Monday, 17 June 2024

Ethereum (ETH) – The Second-Largest Cryptocurrency

16 Jun 2024
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Ethereum (ETH) - The second-largest cryptocurrency, known for its smart contract

Ethereum is the second-largest cryptocurrency based on market capitalization. Trailing only Bitcoin, Ethereum’s native cryptocurrency, Ether (ETH), has a market cap of around $380 billion (as of May 2024).

Conceptualized by Vitalik Buterin, a cryptocurrency visionary, Ethereum was crowdfunded in 2014. The project raised over 18 million USD in Bitcoin.

Launched in July 2015, Ethereum is the largest decentralized software platform. It enables developers to build and deploy smart contracts and decentralized applications (dApps) without interference.

Key Takeaways

  • Ethereum is the second-largest cryptocurrency by market capitalization, with a market cap of approximately $380 billion as of May 2024.
  • Ether (ETH) is the native cryptocurrency of the Ethereum network, used to fuel transactions, investments, and payments.
  • Ethereum enables the development of smart contracts and decentralized applications (dApps) on its open-ended platform.
  • Ethereum was conceptualized by Vitalik Buterin and launched in July 2015 after a successful crowdfunding campaign.
  • The Ethereum network has experienced significant growth and adoption, with major enterprises and financial institutions investing in the ecosystem.

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What is Ethereum?

Ethereum is a global platform for applications and money. Thousands of games and financial apps run on Ethereum’s blockchain.3 Launched in 2015, Ethereum’s cryptocurrency ether (ETH) is the second-largest by market value.3

Decentralized Computing Network

The Ethereum blockchain is decentralized and public. Transactions are verified and recorded here.4 Everyone on the network holds an identical ledger copy.4 Ethereum promises to eliminate intermediaries like banks.

Blockchain Technology

Ethereum utilizes blockchain to store and transfer data securely. It handles complex financial transactions too.4 In 2022, Ethereum switched from proof-of-work to proof-of-stake.4

Ether (ETH) – The Native Cryptocurrency

Ether (ETH) is Ethereum’s native token. It can buy goods, services, invest or store value.1 As of May 2024, ETH has around $380 billion market cap.1 It has seven denominations like Wei, Gwei, etc.3 Ethereum releases 18 million ETH yearly.4

Ether pays for running Ethereum Virtual Machine nodes, electricity and hardware.1 Investors speculate on ETH price via futures ETFs.1 SEC regulation changes in 2024 allowed spot Ethereum ETFs.1 These ETFs directly hold ETH, giving mainstream investors exposure.1

Buy ETH on Coinbase, Kraken etc using compatible wallets.1 Consult financial planners before investing due to crypto volatility.1 Use ETH to pay merchants or speculate using strategies.1 Ether and Ether products are susceptible to high volatility.1

Ethereum vs. Bitcoin

Bitcoin and Ethereum operate on blockchain technology and cryptography.5 However, they differ in many aspects.

Bitcoin aims to serve as a decentralized digital currency and store of value.5 Ethereum offers a versatile platform supporting digital currency, smart contracts, and decentralized applications (dApps).5

Purpose and Functionality

Bitcoin is a decentralized digital currency and store of value.5 Ethereum serves as a platform for smart contracts, dApps, and transactions.5

Ethereum’s versatility has driven its adoption and growth, including decentralized finance (DeFi), non-fungible tokens (NFTs), and dApps on its blockchain.5

Transaction Speed

Ethereum transactions are confirmed in seconds, while Bitcoin takes minutes.5 This is due to different consensus mechanisms: Bitcoin uses Proof of Work (PoW), while Ethereum transitioned to Proof of Stake (PoS) under Ethereum 2.0.6

Supply and Scarcity

Bitcoin has a capped supply of 21 million coins, enhancing scarcity for value preservation.6 Ethereum does not have a fixed supply limit, facilitating broader use in executing smart contracts and running DApps.6

The analysis shows technical, operational, and strategic differences shaping their distinct roles and impacts in cryptocurrencies and blockchain technology.6

Ethereum (ETH) – The second-largest cryptocurrency, known for its smart contract

Ethereum’s versatility supports a wide range of applications.3 This has driven its adoption and growth.3 Decentralized finance (DeFi), non-fungible tokens (NFTs), and decentralized applications (dApps) are developed on the Ethereum blockchain.

This robust ecosystem attracts developers, investors, and users.

Smart Contracts and Decentralized Applications (dApps)

The Ethereum Virtual Machine (EVM) allows developers to build and deploy smart contracts. Smart contracts are self-executing with coded terms.

The ability to create decentralized applications (dApps) has been key for Ethereum’s growth and adoption.

Ethereum Virtual Machine (EVM)

The EVM is crucial for the Ethereum network. It enables execution of smart contracts and development of decentralized applications.

This powerful technology revolutionizes how developers build blockchain-based solutions.

Proof-of-Work to Proof-of-Stake Transition

In September 2022, Ethereum transitioned from proof-of-work (PoW) to proof-of-stake (PoS).3 This improves security, energy efficiency, and scalability.2

Ethereum 2.0: The Serenity Upgrade

Ethereum 2.0, the Serenity upgrade, introduces significant improvements. The proof-of-stake consensus mechanism increases scalability by introducing shard chains.7 Shard chains distribute processing, improving overall efficiency.7

Improved Scalability

Shard chains in Ethereum 2.0 are game-changers for scalability. Splitting data into 64 shards processes transactions quicker and efficiently.7 Sharding aims to increase transactions per second to hundreds or thousands.7

Enhanced Network Efficiency

Ethereum 2.0’s proof-of-stake transition improves network efficiency. Shard chains work with the beacon chain to distribute loads.7 This efficiency enhances decentralized applications and smart contracts’ user experience.

Sustainability and Energy Efficiency

A significant Ethereum 2.0 benefit is improved sustainability and energy efficiency. Switching from proof-of-work to proof-of-stake reduces energy consumption by 99.95%.7 This transition aligns with global sustainability focus for blockchain technologies.

The Serenity upgrade positions Ethereum for growth and innovation. Enhancing scalability, efficiency, and sustainability makes Ethereum poised to become the dominant global blockchain platform.7

ethereum 2.0 upgrades

Applications and Use Cases

Ethereum supports diverse applications showcasing its versatility. Its impact areas include decentralized finance, non-fungible tokens, and identity solutions.

Decentralized Finance (DeFi)

In DeFi, Ethereum apps aim to replicate financial systems using blockchain. They offer transparent, immutable, cost-effective, and secure lending, borrowing, exchanges, and stablecoins.

These DeFi apps are accessible to anyone, irrespective of financial status.

Non-Fungible Tokens (NFTs)

Ethereum enables creating NFTs, unique digital assets representing ownership. It’s the top blockchain for minting and trading digital art, collectibles, and assets.

Identity and Authentication Solutions

Ethereum-based solutions provide decentralized identity and authentication services. Users control personal data through self-sovereign identity on Ethereum.

These applications showcase Ethereum’s power to transform industries. Leveraging transparency, security, and decentralization, Ethereum drives innovation and adoption across sectors.

Buying and Investing in Ethereum

Purchasing Ether (ETH), Ethereum’s native cryptocurrency, is relatively straightforward. Investors can buy Ether through cryptocurrency exchanges like Coinbase, Binance.US, and Kraken.1 They can also buy through online brokerages like Robinhood and SoFi.

To store Ether securely, users can transfer their coins to a digital wallet or a cold wallet not connected to the internet.1 Investors can consider investing in Ethereum-focused funds or companies building applications on the Ethereum network.

Ethereum’s market capitalization represents approximately 20% of the $1.1 trillion global crypto market.4 Coinbase charges 0.4% Maker Fee and 0.6% Taker Fee for trading ETH, offering over 200 tradable coins.4

New blocks validate on the Ethereum network every 12 seconds, compared to Bitcoin’s 10 minutes.4 While Bitcoin has a 21 million coin limit, Ethereum has no limit on potential Ether tokens.4

Ethereum 2.0 reduced the crypto’s carbon footprint by up to 99.9% by switching to proof of stake.4 The potential yearly Ether release is 18 million coins, with no lifetime limit.4

Ethereum transaction fees, known as “gas,” can fluctuate and be costly due to growing popularity.4 Ethereum 2.0 requires validators to stake cryptocurrency for transaction verification, eliminating miners.4

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Conclusion

Ethereum has emerged as a powerhouse, securing its position as the second-largest cryptocurrency. Its innovative blockchain platform supports a wide array of cutting-edge applications.8 From decentralized finance to non-fungible tokens, the Ethereum network has become a hub for pioneering blockchain-based technologies.9 The recent transition to Ethereum 2.0 has improved scalability, efficiency, and sustainability, positioning the network for continued growth.10

Ethereum’s versatility and range of supported applications have driven its adoption and expansion.8 The development of decentralized finance, non-fungible tokens, and decentralized applications on the Ethereum blockchain has created a thriving ecosystem.9 The Ethereum Virtual Machine allows developers to build and deploy smart contracts, self-executing contracts with code-written terms.8

The transition to Ethereum 2.0, the Serenity upgrade, introduced significant improvements.10 The new proof-of-stake consensus mechanism increased scalability by introducing shard chains, enabling thousands of transactions per second.910 Additionally, the switch to proof-of-stake reduced Ethereum’s energy consumption by approximately 99.95%, making the network more eco-friendly.10

FAQ

What is Ethereum?

Ethereum is a worldwide, decentralized platform for digital money and innovative apps. Thousands of games and financial apps run on Ethereum’s blockchain network. This blockchain is a decentralized public ledger where transactions get verified and recorded. Everyone on the network holds an identical copy of this ledger. Ether (ETH) is Ethereum’s native token, used for buying/selling, investing, or storing value.Ethereum differs from Bitcoin in several ways. Bitcoin aimed to be an alternative digital currency and store of value. Ethereum was developed as a versatile platform supporting digital currency, smart contracts, and decentralized apps (dApps). Ethereum’s transactions confirm in seconds versus minutes for Bitcoin. Ethereum uses proof-of-stake consensus, while Bitcoin uses proof-of-work.Ethereum’s versatility and wide range of supported apps have driven its adoption and growth. The development of decentralized finance (DeFi), non-fungible tokens (NFTs), and dApps on Ethereum has created a robust ecosystem attracting developers, investors, and users. The Ethereum Virtual Machine (EVM) allows developers to create and deploy smart contracts, which are self-executing coded contracts.

What is Ethereum 2.0 and how does it improve the network?

Ethereum 2.0, the Serenity upgrade, introduced major improvements. The new proof-of-stake (PoS) consensus increased scalability by adding shard chains, allowing thousands of transactions per second. Shard chains work with a beacon chain to distribute processing loads, boosting network efficiency. PoS also reduced Ethereum’s energy consumption by approximately 99.95%, making it more eco-friendly.

What are the main applications and use cases of Ethereum?

In decentralized finance (DeFi), Ethereum apps aim to replicate traditional financial systems using blockchain, offering lending, borrowing, decentralized exchanges, and stablecoins. Ethereum enables non-fungible tokens (NFTs) representing ownership of unique digital items like art and gaming assets. Ethereum solutions can also provide decentralized identity and authentication services, giving users control over personal data.

How can I buy and invest in Ethereum?

Purchasing Ether (ETH), Ethereum’s native cryptocurrency, is straightforward through exchanges like Coinbase, Binance.US, Kraken, or online brokerages like Robinhood and SoFi. Users can store Ether securely in digital or cold wallets. Additionally, investors can consider Ethereum-focused funds like Bitwise Ethereum Fund or Grayscale Ethereum Trust, or companies building Ethereum applications.

Source Links

  1. https://www.investopedia.com/tech/what-ether-it-same-ethereum/
  2. https://en.wikipedia.org/wiki/Ethereum
  3. https://www.investopedia.com/terms/e/ethereum.asp
  4. https://www.forbes.com/advisor/investing/cryptocurrency/what-is-ethereum-ether/
  5. https://www.investopedia.com/articles/investing/031416/bitcoin-vs-ethereum-driven-different-purposes.asp
  6. https://www.vaneck.com/us/en/blogs/digital-assets/bitcoin-vs-ethereum/
  7. https://medium.com/pnetwork/eth-2-0-what-is-it-6104a86ff634
  8. https://yjolt.org/blog/ethereum-20-and-prospect-reverse-mutation
  9. https://crypto.com/university/what-is-ethereum-2
  10. https://www.linkedin.com/pulse/ethereum-20-evolution-second-largest-cryptocurrency-germanakos