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What is Ethereum?
The main purpose of Ethereum was to offer a new and innovative solutions to combat the limitations of the Bitcoin network. ETH is famous for its well-developed smart contracts and ERC20 tokens, providing the option to utilize assets or find financial support for your projects. Currently, there are more than 100 million Ether coins in circulation without any upper limit.
Advantages
Ethereum is commonly referred to not only as a cryptocurrency but also as a platform. That is due to the fact that it enables the creation of decentralized apps (dApps) and smart contracts on the basis of its blockchain. Further benefits include:
- High speed transactions (14-15 seconds block time)
- Proof of work mining consensus provides high security
- It is completely decentralized and immutable
Disadvantages
At this stage, Ethereum is not perfect and has some drawbacks. One of the main negatives is that the network faces a serious scaling problem due to the ever-increasing network difficulty.
- Unlimited supply of coins – devalues the currency long-term
- Proof of work consensus is extremely inefficient as it consumes a lot of electricity
History and Evolution
Developed in late 2013 by Vitalik Buterin and his companions Mihai Alisie, Anthony Di Iorio, and Charles Hoskinson, it was released to the public in January 2014. With the assistance of the Swiss company GmbH and the Ethereum foundation, this project was presented as an innovative and unique platform. Currently, a new development is underway, that aims to overcome the ineffectiveness and lack of scalability of the Proof of Work consensus. For the time being, to increase network security, a measure to keep block times stable has been introduced, alongside reducing the reward.
Ethereum Blockchain
Further improving upon the immutability and security of Bitcoin’s blockchain, Ethereum has introduced unique features such as smart contracts and orphaned block rewards. Users have the option to design rulesets to control payments when Ethereum’s platform is used for any project funding and furthermore, even orphaned blocks that are delivered after a block is found, receive a small number of funds for their efforts, thus increasing miners’ incentive. Block times are kept low – roughly 14 seconds, to increase transaction output and block size is at 90KB. As previously mentioned, the consensus algorithm used currently is Proof of Work, which has participants try to solve cryptographic puzzles based on the Ethash hashing algorithm. In turn, new coins are issued as a reward. The difficulty of mining is adjusted based on the time required for previous block completion.
Ethereum Nodes
Every user in the network capable of sending and receiving transactions is called a node. There are several types of different responsibilities:
- Full nodes – users download the whole blockchain on their computers, i.e. the entire history of the coin, to assist the miners in their daily tasks, they keep the integrity of the chain
- Light nodes – basically clients that operate on the network without having a local copy of the chain. They communicate to full nodes to be able to keep up-to-date and validate blocks
Smart Contracts
A smart contract is a protocol capable of facilitating, verifying or creating an arrangement between parties. In other words, it’s a self-executing contract with strictly coded rules of agreement. It provides the possibility to conduct complex transactions negotiated in advance. They serve as governing rules for the implementation of the ERC-20 tokens in the Ethereum blockchain.
Forks or Tokens based on ETH
Ethereum originates from Bitcoin, however, it is not a hard-fork and was separately designed. On the other hand, there are a lot of coins that are forked from ETH. The most popular one is the DAO issue, which I’ve covered in detail later in the article. At that moment is when the split to ETH and ETC happened.
Hard forks
- Frontier: forked at block 1
- Frontier Thawing: forked at block 200000
- Homestead: forked at block 1150000
- DAO Fork: forked at block 1920000
- EIP-150 Hard Fork: forked at block 2463000
- Spurious Dragon: forked at block 2675000
- Byzantium: forked at block 4370000
Here is the list of the most popular ERC-20 tokens
- Binance Coin (BNB)
- VeChain (VEN)
- OmiseGO (OMG)
- 0x Token (ZRX)
- Maker (MKR)
How to get Ethereum
The ETH coins are ones of the most popular and they also have high market cap thus you can find this cryptocurrency for sale on almost every exchange platform. Another option would be to mine it, if you’d like to invest in hardware for the job.
Where to Buy ETH
Below you will find the top 3 options to buy Ethereum coins with fiat currency:
| Exchange | Cryptocurrencies | Fiat Money | |
|---|---|---|---|
|
bitfinex
|
Ethereum, Bitcoin, Ripple + 50 more | USD, EUR, GBP | Trade now |
|
Conbase Pro
|
Ethereum, Litecoin, 0x + 2 more | USD, EUR, GBP | Trade now |
|
Kraken
|
Ethereum, Zcash, Monero + 13 more | USD, EUR, GBP, JPY | Trade now |
Mining Ethereum
As mentioned earlier one of the ways to obtain ether is by mining it. It can be mined with a GPU rig consisting of a computer with usually 6 to 8 graphics cards. Alternatively, you can use an Applications Specific Integrated Circuit (ASIC) which are specially designed for mining. ASICs are devices with huge computing power, restricted to serve only one algorithm but considered to be most efficient nowadays. Before choosing one you must be advised that both options accumulate serious amount of electricity, heat and noise. The best mining gear that I can recommend is the Innosilicon A10 ETHMaster ASIC machine or Nvidia GTX 1080ti video card, both are showing serious potential in the mining field. If you would like to know more about How to Mine Ethereum, I’ve got you covered.
Wallets for Ethereum
To enter the crypto world, you must have a wallet to be able to safe-keep, trade or stake your funds. You can always go ahead with the official Ethereum desktop wallet which is compatible with Windows, Linux, and Mac. Here are the links you will need to set it up:
- Setup Guide: – https://github.com/ethereum/mist/wiki
Alternative Wallets
You may consider exploring different options and go ahead with other wallets which provide better features. Some offer support for multiple coins, others – a mobile version for easier access. If you are planning to invest hugely I will recommend getting a hardware one as it has no network access and should be considered the safest option for your funds. Popular wallets on the market:
Web/Online Wallets
Mobile Wallets
Hardware Wallets
Staking Ethereum
In the future of Ethereum, potentially in the year 2019, we can expect changes which would transition ETH to from Proof of Work to a consensus algorithm that will allow staking. For now, the coin is not stakeable.
Network Security
It is a common opinion that one of the safest networks in the crypto sphere is that of Ethereum. Its architecture with smart contracts and the inherent benefits of the blockchain create a fast and secure environment for transactions of funds, creating projects etc. Of course, nothing is perfect, and ETH has had its security breached – the event known as the DAO hack. The Decentralized Autonomous Organization (DAO) is a capital fund structure where users can invest their money and make decisions as a community to support future development of the network. Due to a security bug, a malicious attacker managed to gain access to the DAO wallet and drain a part of the capital. A hard fork occurred so the blockchain could be reversed to a prior moment, but part of the community disagreed. As a result, the original Ethereum chain was renamed Ethereum Classic and the new chain that had the effects reversed is called Ethereum (ETH).
Future of the ETH Cryptocurrency
Despite past events, the Ethereum cryptocurrency continues to be one of the top coins on the market providing exclusive features and a clear roadmap for their future improvements. After the release of the latest update “Constantinople” in 2018, the improvements of which I explored above, the next is scheduled for 2019 and it’s called “Serenity”. That will be the major change of the mining consensus to Proof of Stake. The roadmap until 2021 is available on the official website.
News and Useful Links
I hope you found this Ethereum review helpful. If you are looking for more information about ETH and would like to keep up with the latest news, I can recommend reputable sources: