What is Ethereum (ETH)?

By January 21, 2020 DApps
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In this article, you will learn the most important things about the cryptocurrency Ethereum.

History

The Ethereum mainnet was started in 2015. The biggest pioneers in the development of Ethereum were Vitalik Buterin, Gavin Wood and Jeffrey Wilke. The market capitalization grew very fast and it didn’t take too long that ETH was one of the biggest projects in the cryptocurrency space.

How does Ethereum work?

Ethereum started with the same consensus mechanism as Bitcoin did, the proof-of-work. But the project wants to shift to proof-of-stake. At Ethereum, this new protocol is named Casper. Unlike Bitcoin, Ethereum has a touring-complete virtual machine. This machine can be used to create impactful decentralized programs, better known as smart contracts. These programs are written down on the blockchain with transactions. The users then should be able to access the features of these programs via transactions. With this, the conditions of the program can be changed depending on the logic and situations.

The Ethereum is different from other cryptocurrencies. The Ethereum ecosystem includes various things such as:

  • smart contracts
  • Tokens
  • ICOs and STOs
  • CryptoKitties
  • Digital scarcity
  • Rewards.
  • Micro-tipping.
  • Decentralized finance.

Ethereum is decentralized. In other words, the Ethereum system is independent and not regulated by anyone. There is no case of failure at Ethereum as it is run by many people around the world. The ETH community is run by thousands of volunteers. This is the reason why Ethereum can never go offline. The entire Ethereum operation is a backed system of nodes. For example, the volunteers download the complete Ethereum blockchain on their machine and completely implement all the consensus protocols of the system. Due to this, the network reaches these measures and receives rewards for doing so.

Ethereum Accounts

In Ethereum, the event is created by objects known as “accounts”. Each account contains a 20-byte address. The state transitions are direct transfers between accounts. There are four fields in one Ethereum account:

  • The nonce. This is a counter which is used to make sure that every transaction is processed only once.
  • The current ether balance of the account
  • The contract code of account
  • The default account storage.

“Ether is the heart of the Ethereum. It is used to give transaction fees. In other words, there are two types of accounts: externally owned accounts that are managed by private keys, and contract accounts which are managed by their contract code. The difference between these two accounts is that an external account has no code. If someone wants to communicate or send a message then it can be done by creating and signing a transaction. In the case contract account, its code activates whenever it receives a message.

Ethereum is the first cryptocurrency project to bring a full virtual machine with it. This was the first time that the concept of smart contracts described by Nick Szabo in the 90s was realized.

Technical data for Ethereum

As mentioned earlier, Ethereum depends on the proof-of-work consensus mechanism. The block time (average time in which a block is found) is 15 seconds. The block size is dynamic. However, in the case of Bitcoin, the sum of the transaction data is defined as block size and the sum of gas that was allocated to the transactions. The native coin is called ether (ETH). Because of the disadvantages of proof-of-work, people are working on alternatives, such as the implementation of proof-of-stake and second-layer solutions such as sharding.

Are Ethereum coins Limited?

No, in the case of the Ethereum there is no limit. This is the reason why Bitcoin is known as digital gold but you can’t say the same thing about Ethereum. For more information, read this post

The ETH addresses are also not case sensitive. Ethereum addresses start with “0x” which is a standard identifier for the hexadecimal numeral system. It is concatenated with the almost 20 bytes of the hash of the public key.

What about the ethereum price?

As mentioned before Ethereum has a quite high market capitalization and is settled right after Bitcoin on rank #2 on the list of the biggest cryptocurrencies after market capitalization. In 2016 hackers exploited a security breach in the Ethereum code and carried off a huge amount of ETH. Then the blockchain was split into Ethereum and Ethereum Classic. This event led to a significant crash of the Ethereum price. With the ICO hype in 2017, Ethereum was able to counterbalance these losses and became the biggest ICO hoster in the crypto-space. One reason for this is for sure that ICOs can be held super easily with the smart contracts on Ethereum.

In January 2017 ether, the native coin of the Ethereum network, was traded around $8. Only one year later the ETH price reached its all-time high at $1432. Nowadays one ether can be bought for around $144.

Where to buy Ether?

CoinMarketCap has 400 trading pairs listed with ether. The coin can be bought on nearly every crypto exchange. For investors/traders living in the EU, trading pairs against the euro are attractive. Ether can be traded against EUR on Kraken, Bitfinex or Coinbase among several other exchanges. To get an overview of exchanges offering trading pairs against the euro, have a look at our exchange comparison.

Which wallets to use for ETH?

In addition to hardware wallets like the ledger or trezor, the web interface metamask can be recommended. Metamask is available as a browser plugin and can be used for the uncomplicated interaction with dApps. When making a transaction, the website creates it and then metamask signs it. As always in the crypto space: Look carefully that the download source of the software is trustworthy.

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