Ethereum is an open-source, decentralised computing infrastructure. It uses a global network of computers that are connected via a publicly distributed network called a blockchain.
Ethereum is best known for supporting smart contracts. Although Bitcoin supports smart contracts, Ethereum lets developers use them in a lot more ways to create decentralised applications (dapps).
For example, to create financial applications (i.e. DeFi), games, store value, NFTs or important digital assets. Think of Ethereum as the network or app store on which any developer can deploy an app.
History of Ethereum
Ethereum’s whitepaper was published in Nov. 2013 by computer programmer Vitalik Buterin. After being built by Buterin and other developers, the first Ethereum block was mined in July 2015. Ethereum went through a contentious hard fork in 2016 resulting in Ethereum Classic (the original, unaltered history of the Ethereum network).
The founding team raised roughly $18 million in a presale, where investors received ETH in return.
Ethereum is undergoing a major redesign and upgrades. This is to evolve Ethereum to solve scalability and congestion issues that have been plaguing the network to meet demand.
Often touted as ‘Ethereum 2.0’ (branding which has since been discontinued), it will be a series of core implementations to increase network capacity, cater to more transactions and improve efficiency. This is a continual process that will happen over the next couple of years.
These changes include:
- Moving from proof of work (PoW) to proof of stake (PoS).
- Embracing scaling solutions such as roll-ups to house the bulk of transactions—with the Ethereum base layer to become the settlement layer.
- Implement sharding—this essentially splits the ledger into smaller bits to spread the load of validating transactions.
ETH Token Utility
Ethereum’s native cryptocurrency is ether (ETH). Unlike cryptocurrencies like BTC, ETH has no maximum supply. In early 2023, the circulating supply is roughly 120 million ETH. The supply changes based on several factors, including network usage.
ETH is the economic incentive used to reward those who validate transactions on the blockchain. Other use cases for ETH are listed below.
- Transaction fees: ETH is required to send transactions or build applications. (See: What Is Gas on Ethereum?)
- Store of value: As ETH is an important resource to running the blockchain, many users may choose to buy and hold as ETH becomes more scarce and a required asset to buy for gas.
- Economic incentive: ETH is primarily the economic incentive for stakers to secure and validate the blockchain. Without ETH, there’s no incentive for users to secure the chain.
Some fun facts about ETH:
- Initially, the total supply was 72 million ETH, of which 5.9 million went to 83 early contributors and an equal amount went to the Ethereum Foundation.
- At least 636,000 ETH—roughly 0.5% of the circulating supply—is considered lost.
- As of the end of 2022, solo stakers were responsible for roughly 6.5% of actively staked ETH, according to a study by Rated in 2023.
- ETH is not an ERC-20 token. This is why wrapped ETH (WETH) exists.
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