Ethereum

Ethereum is a decentralized and open-source blockchain platform that comes with its own native cryptocurrency, Ether (ETH). It serves as a foundation for numerous other digital currencies and allows for the operation of decentralized smart contracts.

The concept of Ethereum was introduced in a whitepaper by Vitalik Buterin in 2013. Buterin, in collaboration with other co-founders, raised funds for Ethereum in an online public crowdsale during the summer of 2014. They amassed $18.3 million worth of Bitcoin, pricing Ethereum's initial coin offering (ICO) at $0.311, with over 60 million Ether sold. Considering Ethereum's current market value, this translates to an annualized return on investment of over 270%, which effectively means quadrupling the investment each year since that summer.

On July 30, 2015, the Ethereum Foundation officially launched the blockchain with a prototype version named "Frontier." Numerous upgrades have followed, including "Constantinople" on Feb. 28, 2019, "Istanbul" on Dec. 8, 2019, "Muir Glacier" on Jan. 2, 2020, "Berlin" on April 14, 2021, and the "London" hard fork on Aug. 5, 2021.

Ethereum aims to become a global platform for decentralized applications, enabling users worldwide to create and execute software that is immune to censorship, downtime, and fraud.

Ethereum was established by a unique group of eight co-founders, which is quite large for a crypto initiative. Their first gathering took place on June 7, 2014, in Zug, Switzerland.

* Vitalik Buterin, who is of Russian-Canadian descent, is perhaps the most prominent among them. He wrote the original white paper outlining Ethereum in 2013 and continues to work on its development. Before Ethereum, Buterin co-founded and contributed to Bitcoin Magazine.

* Gavin Wood from the UK is considered the second most significant co-founder. He implemented Ethereum's first technical version in C++ and proposed Solidity, Ethereum's programming language. He also served as the initial chief technology officer for the Ethereum Foundation. Previously, Wood was a research scientist at Microsoft and later founded the Web3 Foundation.

Other key figures include Anthony Di Iorio, who funded the project during its nascent stages; Charles Hoskinson, who was instrumental in setting up the Ethereum Foundation and its legal framework in Switzerland; Mihai Alisie, who supported the establishment of the Ethereum Foundation; Joseph Lubin, a Canadian entrepreneur who not only helped fund Ethereum but also launched ConsenSys, a startup incubator based on ETH; and Amir Chetrit, who co-founded Ethereum but distanced himself early on in its development.

Ethereum introduced the world to the blockchain smart contract platform. These smart contracts are self-executing programs that automatically carry out the terms of an agreement among parties online. They were created to minimize the reliance on trusted intermediaries among contractors, thereby cutting transaction costs and enhancing transaction reliability.

Ethereum's groundbreaking contribution was creating a platform that executes smart contracts using its blockchain, amplifying the advantages of this technology. According to co-founder Gavin Wood, Ethereum's blockchain was envisioned as a "single computer for the entire globe," theoretically capable of making any program more resilient, resistant to censorship, and less vulnerable to fraud by running it across a globally distributed network of public nodes.

Beyond smart contracts, Ethereum's blockchain supports hosting other cryptocurrencies, known as "tokens," using the ERC-20 compatibility standard. This feature has been widely utilized, with over 280,000 ERC-20-compliant tokens launched to date. More than 40 of these tokens are among the top 100 cryptocurrencies by market capitalization, such as USDT, LINK, and BNB. The rise of Play2Earn games has also spiked interest in the ETH to PHP exchange rate.

The Ethereum Name Service (ENS) is a decentralized, extensible naming system built on Ethereum's blockchain, akin to a Web3 version of the domain name service (DNS).

Typically, a cryptocurrency address is a lengthy string of alphanumeric characters designed for computer readability, such as "0xDC25EF3F5B8A186998338A2ADA83795FBA2D695E," which can often be confusing and occasionally lead to errors or loss of funds.

ENS addresses this challenge by converting these complex crypto addresses into user-friendly names. It associates human-readable names with machine-readable identifiers, like Ethereum addresses, metadata, other cryptocurrency addresses, and content hashes. For instance, it can replace a cumbersome address with something simple like "Alice.eth," allowing you to receive any cryptocurrency or NFT through your ENS domain.

ENS operates using two Ethereum smart contracts. The first, the ENS registry, maintains crucial information about a domain's owner, the domain's resolver, and caching time for records. The second contract, the Resolver, converts domain names into machine-readable addresses and vice versa.

Additionally, ENS is not limited to .eth names; it also supports popular DNS names such as .com, .org, .io, .app, and others.

Since its inception, Ethereum has held its position as the second-largest cryptocurrency by market capitalization. However, like any blockchain network, Ethereum has its limitations, notably high transaction fees and a relatively low throughput of 15 to 30 transactions per second.

Plans are underway to address these issues through a series of upgrades, but competitors have used this time to offer users blockchains with cheaper and faster transaction processing.

The term "Ethereum Killer" surfaced around 2016/2017 as emerging blockchains like Cardano began making their presence known in the crypto world. In 2018, EOS entered the scene as another contender, garnering a monumental $4.1 billion during its ICO. Other potential challengers, such as Tezos, Solana, Fantom, Avalanche, and Binance Smart Chain, have since appeared.

These blockchain rivals utilize various consensus mechanisms to overcome the limitations posed by Ethereum's proof-of-work model. For example, Solana employs proof-of-history (PoH), while Binance Smart Chain combines proof-of-authority (PoA) with delegated proof-of-stake (DPoS).

Despite their innovations, none have succeeded in dethroning Ethereum as the second-largest cryptocurrency by market cap. Furthermore, Ethereum remains the leading blockchain for NFT trading.

The EIP-1559 upgrade brought significant changes to how gas fees are estimated on the Ethereum blockchain. Before this upgrade, users engaged in an open auction process, known as a "first-price auction," to have their transactions processed by miners, with the highest bidder winning.

EIP-1559 introduced an automated bidding system that set a "base fee" for transactions to be included in the next block. This base fee fluctuates according to network congestion levels. Additionally, users eager to expedite their transactions can pay a "priority fee" to incentivize miners for quicker processing.

A notable change with EIP-1559 is the fee-burning mechanism, where a portion of the transaction fee (the base fee) is permanently removed from circulation. This aims to decrease the overall supply of Ether, potentially increasing its value over time.

Remarkably, within two months of the London upgrade's activation, the network had already burned over $1 billion in Ether.

As of September 2021, approximately 117.5 million ETH coins were circulating, with the initial block, or genesis block, issuing 72 million of them. Of those, 60 million were allocated to early contributors from the 2014 crowd sale that funded the project, while 12 million went to the development fund.

The remaining ETH has been distributed as block rewards to miners on the Ethereum network. In 2015, the reward was initially set at 5 ETH per block, which later decreased to 3 ETH in 2017 and then to 2 ETH in 2019. The typical time to mine an Ethereum block is about 13 to 15 seconds.

The London hard fork in August 2021 included the Ethereum Improvement Proposal, EIP-1559, which replaced the first-price auction system with a "base fee" model for transaction inclusion in the next block. Users can pay a "tip" or "priority fee" to prioritize their transactions. This system helps stabilize Ethereum gas fees' volatility, even if it doesn't lower the notoriously high prices during periods of heavy network traffic.

Unlike Bitcoin, Ethereum's economic model is not deflationary; its total supply isn't capped. This is because developers did not want a "fixed security budget" for the network. By allowing for adjustments in ETH issuance through consensus, Ethereum can maintain essential issuance levels for adequate security.

However, with EIP-1559, the base fees from transactions are burned, effectively reducing ETH in circulation. As activity on the network rises, more ETH is burned, which could lead to a reduction in supply and a potential increase in Ethereum's market value. This possibility of Ethereum becoming deflationary excites ETH holders, anticipating an upward trend in Ethereum's price.

As of August 2020, Ethereum's security relies on the Ethash proof-of-work algorithm, part of the Keccak family of hash functions.

There are plans, however, to shift the network to a proof-of-stake algorithm as part of the Ethereum 2.0 upgrade, which began rolling out in late 2020.

With the launch of Ethereum 2.0's Beacon Chain (Phase 0) in early December 2020, staking on the network became possible. Staking involves depositing ETH (a minimum of 32 ETH is needed) into the Ethereum 2.0 deposit contract to activate validator software, which then helps secure the network by storing data, processing transactions, and adding new blocks to the blockchain. By mid-September 2021, the cost of 32 ETH was approximately $116,029, with Ethereum validators earning an annual return of 6% APR, which equals about 1.91952 ETH or $6,960 at that time. These figures will change as the network evolves and more validators join.

Ethereum staking rewards are determined by a distribution curve based on the participation and average percentage of stakers, with initial rewards for early stakers at 20%, expected to stabilize between 7% and 4.5% annually.

The minimum requirement for staking in Ethereum 2.0 is 32 ETH. Choosing to stake means your Ethereum will be locked up for an extended period, possibly months or years, until the Ethereum 2.0 upgrade is fully completed.

As the second-most prominent cryptocurrency after Bitcoin, Ethereum is readily available for purchase and trading across almost all major crypto exchanges. Some of the most significant platforms include:

* Binance
* Coinbase Pro
* OKEx
* Kraken
* Huobi Global

Common trading pairs for Ethereum include ETH/USD, ETH/GBP, ETH/AUD, and ETH/JPY.