Founded in 2014 and launched in 2015, Ethereum is an open-source, blockchain-based, decentralized software platform used for its own cryptocurrency, ether. It enables Smart Contracts and Distributed Applications (DApps) to be built and run without any downtime, fraud, control, or interference from a third party. Ethereum is not just a platform but also a programming language (Turing complete) running on a blockchain, helping developers to build and publish distributed applications. The Ethereum Virtual Machine (EVM) can execute scripts and run decentralized applications. Ethereum is used in decentralized finance (DeFi), Non-foungible Token (NFT ) and other fields, and provides a platform for token issuance (ERC-20 standardized tokens) and contract execution for a large number of decentralized projects.
Ethereum was proposed in 2013 by programmer Vitalik Buterin. Development was crowdfunded in 2014, and the network went live on 30 July 2015, with 72 million coins pre-mined.
In 2016, a hacker exploited a flaw in a third-party project called The DAO and stole $50 million of Ether. As a result, the Ethereum community voted to hard fork the blockchain to reverse the theft and Ethereum Classic (ETC) continued as the original chain. Ethereum has started implementing a series of upgrades called Ethereum 2.0, which includes a transition to proof of stake and an increase in transaction throughput using sharding.
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ETH is the native cryptocurrency of Ethereum. When a user sends ETH or uses an application running on Ethereum, the user is required to pay a small amount of ETH as a fee for using the network, this fee is called a gas fee. This fee is an incentive for miners to process and validate the actions that users want to perform. Ethereum miners are the key to ensuring the safe operation of Ethereum. Their job is to provide data records for Ethereum, that is, the work of generating blocks. Miners who do this work will also be rewarded with a small amount of newly issued ETH.
In 2022, Ethereum plans to switch to proof-of-stake with its Ethereum 2.0 update. This switch has been in the Ethereum roadmap since the network's inception and would see a new consensus mechanism, as well as introduce sharding as a scaling solution. The current Ethereum chain will become the Beacon Chain and serve as a settlement layer for smart contract interactions on other chains. In late 2021, Ethereum's Arrow Glacier update was delayed to June 2022. Until then, Vitalik Buterin expects the road to the network's endgame to be shaped by optimistic rollups and Zk-rollups.
Ethereum was conceived by Vitalik Buterin in his introductory paper while founded by a group of people. Vitalik Buterin, Anthony Di Iorio, Charles Hoskinson, Mihai Alisie and Amir Chetrit are the initial 5 founders in 2013. Joseph Lubin, Gavin Wood and Jeffrey Wilcke joined the founder team in 2014.
Ethereum was created after Buterin failed to reach an agreement on the future of Colored Coins project, an open-source protocol built on the Bitcoin 2.0, with its core members in 2013. With the hope to benefit more applications and attach real-world assets, he proposed to create a new platform with a Turing-complete programming language, which becomes Ethereum later on.
Buterin proposed that Ethereum should proceed as a non-profit project in 2014 when the founders met in Zug, Switzerland. Then Hoskinson left and established IOHK and Cardano in 2015.
The formal software development started in 2014 via a Swiss company, Ethereum Switzerland GmbH. The technical definition of the Ethereum protocol was published in the Yellow Paper by Gavin Wood. Soon afterwards, the Ethereum Foundation was built and the development was founded by an online public crowd. In 2015, the first live release of the Ethereum network "Frontier" was published, which marked the official launch of Ethereum.
Ethereum can run code across a distributed system. As such, programs can’t be tampered with by external parties. They’re added to Ethereum’s database (i.e., the blockchain), and can be programmed so that the code can’t be edited. In addition, the database is visible to everyone, so users can audit code before interacting with it.What this means is that anyone, anywhere, can launch applications that can’t be taken offline. More interestingly, because its native unit – ether – stores value, these applications can set conditions on how value is transferred. We call the programs that make up applications smart contracts. In most cases, they can be set to operate without human intervention.
Understandably, the idea of “programmable money” has captivated users, developers, and businesses around the globe.
ERC-20 is a technical standard used to issue and implement tokens on the Ethereum blockchain. It was proposed in November 2015 by Ethereum developer Fabian Vogelsteller. The standard describes a common set of rules that should be followed for a token to function properly within the Ethereum ecosystem. Therefore, ERC-20 should not be considered as a piece of code or software. Instead, it may be described as a technical guideline or specification.The ERC-20 standard makes it easier for developers to predict with more accuracy the interaction between different tokens and applications. It also defines how ERC-20 tokens are transferred within the Ethereum blockchain and how their respective supply and address balances are being consistently recorded. In other terms, the ERC-20 gives developers a list of rules to follow, which enables seamless functioning within the larger Ethereum platform. Numerous decentralized applications (DApps) and services support ERC-20 tokens, making it easier for community members and businesses to adopt and use them on a wide range of applications (such as cryptocurrency wallets, decentralized exchanges, games, and so forth).
There are several ERC20-compliant tokens deployed on the Ethereum blockchain, but with distinct and unique implementations. Depending on the approach, the tokens can be used to represent various kinds of digital assets or tradable goods (such as coins, vouchers, gold certificates, loyalty points, and IOUs). Additionally, ERC-20 tokens may be used as a mean to tokenize voting rights during elections.The ERC-20 standard reduced significantly the efforts required to create and issue a digital token, and this is probably related to the raising interest in ICO crowdfunding events and blockchain technology as a whole. Several projects are already using the technical standard, and the number of ERC-20 token contracts has grown drastically in the last couple of years. Although the majority of tokens on the Ethereum network follow the ERC-20 standard, there are some exceptions. Ether (ETH), for instance, was created before the standard and does not comply with it yet. This led to the creation of the so-called Wrapped Ether (WETH) - which is an ERC-20 token that represents Ether at a 1:1 ratio (1 WETH = 1 ETH). WETH allows users to trade their ETH to other ERC-20 tokens on decentralized exchanges.
Technically, the ERC-20 standard describes six functions that maintain some functionalities and features of Ethereum-based digital tokens. These functions include the way tokens are transferred between addresses and some important data related to the token smart contract, such as symbol, name, and supply.
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 from 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.