What is Ethereum?

Bitcoin remains the largest cryptocurrency by market capitalization, but Ethereum holds the second spot. 

However, unlike Bitcoin – which primarily serves as digital money – Ethereum is much more than just a cryptocurrency. It’s a decentralized platform that powers a wide range of applications and services. 

Understanding Ethereum 

In 2013, Vitalik Buterin, a programmer and co-founder of Bitcoin Magazine, released the Ethereum whitepaper, outlining its technology, concept, and goals. He was later joined by several other co-founders and, in 2015, Ethereum officially launched as an open, decentralized network. 

Ethereum expands blockchain technology beyond cryptocurrency, serving as the foundation for thousands of applications, from decentralized finance (DeFi) services to blockchain-based games. According to Electric Capital’s Developer Report, Ethereum has the highest developer activity across every continent. 

The Ethereum Foundation describes the network as “a worldwide system, an open-source platform to write computer code that stores and automates digital databases using smart contracts, without relying upon a central intermediary, solving trust with cryptographic techniques.”

Unlike traditional networks, Ethereum is not owned by any single entity. It’s maintained by a global community of users and organizations. 

Smart contracts

Ethereum enables decentralized applications (DApps) through smart contracts, which are self-executing computer programs that run when predefined conditions are met. These contracts work on an “if this, then that” basis, ensuring secure and transparent transactions without intermediaries. 

Like traditional contracts, smart contracts outline agreement terms. However, unlike conventional contracts, they execute automatically, doing away with the need for banks or other middlemen.

Smart contracts are designed to be secure and reliable, with the added assurance that they cannot be deleted – though vulnerabilities can still occur.

Ethereum 2.0: From PoW to PoS

Ethereum originally used a Proof of Work (PoW) system, similar to Bitcoin, where miners used powerful computers to solve complex puzzles and validate transactions. However, this method was energy intensive and required specialized computers. 

In 2022, Ethereum transitioned to Proof of Stake (PoS) through an upgrade known as The Merge. Instead of mining, PoS allows users to validate transactions by locking up, or staking, their holdings. This shift drastically reduced Ethereum’s energy consumption and improved its scalability, marking the beginning of Ethereum 2.0.

The upgrade aimed to reduce energy consumption and enhance scalability, positioning Ethereum for wider use.

The future of Ethereum 

Ethereum powers a diverse array of decentralized applications, enabling innovation across finance, gaming, and more. As its ecosystem evolves, it’s set to unlock new possibilities and shape the future of blockchain technology.