.

The term "Ethereum Killer" emerged around 2016/2017 as substitute blockchains like Cardano entered the scene.

In 2018, EOS made its debut as the next "Ethereum killer", raising $4.1 billion from investors, the highest amount an ICO had ever generated.

Several other blockchains, including Tezos, Solana, Fantom, Avalanche, and Binance Smart Chain, have also been referred to as possible Ethereum killers.

Each of these blockchains uses a different consensus model to tackle Ethereum's proof-of-work (PoW) limitations, such as Solana's proof-of-history (PoH) and Binance Smart Chain's proof-of-authority (PoA) and delegated proof-of-stake (DPoS).

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Blockchain technology is a method of using cryptographic fundamentals to link blocks of digital records kept on a group of computers. Each computer contains a complete record of all transactions, making the system highly secure and resistant to failure.

A decentralized system, blockchain technology has no governing authority controlling the network, allowing for transparent recordkeeping and public access to the network's records. This transparency is key to building trust in the system.

The records on a blockchain network are encrypted and cannot be forged or altered. Each new transaction undergoes a rigorous mathematical verification process, making it virtually impossible to maliciously alter a record.

In fact, to alter a record, one would have to change every occurrence of that record on every computer in the world participating on that network – an almost impossible task.

Here are the key components of a blockchain network:

Miners on the Ethereum network work to validate blocks by using computational power and resources to get the appropriate hash value by varying the nonce. The miners will vary the nonce and pass it through a hashing algorithm, producing a hash value that should be less than the predefined target as per the proof-of-work consensus.

Smart contracts are revolutionizing traditional contracts by facilitating the exchange of any asset between two parties. They're essentially simple computer programs that operate on the Ethereum network, allowing anyone to create, execute, and verify transactions.

A smart contract's primary feature is that once it's executed, it cannot be altered, and any transaction done on top of it is registered permanently. This immutability ensures that transactions are secure and trustworthy.

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Smart contracts can create a new digital asset known as a token, which can be used as digital currency in connection with an application. The Ethereum blockchain hosts an unlimited number of digital currencies, such as Tether USD (USDT) and ChainLink.

Here are some key features of smart contracts:

Decentralized Applications (DApps) are software designed to work in the Ethereum network without being controlled by a centralized system. They provide direct interaction between end-users and decentralized application providers, and are open-source, using a public blockchain-based token to run their applications.

Smart contracts are computer programs that facilitate the exchange of assets between two parties, and they're a key component of decentralized applications (DApps). They're essentially self-executing contracts with the terms and conditions mutually agreed upon between the parties.

A smart contract is a simple program that can be created by anyone on the Ethereum network, and it's primarily made up of the terms and conditions agreed upon between the parties. The contract is immutable, meaning it can't be altered once it's executed.

The verification process for smart contracts is carried out by anonymous parties in the network without the need for a centralized authority, making the execution of smart contracts on Ethereum a decentralized process. This ensures a transparent and trustworthy transfer of assets or currency.

In traditional contract systems, you sign an agreement and then trust and hire a third party for its execution, but with smart contracts, the agreement is coded in a program. A centralized authority doesn't verify the result; it's confirmed by the participants on the Ethereum blockchain-based network.

Here are the key features of smart contracts:

Smart contracts can be used for a wide range of applications, from simple transactions to complex business agreements. They offer a secure, transparent, and efficient way to execute contracts, making them an essential component of DApps.

Name Service is essentially the Web3 version of DNS, short for domain name service. It's a distributed and extensible naming system based on the Ethereum blockchain.

A cryptocurrency address can be a long string of numbers and letters, like "0xDC25EF3F5B8A186998338A2ADA83795FBA2D695E". ENS provides a solution by assigning human-readable names to machine-readable identifiers.

ENS assigns names like "Alice.eth" to machine-readable addresses, making it easier to receive cryptocurrencies or NFTs. This can help prevent confusion and loss of funds.

ENS is based on two Ethereum smart contracts: the ENS registry and the Resolver. The ENS registry records the owner of the domain, the resolver, and the caching time for all records under the domain.

ENS supports not only .eth names but also popular DNS names like .com, .org, .io, and .app.

Non-Fungible Tokens are tokenized digital items created using Ethereum, giving one digital asset an identifying token with a private key that only the owner has access to.

These tokens can be traded or sold, and are a transaction on the blockchain, verified by the network and transferring ownership.

NFTs are being developed for various assets, such as sports tokens, also called fan tokens, which can be treated like trading cards.

Some NFTs are pictures that resemble a trading card, while others are videos of memorable or historic moments in an athlete's career.

The applications you may use in the metaverse, such as your wallet, a dApp, or the virtual world and buildings you visit, are likely to have been built on Ethereum.

The Ethereum network is secured through the Ethash proof-of-work algorithm, which belongs to the Keccak family of hash functions, as of August 2020.

However, plans are underway to transition to a proof-of-stake algorithm with the Ethereum 2.0 update.

You'll need 32 ETH to activate validator software and start staking on the Ethereum 2.0 network, which can earn you a return of 6% APR.

At the time of writing, this equates to around 1.91952 ETH, or $6960 in Ethereum price today.

Ethereum staking rewards are determined by a distribution curve, which will lower the rewards from 20% for early stakers to between 7% and 4.5% annually.

Your Ethereum stake will be locked up on the network for months, if not years, until the Ethereum 2.0 upgrade is completed.

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The Ethereum network is secured through the Ethash proof-of-work algorithm, which is part of the Keccak family of hash functions.

As of August 2020, Ethereum is secured via the Ethash proof-of-work algorithm, belonging to the Keccak family of hash functions. This means that the network is protected through complex mathematical calculations.

However, Ethereum is planning to transition to a proof-of-stake algorithm with the Ethereum 2.0 update. This update aims to make the network more secure and efficient.

The Ethereum 2.0 Beacon Chain went live in December 2020, allowing users to begin staking on the network. Staking requires a minimum of 32 ETH, which is currently worth around $116,029.

Ethereum staking rewards are determined by a distribution curve, and early stakers were rewarded at 20% annually. However, this rate will be lowered to between 7% and 4.5% annually.

Validators on the Ethereum 2.0 network earn a return of 6% APR, which equates to around 1.91952 ETH, or $6960 in Ethereum price today.

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To validate blocks, solo validators must stake 32 ETH to activate their validation ability.

Individuals can stake smaller amounts of ETH, but they are required to join a validation pool and share any rewards.

Validators create a new block and attest that the information is valid in a process called attestation.

The block is broadcast to other validators called a committee, which verifies it and votes for its validity.

Dishonest validators are punished by having their staked ETH burned and removed from the network.

Validators who act dishonestly are punished under proof-of-stake, which flags the blocks to accept and reject based on the validators' votes.

A validator creates a new block and attests that the information is valid in a process called attestation.

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There are approximately 117.5 million Ethereum coins in circulation.

The genesis block, the first ever block on the Ethereum blockchain, issued 72 million ETH coins, which were allocated to the initial contributors to the 2014 crowd sale that funded the project, and the development fund.

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12 million of the genesis block ETH coins were given to the development fund.

The remaining amount has been issued in the form of block rewards to the miners on the Ethereum network.

The original reward in 2015 was 5 ETH per block, which later went down to 3 ETH in late 2017 and then to 2 ETH in early 2019.

The average time it takes to mine an Ethereum block is around 13-15 seconds.

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Ethereum is a unique cryptocurrency platform that allows outside developers to create their own applications, unlike Ripple which has an exclusive network devoted to its own services.

Many other cryptocurrencies run on the Ethereum platform, including some of the most widely circulated currencies on the crypto market. Ethereum's open-door policy has made it a popular choice for entrepreneurs.

Ethereum's transition to the proof-of-stake protocol has added capacity to the network, helping to address chronic network congestion problems that have driven up gas fees. This upgrade also enabled users to validate transactions and mint new ETH based on their ether holdings.

Ethereum has an open-door policy to developers, unlike Ripple, which is an exclusive network devoted to its own services.

Many other cryptocurrencies run on the Ethereum platform, including some of the most widely circulated currencies on the crypto market.

Ripple doesn't have the same multi-purpose software platform as Ethereum, which allows developers to create their own applications.

Tether's value is linked to the value of fiat currencies, making it a stablecoin that aims to reduce volatility in crypto prices.

Ideally, a tether coin would always be worth the equivalent of $1, but its value can fluctuate like other cryptocurrencies.

The Ethereum platform has been used by many entrepreneurs to launch their own cryptocurrencies, creating a diverse range of altcoins.

People often confuse Ethereum with its native currency, ether, but they're actually two different things - Ethereum is the network, and ether is the currency.

Ethereum and Bitcoin are two of the most well-known cryptocurrencies, but they have some key differences.

Ethereum was created in 2015, while Bitcoin was first released in 2009. Ethereum's primary creator is Vitalik Buterin and Gavin Wood, whereas Bitcoin's creator is unknown.

The purpose of Ethereum is to be a decentralized platform for developers, whereas Bitcoin is a digital monetary system. Ethereum has a market cap rank of 2nd, while Bitcoin is ranked 1st.

Ethereum's currency is called ether, and there is no limit to the number of ether that can be created. In contrast, Bitcoin's coin limit is 21 million.

Ethereum is known for its fast transaction speed, while Bitcoin's is relatively slow. Additionally, Ethereum is home to other currencies, whereas Bitcoin is not.

Here's a comparison of Ethereum and Bitcoin's features:

Ethereum uses a proof-of-stake consensus mechanism, whereas Bitcoin uses the energy-intensive proof-of-work consensus.

Ethereum's transition to proof-of-stake protocol has enabled users to validate transactions and mint new ETH based on their ether holdings.

This upgrade has added capacity to the Ethereum network, which will eventually help address chronic network congestion problems.

The Ethereum platform now has two layers: the execution layer, where transactions and validations occur, and the consensus layer, where attestations and the consensus chain are maintained.

Danksharding, a scalability solution, will process transactions off-chain, roll them up using data availability sampling, and post them to the main chain via BLOBs.

This approach is expected to greatly reduce costs and increase transaction processing speeds.