What is Ethereum?
Ethereum is an open-source, public, peer-to-peer, blockchain-based distributed computing platform and operating system.
Vitalik Buterin created Ethereum in 2014 to design a platform on which smart contracts can be built and run.
Objective of Ethereum
Today is the world of the internet. Though the internet has modernised the present technology, there are some hidden downsides of it.
Your personal data, password, and other financial confidential information are stored on other people’s computers and servers. Storing this information, the companies offer a number of conveniences. However, along with this convenience comes vulnerability. That is, a hacker can gain access to your files without your consent, and as a result, steal, leak or alter important information.
Ethereum is a technology which primarily strives to achieve the goal of protecting user’s data. While Bitcoin aims to take over the PayPal and online banking, Ethereum has the goal of using a blockchain to disrupt the internet third parties (the ones who store data, transfer mortgages and keep track of financial instruments).
To sum it up, Ethereum wants to be a ‘World Computer’ which can decentralise or democratise the existing client-server model. Ethereum is referred to as a ‘World Computer’ because it is believed that the servers and clouds would be replaced by thousands of “nodes” run by volunteers all across the world.
Introduction to Ether
We know that Ethereum aims to function like a decentralised internet or a decentralised app store. But, the system that provides the functionality cannot be obtained for free. Hence, it needs something called “ether,” a unique chunk of code that can be used for paying for the computational resources and run the Ethereum-based application or program.
So, Ether is a digital asset just like Bitcoin, that doesn’t require a third-party to process & approve a transaction. Bitcoin operates as a digital currency where people can make usual transactions; while Ether, on the other hand, is used to “fuel” the decentralised apps on the Ethereum network.
Well, let us cement the concept of Ether by considering an example. In a decentralised online notebook, you need to pay a transaction fee in Ether, to post, delete or modify a note. And, once you make the payment, the updates/changes will be reflected on your account.
Moreover, the transaction fee is also referred to as “digital oil” or “gas”. So, basically, every action in the application requires some amount of gas (Ether) to process.
Ether Market cap and volume
Ether is traded in the exchange market with the symbol ETH. Its current market price is $229.75 and has a 24-hour trading volume of $ 10,005,302,354. Also, the market size of Ether is $ 24,675,883,677.
What is a Smart Contract?
A smart contract is just a simple phrase used to describe a computer code that facilitates the exchange of money, content, property or anything that holds value. If we were to consider the working of smart contracts in a blockchain network, it acts like a self-operating program that executes automatically when some specific conditions are met. And, since we’re dealing with blockchain, the code is programmed such that it there is no possibility of censorship, fraud or third-party interface.
How Ethereum Works: The Ethereum Blockchain
A blockchain network consists of multiple nodes which belong to miners. However, some nodes are not involved in mining. And these nodes help in the execution of smart contracts and transactions. And, these are known as Ethereum Virtual Machines (EVMs). Every node in the network is connected to each other, which use a peer-to-peer protocol to communicate.
Each miner maintains a copy of the ledger. The ledger contains all blocks in the chain. Due to multiple miners, there is a possibility that each ledger’s instance might have different blocks than others. So, the miners synchronise their blocks such that every miner’s ledger instance is the same as the others.
The EVM hosts the Smart contracts, which help in extending Ethereum by writing a unique functionality into it. Finally, these smart contracts can be executed as part of the transaction in a similar fashion, as mentioned above in the process of mining.
Investors’ perspective on Ethereum
If we were to talk about the past; for many, investing in Ethereum has proven to be an excellent decision. Back at the beginning of 2017, the price of one Ether was just $30. And, in a year, the price dramatically jumped to $750. So, basically, in one-year-period, the value of Ether rose 2500% or 25times.
Why invest in Ethereum?
Ethereum still has the potential to generate good returns if you have a long-term perspective on it.
Below are the factors which prove that ETH is an exceptional long-term investment.
The growth of Ether
The entire cryptocurrency industry is still pretty young. So, as this industry grows, so will Ethereum industry. Ether is one of the few coins that is used by Initial Coin Offerings (ICOs), which means that it behaves as a launchpad for other new tokens to be launched. Hence, this makes Ethereum a valuable platform for many communities.
Moreover, ETH is one of the most used cryptocurrencies for purchasing and for making payments. So, as the technology grows, ETH will undoubtedly be one of the top coins people will use to transact.
Improvement to its blockchain
As the present technology is progressively developing, Ethereum too has plans for improvement in the future. And, this success can cause the ETH price to go up.
Though new blockchains are being developed, the Ethereum blockchain is still maintaining grounds. Also, since many people are already using this blockchain, it is building more trust compared to other blockchains.
The Proof-of-Stake Technology update
Bitcoin and Ethereum are presently using the Proof-of-Work(POW) system to validate the transactions. However, Ethereum has got plans to top up their system to the Proof-of-Stake(POS) system.
POW requires a large amount of electricity and computing power. But, the POS system is both energy and cost-efficient. So, if Ethereum manages to implement this system, then its demand would increase, and as a result, its value would also rise.
Bitcoin is not the only cryptocurrency which has the potential to disrupt the present technology. Ethereum too, has got its unique features, which can help dominate the cryptocurrency space.
Investing in Ethereum has made the earliest investors quite a lot of money, although some lost money as well. Well, one must understand that the cryptocurrency market is just like the other markets, i.e., the prices rise and fall always. The only difference, it is a little more volatile compared to other markets. So, if you are willing to invest in Ethereum, you must be strong enough to hold your investment irrespective of the time, because this industry can generate good returns only if you have a long-term outlook.