About Ethereum (ETH)weiss-badge

Overview

Launched in 2015, Ethereum is a decentralized software based on blockchain technology with its own cryptocurrency that goes by the name 'Ether.' It is an open-source computing platform, an entirely decentralized fintech solution with several applications like smart contracts, distributed applications, and more. All transactions and operations that can be carried over the Ethereum platform are decentralized and independent of third-party control or interference. Ethereum is currently the second most popular blockchain-based solution with the highest valuation standing next only to Bitcoin. The current market cap of ether is estimated to be more than $206 bn.

History

Ethereum was first proposed in 2013 by Vitalik Buterin, the co-founder of the Ethereum platform, as an alternative to Bitcoin that went beyond the usual financial use cases. He published a white paper describing the general idea and a sample implementation of how Ethereum could be a blockchain-based technology with broader application scope. The project soon took off with a crowdsourcing campaign funded by selling Ether, which raised more than $18 million. And soon, the very first version of Ethereum, known as Frontier, was launched in 2015. Frontier went live with 72 million coins pre-mined. Ethereum since then has had its fair share of high and low moments with fluctuating prices and security incidents. But it is relatively a young and growing platform and is definitely shaping up to be a better alternative to Bitcoin and possibly overtake in the future. A newer version of Ethereum under Ethereum 2.0 is under development and will include advanced features like proof of stake and enhanced transaction performance.

Team

The Ethereum open-source platform is currently maintained by the Ethereum Foundation. The Ethereum foundation comprises 15 experts from various spaces like programming and blockchain research, including the founder, Vitalik Buterin.

Technology

The idea behind Ethereum is to eliminate the need for intermediaries and instead make use of smart contracts to enforce the rules regarding a transaction. For instance, when you make a payment online, you either go through payment services like PayPal or a banking payment gateway. In these cases, you will have to supply your data and financial information to a central server owned by the payment facilitator. But with Ethereum, smart contracts will take over the functionality of the payment gateways and allow you to transact assets without sharing your personal details. This ensures security as well as privacy. Thus, helping you decentralize a wide variety of applications beyond the financial space as well. Smart contracts are pieces of code that, upon execution, will carry out a particular set of actions agreed upon by the two parties involved without the interference of any other third party. It provides a secure and anonymous way for anyone to implement binding digital contracts on any operation or asset. There is no downtime involved, no censorship, and no need for any intermediaries. Ethereum aims to give back control of user data to the users themselves rather than submit it to a third party service. The four technical building blocks of a smart contract are: Cryptographic tokens (Ether): Cryptographic tokens and addresses are mathematically secure unique identification systems used to identify any particular transaction, be it financial or digital assets transfer. Peer to Peer networking: Every cryptocurrency available in the market runs on peer-to-peer network systems. The buyers and sellers can directly connect without going through an intermediary like a bank or payment system. Ethereum users can also use the same principle and exchange tokens and carry out blockchain-based transactions over the internet without relying on any central server. Consensus algorithm: The Ethereum blockchain typically reaches a consensus for every 15 seconds in which a new block is added to the blockchain. The algorithm that defines the state updates and synchronization for reaching a consensus is called the consensus algorithm. Turing complete virtual machine: A Turing complete machine can solve any computational problem with reasonable computing resources. Unlike Bitcoin, Ethereum is a Turing complete and can understand and implement any smart contract that could be put into use in the future. How is new crypto minted? An Ethereum miner uses a high-tech computer, called a "mining rig" to solve complex mathematical problems, that exist only to be solved. With Ethereum 2.0, as previously stated, Ethereum mining will shift from "proof-of-work", or doing work just to prove that you can. The Ethereum protocol will move to "proof-of-stake", a much less energy-intensive process, where you just have to prove that you own some of the coin.

Future Focus

Ethereum is essentially called the World Computer as it is run by thousands of nodes managed by volunteers across the world. All apps built on the Ethereum platform will follow a decentralized architecture and come under the category of Dapps (Decentralized apps). Users will have to use Ether, the Ethereum currency, to make use of these apps. Ethereum is still an evolving technology and has several hurdles to overcome before enjoying a broader acceptance and adoption. The next major update from Ethereum will focus on the current issues like low scalability and low liquidity of Ethereum token. The Ethereum 2.0 version is expected to fix some of these issues with scaling technologies like Raiden. Scaling up will be the immediate focus and goal for the next 65 years. Some more crucial areas that Ethereum will continue to grow include, the cryptocurrency market that ought to narrow the gap between Ether and Bitcoin, and also be able to provide some form of interoperability.

A wallet is essentially a bank account for your cryptocurrency and the wallet address is like your account number. The sender of the cryptocurrency needs a wallet address so they have somewhere they can send it from their wallet, much like a bank transfer. This wallet is giving you access to the blockchain where you can view your balance, send and receive cryptocurrency.

For information please read our beginners guide to cryptocurrency wallets.

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Storing your coins with Wallets

A wallet is essentially a bank account for your cryptocurrency and the wallet address is like your account number. The sender of the cryptocurrency needs a wallet address so they have somewhere they can send it from their wallet, much like a bank transfer. This wallet is giving you access to the blockchain where you can view your balance, send and receive cryptocurrency.

For information please read our beginners guide to cryptocurrency wallets.

Pay with POLI. Its fast!

POLI - internet bankingPOLI is secure and fast. It links directly to your internet banking – login with your normal details and the rest is easy. No extra fees or surcharges. Watch this short video to see how it works.

About Bitcoin

Bitcoin (BTC) is a form of digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds. Transactions are stored on a distributed, immutable, online, public ledger known as a blockchain. Bitcoin was the first truly decentralised cryptocurrency which was created by a programmer under the pseudonym Satoshi Nakamoto and was released in 2009. The system is peer-to-peer, verified by network nodes and recorded in a public distributed ledger called the blockchain. Bitcoin can be exchanged for other currencies, products, and services with over 100,000 merchants and vendors accepting bitcoin as payment. Bitcoin can also be held as an investment. There are only a fixed number of Bitcoin will ever be mined (21 million), it’s not controlled by any one government or central bank, and there’s no such thing as quantitative easing or fractional reserve banking. These qualities make Bitcoin excellent as a store of value and a long-term safe-haven asset, similar to gold.

A Bitcoin success story that went viral on social media is Kristoffer Koch from Norway. Koch invested around $27 in Bitcoin in 2009 and then forgot about it for four years. He remembered about his Bitcoin wallet in 2013, which had then grown in value to $886,000.

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