Ethereum is a decentralised open-source blockchain system that features its own cryptocurrency, Ether. ETH works as a platform for numerous other cryptocurrencies, as well as for the execution of decentralised smart contracts. Ethereum supports smart contracts in which developers can write code in order to program digital value. Examples of decentralised apps (dapps) that are built on Ethereum include token, non-fungible tokens, decentralised finance apps, lending protocol, decentralised exchanges, and much more.
When was Ethereum created?
Ethereum was first described in a 2013 whitepaper by Vitalik Buterin. Buterin, along with other co-founders, secured funding for the project in an online public crowd sale in the summer of 2014. The project team managed to raise $18.3 million in Bitcoin, and Ethereum’s price in the Initial Coin Offering (ICO) was $0.311, with over 60 million Ether sold. Taking Ethereum’s price now, this puts the return on investment (ROI) at an annualised rate of over 270%, essentially almost quadrupling your investment every year since the summer of 2014.
The Ethereum Foundation officially launched the blockchain on July 30, 2015, under the prototype codenamed “Frontier.” Since then, there has been several network updates — “Constantinople” on Feb. 28, 2019, “Istanbul” on Dec. 8, 2019, “Muir Glacier” on Jan. 2, 2020, “Berlin” on April 14, 2021, and most recently on Aug. 5, 2021, the “London” hard fork.
What is Ethereum’s goal?
Ethereum’s own purported goal is to become a global platform for decentralized applications, allowing users from all over the world to write and run software that is resistant to censorship, downtime and fraud.
Who created Ethereum?
Ethereum has a total of eight co-founders — an unusually large number for a crypto project. They first met on June 7, 2014, in Zug, Switzerland.
- Russian-Canadian Vitalik Buterin is perhaps the best known of the bunch. He authored the original white paper that first described Ethereum in 2013 and still works on improving the platform to this day. Prior to ETH, Buterin co-founded and wrote for the Bitcoin Magazine news website.
- British programmer Gavin Wood is arguably the second most important co-founder of ETH, as he coded the first technical implementation of Ethereum in the C++ programming language, proposed Ethereum’s native programming language Solidity and was the first chief technology officer of the Ethereum Foundation. Before Ethereum, Wood was a research scientist at Microsoft. Afterward, he moved on to establish the Web3 Foundation.
Among the other co-founders of Ethereum are:
- Anthony Di Iorio, who underwrote the project during its early stage of development.
- Charles Hoskinson, who played the principal role in establishing the Swiss-based Ethereum Foundation and its legal framework.
- Mihai Alisie, who provided assistance in establishing the Ethereum Foundation.
- Joseph Lubin, a Canadian entrepreneur, who, like Di Iorio, has helped fund Ethereum during its early days, and later founded an incubator for startups based on ETH called ConsenSys.
- Amir Chetrit, who helped co-found Ethereum but stepped away from it early into the development.
What is Ether?
While Ethereum refers to the blockchain network. The native currency that flows within the Ethereum economy is called Ether (ETH). Ether is typically used to pay for transaction fees called Gas, and it is the base currency of the network.
What is Ethereum Gas Fees?
On Ethereum, all transactions and smart contract executions require a small fee to be paid. This fee is called Gas. In technical terms, Gas refers to the unit of measure on the amount of computational effort required to execute an operation or a smart contract. The more complex the execution operation is, the more gas is required to fulfill that operation. Gas fees are paid entirely in ETH.
The price of gas can fluctuate from time to time depending on the network demand. If there are more people interacting on the Ethereum blockchain such as transacting in ETH or executing a smart contract operation, due to the limited amount of computing resources on the network, Gas price can increase. Conversely when the network is under utilised, the market price of gas would decrease.
What is Ethereum London Hard Fork?
The Ethereum network has been plagued with high transaction fees, often buckling at seasons of high demand. In May 2021, the average transaction fee of the network peaked at $71.72.
In addition to the high cost of transactions, the leading altcoin also suffers from scalability issues.
As already mentioned, there are plans to transition to a proof-of-stake algorithm in order to boost the platform’s scalability and add a number of new features. The development team has already begun the transition process to ETH 2.0, implementing some upgrades along the way, including the London hard fork.
The London upgrade went live in August 2021. It included five Ethereum Improvement Proposals (EIPs), namely EIP-3529, EIP-3198, EIP-3541, and most notably EIP-1559 and EIP-3554.
EIP-1559 is arguably the most popular upgrade out of all the EIPs.
What Is EIP-1559?
The EIP-1559 upgrade introduces a mechanism that changes the way gas fees are estimated on the Ethereum blockchain. Before the upgrade, users had to participate in an open auction for their transactions to be picked up by a miner. This process is known as a “first-price auction,” and as expected, the highest bidder wins.
With EIP-1559, this process is handled by an automated bidding system, and there is a set “base fee” for transactions to be included in the next block. This fee varies based on how congested the network is. Furthermore, users who wish to speed up their transactions can pay a “priority fee” to a miner for faster inclusion.
EIP-1559 also introduces a fee-burning mechanism. A part of every transaction fee (the base fee) is burned and removed out of circulation. This is intended to lower the circulating supply of Ether and potentially increase the value of the token over time.
Interestingly, less than two months after the London upgrade was implemented, the network had burned over $1 billion worth of Ether.
What is a Smart Contract?
A smart contract is a programmable contract that allows two counterparties to set conditions of a transaction without needing to trust another third party for the execution.
For example, if Alice wants to set up a trust fund to pay Bob $100 at the start of each month for the next 12 months, she can program a smart contract to:
Check the current date
At the start of each month, send Bob $100 automatically
Repeat until the fund in the smart contract is exhausted
Using a smart contract, Alice has bypassed the need to have a trusted third-party intermediary (lawyers, escrow agents etc) to send the trust fund to Bob and made the process transparent to all involved parties.
Smart contracts work on the “if this, then that” principle. Whenever a certain condition is fulfilled, the smart contract will carry out the operation as programmed.
What are the programming languages that are used to write smart contracts on Ethereum?
There are two popular programming languages that are typically used to write Ethereum smart contracts. The first one is called Solidity which has very close similarities to Javascript and C++. The other language is called Vyper which is relatively new that has very close similarities to Python.
