Ethereum (ETH), introduced in 2015, is an open-source, peer-to-peer platform based on blockchain technology that allows the creation of smart contracts and dApps. Ether is its native coin, which is utilized to power its blockchain activities. As of December 22, 2021, it is the second biggest cryptocurrency behind Bitcoin (BTC), with a market cap of $474.15 billion.
Ethereum allows developers to design and create smart contracts and dApps without the danger of downtime, theft, or third-party intervention.
It differs from Bitcoin in that it is a programmable network that acts as a marketplace for financial services, NFTs, games, and apps that can all be purchased using ether money. It relied on proof-of-work consensus or mining, but ETH 2.0 upgrade will see it shift to proof-of-stake consensus.
Let's look at some of the pros and cons of Ethereum.
- Ethereum was the first blockchain to implement smart contracts. As a result, it is used by the vast majority of applications. According to State of the dApps, Ethereum's network hosts around 80% of DeFi apps and the TVL is $153.72 billion.
- Even though Ethereum was not the first blockchain, it has grown in popularity among developers to become one of the most widely used digital assets. Many people appreciate the Ethereum team, notably Vitalik Buterin and Ethereum's clear plan, which is one reason people trust it so much.
- Ethereum has a vast and active developer community all around the world. According to the Outlier Ventures report, Ethereum leads with 220 monthly active core developers on average. Malicious users will have a tougher time gaining control of the blockchain as a result of this. Popularity equals security in blockchain technology.
- Ethereum offers a diverse set of functionalities and is used to handle different forms of financial transactions, perform smart contracts, and store data for third-party apps in addition to being utilized as a digital currency.
- Thousands of nodes are used to power Ethereum, which are distributed all around the world. This safeguards the network against failure, assaults, and malicious collusion. This assures that the Ethereum platform is free of censorship and is not controlled by a single party. This is a significant feature of Ethereum, and it is one of the factors for its growing community.
- It's open-source, which means anybody may go through the code, find flaws, and ultimately enhance its functionality. Ethereum becomes more powerful, efficient, and secure as a result of this. Ethereum's decentralized and adaptable structure makes it perfect for long-term growth and expansion. Its versatility distinguishes it from other blockchains.
- Eth 2.0 is causing problems in the community. The switch to Ethereum has created controversy in the community, notably among miners. Miners' pricey setups will surely become obsolete as a result of the update, which they do not welcome. This has resulted in a quarrel between the miners and the community's developer site. Ethereum 2.0 is being released in stages, with the first, known as the Beacon Chain, having gone live on December 1, 2020. These updates are slow as compared to other blockchains (Solana for example).
- Congestion on the Ethereum platform elevated transaction costs to absurdly high levels in early 2021, prompting many projects to hunt for a new home with more steady transaction prices. YCharts shows the incredibly high transaction fees in 2021, with ridiculous spikes in May with the value peaking to 71.72 USD on May 19, 2021.
Building dApps is difficult due to uncertainty. Budgets get drained by such uncertainty.
- Ethereum makes use of the Solidity programming language, which might be challenging to grasp at first. One of the most significant issues is that beginner-friendly lessons are difficult to come by.
- Unlike Bitcoin, which serves a single purpose, Ethereum serves as a ledger, a platform for smart contracts which can lead to errors or system failures. While its versatility may be appealing, Ethereum must address scaling and network congestion challenges.
- In Ethereum, there are a variety of miners, although certain hubs have more computing power than others. This indicates that these individuals have hub centralization over the network. You never know whether their motives are genuine, even if they don't utilize this capacity to meddle with transactions or redirect payments. There's also a potential that these hubs will fail, putting the entire system at risk.
Projects on Ethereum
Ethereum's network is used by developers to "codify, decentralize, secure, and exchange just about anything," according to the company's website. Many projects are in the works to put the notion to the test.
Ethereum has an infrastructure that aids in creating distributed apps by developers. Microsoft's cooperation with ConsenSys, which offers Ethereum Blockchain as a Service on Microsoft Azure, enables developers and corporate clients to have a cloud-based solitary network developer ecosystem, is one of the key initiatives with Ethereum.
Ethereum has not only revolutionized the blockchain industry but has also aided the development of a variety of other businesses. For example, uPort is working on creating a universal ID that developers can use to log into various platforms. The ID would be an Ethereum address.
Polygon is a decentralized application ecosystem and Ethereum Layer 2 scaling solution that is widely used and expanding. Polygon addresses the drawbacks of blockchains, such as expensive gas prices and slow speeds, without compromising security.
Polygon essentially adds a few traffic lanes to Ethereum's heavily used Layer 1 highway. The Ethereum blockchain now houses the bulk of DeFi initiatives. As a result, lower Ethereum congestion implies quicker speeds and greater benefits for the DeFi ecosystem.
Uniswap is an Ethereum smart contract-based automated marketplace where developers, traders, and liquidity providers work together. According to its website, Uniswap gives superpowers for DeFi developers to build and gives them a quick start with their user guides.
A short glance at the State of the dApps website reveals the number of Ethereum projects in several categories, including NFTs, DeFi, Finance, and Games, etc., as well as their popularity. This website is a fantastic way to remain up to date on the latest dApps and the chart below shows the regular increase in the total dApps per month on Ethereum.
Although these Ethereum projects represent just a small portion of what is available, they will provide you with some insight into what others are doing with Ethereum.
The projects mentioned above are all based on Ethereum, even though they are highly diverse. Smart contracts running on the EVMs are used to carry out functionality. At the same time, the Ethereum blockchain records state data in each project.
Roadmap for the Future
The co-founder of Ethereum, Vitalik Buterin, has laid out what he considers is the roadmap for ETH 2.0. This update to the Ethereum blockchain pledges a more scalable, secure, and sustainable Ethereum. There are two key features of Ethereum 2.0:
- Sharding: Ethereum will be split into 18 "Shards" that will run at the same time. This will result in a significant increase in efficiency.
- Staking: Ethereum will switch to Proof-of-Stake Consensus, which is a far more energy-efficient way of network maintenance.
Buterin's latest blog article, titled "Endgame," discusses how the world's largest smart contract network can expand while maintaining high standards of trust and censorship protection.
On October 27, 2021, the first of several phases of the ETH 2.0 update, also known as the Altair Beacon Chain upgrade, occurred. Thanks to this latest update, it will switch from a Proof-of-Work (PoW) to a Proof-of-Stake (PoS) consensus mechanism.
Ethereum has carried on the momentum of Blockchain technology's innovation. The transition to a new, decentralized internet. Ethereum has opened up new, unprecedented pathways in the blockchain realm, expanding on the pioneer achievements of Bitcoin.
For starters, it has given a viable alternative to the challenges associated with a centralized internet. Second, it has broadened the scope of blockchain's practical, real-world applications. It has also freed the technology from the financial constraints that it faced during the Bitcoin era.
Ethereum's path has seen numerous setbacks. The fundamental difficulty impeding its mainstreaming is scalability. The team's zeal for finding innovative solutions is contagious. As a result, Ethereum 2.0 is on track to address the problem for good by 2022.
Overall, Ethereum appears to be a forerunner of the blockchain industry's bright future. Furthermore, other industries will very certainly profit as a result.