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.
Ethereum’s whitepaper was published in November 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).
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 in order 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 up the ledger into smaller bits to spread the load of validating transactions.
ETH Token Utility
Ethereum’s native cryptocurrency is ether (ETH). ETH has no maximum supply, however, following its transition to PoS, ETH could become deflationary.
ETH is the economic incentive that’s used for rewarding miners who validate transactions on the blockchain, similar to Bitcoin mining. Once Ethereum transitions to PoS, ETH will be used as the reward for users staking their ETH to help secure the network.
ETH has several use cases:
- 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 miners or stakers to secure and validate the blockchain. Without ETH, there’s no incentive for users to secure the chain.
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