The second most well-known cryptocurrency started by Vitalik Buterin in 2013, and released in 2015. It is an open-source blockchain platform that utilizes smart contracts and decentralized applications, called DApps. It has played a crucial role in the development of decentralized finance (DeFi) due to its enabling of the creation of a wide range of financial services without needing a traditional intermediary.
Key features
- Smart Contracts: Ethereum introduced the concept of smart contracts, which are self-executing contracts with the terms of the agreement directly written into code. Smart contracts automatically execute and enforce the agreed-upon terms when predefined conditions are met.
- Ether (ETH): Ether is the native cryptocurrency of the Ethereum platform. It is used to compensate participants who perform computations and validate transactions on the network (miners), as well as to pay for transaction fees and computational services.
- Decentralized Applications (DApps): Ethereum allows developers to create decentralized applications (DApps) on its platform. These applications can range from decentralized finance (DeFi) applications to gaming, supply chain management, and more.
- Decentralized Autonomous Organizations (DAOs): Ethereum enables the creation of DAOs, which are organizations governed by smart contracts and operated by code rather than centralized authorities. DAOs can be used for decentralized governance and decision-making.
- ERC-20 Tokens: Ethereum introduced the ERC-20 token standard, which has become the most widely used standard for creating and issuing fungible tokens on the Ethereum blockchain. Many Initial Coin Offerings (ICOs) and token sales are conducted using ERC-20 tokens.
- Ethereum 2.0 (Eth2): Beginning as a Proof-of-Work protocol where you needed major computing power to mine ETH, similar to how Bitcoin is run, Ethereum underwent a major upgrade known as Ethereum 2.0, or Eth2. It transitioned Ehereum to a proof-of-stake (PoS) consensus mechanism, which means no more huge power consumption. This upgrade aims to improve scalability, security, and sustainability.
- ETH holders can now ‘stake’ their coins to earn yield on their crypto instead of it being an idle asset that sits in a wallet.
- Gas Fees: Transactions and computational operations on the Ethereum network require fees known as gas. Gas fees are paid in Ether and are determined by the computational complexity and demand for resources on the network.
- During times when the Ethereum network is very busy, gas fees can be incredibly high, which is the major knock on Ethereum. It could cost you $50 to send $50 worth of ETH.
- Interoperability: Ethereum is designed to be interoperable with other blockchains, and efforts are made to create bridges and standards that allow assets to move seamlessly between different blockchain networks.
