What is Ethereum?
Ethereum is a decentralized blockchain that is open-sourced meaning anyone can build on to their blockchain. Check our previous blog on decentralization. Ethereum’s token is called “Ether (ETH)” use is called ether. Ethereum uses smart contract functions to create secure and legal oversight on transactions.
So… What are Smart Contracts?
Smart contracts are transaction protocols that create agreements within transactions on the blockchain. This basically means it’s just a digital contract, the predetermined conditions of the contract will be automatically executed within the bounds of the terms in the contract. All ethereum users own the public ledger that controls the transactions. A public ledger is a record keeping system between network participants that keeps identities secure. It’s referred to as public because all the transactions will be encoded into the blockchain. The process referred to as “mining” is the process of computers solving mathematical problems in order to confirm each transaction and build blocks that are added to the blockchain.
The open source refers to the users having complete access to the blockchain and thus are able to build onto it. Many new tokens have been created on the ethereum network. This blockchain enables programs and tokens to run on its network, just like a computer program runs on a computer. This ability is something that bitcoin does not have, bitcoin only serves as a currency, while ethereum has the ability to run systems and uphold tokens or smart contracts.what ethereum so valuable is that there is more value to it other than currency. The possibilities are quite literally, endless.
How does Ethereum compares to other cryptocurrencies?
Many new tokens gain their attention and therefore value based on online speculation or celebrity endorsement. Dogecoin anyone? These aren’t actually backed by any physical or virtual value, they only gain their value only due to popularity in purchases. Elon musk, anyone? While this can be good for day trading or short term investment, many alternatives coins do not provide secure long term investment and can be quite dangerous to trade.
They might only boom for a short time and when they have reached their height and drop, they might never come back up again. These cryptocurrencies are referred to as “shitcoins”. There is a disconnect between price and purpose, the purpose serves as a backer of the currencies and in the case for shitcoins there is nothing backing the currencies. Any cryptocurrency that is not bitcoin is usually referred to as an altcoin. So this included ethereum, monero, libra, litecoin, and more.
What is Ethereum 2.0?
Ethereum 2.0 is an upgrade to the ethereum blockchain, increasing the transaction ability, reducing fees and making the networks more sustainable.
Mining takes a huge amount of energy and therefore isn’t very energy efficient, this is why they want to improve their sustainability. The “London” update came out the first week of August, 2021. This includes protocol upgrades, one being EIP-1559. The previous mining incentive was that miners would receive a “first price auction” when validating transactions. Now with EIP-1559 the miners do not get the base fee anymore. This base fee is going to be used by the network. With Ethereum 2.0 proof of work will no longer be taking place, but rather proof of stake. Proof of stake refers to a validation process that is more energy efficient. The stakes will need a group of participants who are basically investing in the proofing process. Depending on the proportion of the stake you invest, you will receive new coins. Each staker will be rewarded with Ether and when the proof is done the network will update the completed transaction.
Basically this update would make it expensive for outside parties to interfere with the network, this makes it more secure from outside attacks. Another benefit is that the proof of stake is chosen by an algorithm and whichever computer is chosen, will be rewarded in currency for validating the transaction. With stake ownership is Ethereum moving in a more decentralized direction and making the interface more safe and easy to use or giving people with more Ether validator access unequal to participants with less Ether?
Written & photos by Rosalie Mosner.