Ethereum

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Discover Ethereum's fundamentals and latest news.

This content was generated by Whalee (BETA), an AI crypto assitant that analyses cryptocurrencies. Informations can be incomplete and/or erroneous. Please always double check and DYOR.

What is Ethereum?

Ethereum is a decentralized blockchain platform that enables the creation and execution of smart contracts and decentralized applications (dApps). It uses its native cryptocurrency, Ether (ETH), to facilitate transactions and computational resources on the network. Ethereum is designed to be scalable, programmable, secure, and decentralized, making it a foundation for various emerging technological advances based on blockchain technology.

How is Ethereum used?

Ethereum (ETH) is used in various ways, primarily as a digital currency and as a fuel for the Ethereum network. Here are some key uses:

  1. Digital Currency: Ether can be used as a peer-to-peer digital currency for financial transactions, similar to Bitcoin. It can be used to buy and sell goods and services at participating merchants and retailers.

  2. Transaction Fees: Ether is used to pay transaction fees on the Ethereum network. These fees cover the costs of running the network, including electricity and hardware for nodes, and act as an incentive for people to contribute their computer systems as nodes.

  3. Smart Contracts: Ether is used to execute smart contracts, which are self-executing agreements that automate specific actions when conditions are met. These contracts are used in various applications, including decentralized finance (DeFi), gaming, and governance.

  1. Decentralized Applications (dApps): Ether is used to power dApps, which are applications that run on the Ethereum blockchain. These applications can store and transfer personal data or manage complex financial transactions.

  2. Investment: Ether can be traded and held as an investment, similar to other cryptocurrencies. Its market value can be checked on cryptocurrency exchanges and financial platforms.

  3. Collateral: Ether is used as collateral by network validators to secure the Ethereum network.

Overall, Ether plays a crucial role in facilitating transactions, executing smart contracts, and powering decentralized applications on the Ethereum network.

How do I store Ethereum?

To store Ethereum (ETH) tokens securely, consider the following methods:

  1. Hardware Wallets: Use a hardware wallet like Trezor or Ledger to store your ETH tokens. These wallets are offline, password or PIN protected, and require physical access to access the funds. Ensure you buy directly from the manufacturer to avoid potential tampering.

  2. Paper Wallets: Create a paper wallet by printing your private keys on paper. This method is accessible but may be fragile and susceptible to physical damage.

  3. Browser Extensions: Utilize browser extensions like MetaMask to store ETH tokens. These extensions store private keys encrypted on your browser and require a password for access.

  1. Cold Storage: Use cold storage options like Ledger Nano, which can be integrated with Web3 wallets, providing secure storage and access to a variety of Web3 applications.

  2. External Owned Accounts (EOAs): Store ETH using an EOA, which is a pair of public and private keys. This method is basic and requires no fees to create.

  3. Multi-Chain Wallets: Use multi-chain wallets that support ETH, allowing you to send and receive tokens securely.

  1. Web3 Wallets: Utilize Web3 wallets like Wigwam, which provide secure storage and direct access to decentralized applications (dApps).

Remember to always prioritize security by using strong passwords, keeping your private keys safe, and avoiding untrusted sources.

How to buy Ethereum?

To buy Ethereum (ETH) tokens, follow these steps:

  1. Choose a Reputable Trading Platform: Select a trusted and regulated exchange, such as Coinbase, Kraken, or Binance, that offers Ethereum trading. Consider factors like security measures, jurisdictional restrictions, and reputation when making your choice.

  2. Create an Account and Verify Your Identity: Sign up for an account on the chosen exchange and provide the required personal information and identification documents. This process may take a few hours to a few days, depending on the exchange.

  3. Deposit Currency: Fund your account using a preferred method, such as bank transfers, debit cards, or wire transfers. Be aware of any associated fees and potential cash advance implications if using credit cards.

  1. Make Your Ethereum Purchase: Navigate to the exchange's buying interface, enter the amount you want to purchase, and select Ethereum (ETH) as the asset. Confirm your purchase and ensure you understand any fees involved.

  2. Withdraw and Store Your Ethereum: For enhanced security, transfer your Ethereum to a cold wallet, which is an offline device that keeps your private keys away from the internet. This minimizes the risk of theft or loss.

Remember to consider the risks involved with cryptocurrency investments and ensure you understand the fees and processes associated with your chosen exchange.

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History of Ethereum

Ethereum (ETH) is an open-source, public blockchain that enables smart contracts and cryptocurrency trading without the involvement of a middleman. The concept of Ethereum was first introduced by Vitalik Buterin in a white paper published in November 2013. The project gained awareness in early 2014 when Buterin presented the idea at a Bitcoin conference in Miami, Florida. The Ethereum blockchain was written in the Solidity programming language, and a nonprofit entity, the Ethereum Foundation, oversees the project.

Early Development and Launch

The Ethereum project raised capital via an initial coin offering (ICO) in 2014, selling millions of dollars worth of ETH in exchange for funds to use for the development of the project. Between July 22 and September 2, 2014, the asset sale sold over $18 million worth of ETH, paid for in Bitcoin. Although ETH coins were purchasable in 2014, the Ethereum blockchain did not actually go live until July 30, 2015, meaning ETH buyers had to wait for the blockchain to launch before they could move or use their ETH.

Key Upgrades and Hard Forks

Ethereum has undergone several significant upgrades and hard forks. The first major hard fork occurred in 2016 following the DAO attack, where 3.6 million ETH were stolen due to a vulnerability in the DAO's code. This incident led to a controversial decision to perform a hard fork, resulting in the creation of two separate chains: Ethereum and Ethereum Classic.

Other notable upgrades include the Beacon Chain upgrade in 2022, which marked Ethereum's transition from a proof-of-work to a proof-of-stake consensus mechanism. This major upgrade was designed to make the network more secure, scalable, and energy-efficient.

Current Status

Today, Ethereum is a dominant cryptocurrency with a significant role in the decentralized finance (DeFi) ecosystem. It has the second-largest market capitalization after Bitcoin and is widely used for decentralized applications (dApps) and smart contracts. Ethereum continues to evolve with ongoing upgrades and improvements aimed at enhancing its usability, security, and decentralization.

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How Ethereum works

Ethereum is a decentralized blockchain network powered by the Ether token. It allows users to make transactions, earn interest on their Ether, and create decentralized applications (dApps) and smart contracts. Here's how it works:

Decentralized Network

Ethereum exists on thousands of computers worldwide, known as nodes, rather than a centralized server. This makes the network highly immune to attacks and ensures that it cannot be shut down. Each node holds a copy of the Ethereum Virtual Machine (EVM), which is a single decentralized system that runs a computer. Any interactions on the network must be verified so that every node can update its copy of the EVM.

Transactions and Blocks

Network interactions are considered transactions and are stored within blocks on the Ethereum blockchain. Miners validate these blocks before committing them to the network, acting as a digital ledger. Each block has a unique 64-digit code identifying it. Miners commit their computer power to find that code, proving that it’s unique. Their computer power is the "proof" of that work, and miners are rewarded in Ether for their efforts.

Gas Fees

Each transaction comes with a fee, called "gas," which is paid by the user initiating the transaction. This fee is paid to the miner who validates the transaction, incentivizing future mining and ensuring network security. Gas serves as a limit, restricting the number of actions a user can make per transaction, and prevents network spam.

Proof-of-Stake (PoS) Consensus

Ethereum has transitioned from a proof-of-work (PoW) consensus method to a proof-of-stake (PoS) method. In PoS, owners validate transactions and earn rewards in the form of Ether coins. This change has made Ethereum more environmentally friendly and scalable.

Smart Contracts

Ethereum allows for the creation and execution of smart contracts, which are computer programs that execute when triggered by a transaction from a user. These contracts make Ethereum very flexible in what it can do and are used in various applications such as lending apps, decentralized trading exchanges, insurance, and NFTs.

Ether

Ether is the native cryptocurrency of Ethereum and is used to pay for certain activities on the network. It can be transferred to other users or used to pay for gas fees. Ether is issued in a precise manner according to the protocol, only to stakers who secure the network.

Ethereum 2.0

Ethereum 2.0 is an upgrade to the network that aims to improve scalability and sustainability. It includes the transition to a proof-of-stake consensus method, which has significantly reduced the network's energy consumption.

Overall, Ethereum is a decentralized platform that enables various applications and functions beyond just being a digital currency. It offers a range of innovative solutions, including smart contracts, decentralized apps, and non-fungible tokens, making it a significant player in the world of blockchain technology.

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Ethereum's strengths

Ethereum (ETH) has several strengths that make it an attractive platform for developers and users:

  • Decentralisation: Ethereum's network is highly decentralised, with a low technological requirement to become a validator, making it less dependent on any one validator. This results in a more robust and secure network.
  • Security: Ethereum's high hashrate makes it extremely difficult to hack the blockchain, and ill-intentioned validators are subject to punishment, further disincentivising malicious activity.
  • Ecosystem: Ethereum is home to the most sophisticated DeFi ecosystem, hosting renowned brands such as Maker, Uniswap, and AAVE, and continues to grow.
  • Large and Robust Network: Ethereum has a well-established and tested network with a global community, making it an attractive platform for developers and users.
  • Programmability: Ethereum's programmability attracts a large community of developers who seek new ways to improve the network and build applications.
  • High Liquidity: Ethereum is the second-largest cryptocurrency by market cap, with high liquidity thanks to its compatibility with a growing list of cryptocurrency exchanges, trading platforms, and brokerages.
  • Continuous Innovation: Ethereum's large community of developers is constantly exploring new ways to improve the network and develop new applications.
  • Versatile Functions: Ethereum can be used as a digital currency, process financial transactions, execute smart contracts, and store data for third-party applications.
  • Eliminating Intermediaries: Ethereum's decentralized network promises to let users bypass intermediaries, such as lawyers who write and interpret contracts, banks that act as intermediaries in financial transactions, or third-party web hosting services.

Ethereum's risks

Ethereum (ETH) faces several risks that investors should be aware of:

  1. High Volatility: Ethereum's value can fluctuate significantly in a short period, leading to potential losses for investors.

  2. Competition from Other Blockchains: Other blockchains like Solana and Binance Smart Chain offer similar services with lower fees, which could attract developers and users away from Ethereum, reducing its demand and price.

  3. Security Threats: Smart contract vulnerabilities can lead to significant losses. While Ethereum has measures to combat these threats, investors should be cautious and take steps to secure their wallets and transactions.

  1. High Gas Fees: Network congestion on the Ethereum blockchain results in high gas fees, which can drive investors to cheaper alternatives, potentially reducing the price of ETH.

  2. Regulatory Concerns: The legal status and regulations surrounding Ethereum can impact its price. Uncertainty and potential bans in various countries can negatively affect the asset's value.

  3. Complexity: Ethereum's frequent hard forks and ongoing code changes introduce technical risks and smart contract risks. This complexity can lead to network disruptions and make it challenging for investors to trust the system's resiliency.

  1. Restaking Risks: The growing restaking market, particularly through protocols like EigenLayer, can bring hidden risks due to nontransparent staking strategies and potential dislocations from underlying assets. This could lead to additional financial and security risks.

  2. Correlation Risks: The correlation risks related to ETH staking are poorly understood and need to be mitigated to maintain the network's security.

These risks highlight the importance of careful consideration and ongoing monitoring for investors looking to invest in Ethereum.

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Did Ethereum raise funds?

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Ethereum’s team

  • Vitalik Buterin: Co-founder of Ethereum, prominent figure in blockchain and cryptocurrency, and leader of Ethereum’s research team.
  • Mihai Alisie: Co-founder, instrumental in establishing the Ethereum Foundation in Switzerland, and previously vice president of the Ethereum Foundation.
  • Anthony Di Iorio: Co-founder, financial sponsor, and founder of Decentral, the company behind Jaxx digital wallet.
  • Amir Chetrit: Co-founder, previously involved with Colored Coins, and stepped down from active involvement in 2014.
  • Charles Hoskinson: Co-founder, currently involved in other blockchain projects.
  • Gavin Wood: Co-founder, contributed to the development of Ethereum.
  • Jeffrey Wilcke: Co-founder, implemented Ethereum using the Go programming language, and currently focuses on game development.
  • Joe Lubin: Co-founder, involved in the early stages of Ethereum.
  • Ming Chan: Executive Director of the Ethereum Foundation, overseeing the next phase of blockchain development.
  • Andrey: Co-founder, though less involved in the project.

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