What Is Ethereum: A World of Decentralized Applications
While Bitcoin pioneered the concept of digital currency and decentralized networks, it primarily focused on serving as a digital store of value.
Ethereum, on the other hand, takes the foundational principles of blockchain and expands upon them by introducing smart contracts, decentralized applications (DApps), and a more versatile ecosystem.
Created by Vitalik Buterin in 2015, Ethereum is today the second-largest cryptocurrency after Bitcoin. At its core, Ethereum’s value proposition lies in its ability to provide a platform for developers to build and deploy decentralized applications, addressing scalability and programmability concerns that were seen as limitations in Bitcoin’s design.
In this article, we will embark on a journey to explore the basics of Ethereum, its historical development, and the vast possibilities it offers as a foundation for a new era of decentralized innovation.
How Ethereum Began
Ethereum was conceived by a young computer scientist named Vitalik Buterin in 2013. At the time, Bitcoin had already captured the world’s attention as a digital currency, but Buterin saw beyond its limitations. He envisioned a blockchain platform that could do more than just transfer value; in his mind’s eye, he saw the formation of a platform that could support programmable applications.
In other words, if money is just data, and Bitcoin has shown how this data can be decentralized, can other types of data be decentralized as well?
Vitalik unveiled his masterpiece in late 2013: a decentralized, open-source platform for programmable applications. His whitepaper detailed the technical specifications and principles that would underpin this new blockchain ecosystem. In 2015, the Ethereum project went live.
Ethereum’s Ecosystem
At the heart of Ethereum’s capabilities lies the Ethereum Virtual Machine (EVM), which serves as the engine that executes smart contracts, bringing them to life on the blockchain. In other words, this EVM turns code into tangible actions on the blockchain.
Fueling the operations within this ecosystem is Ether (ETH), the native cryptocurrency of Ethereum. To execute transactions and computational tasks, users pay a fee known as gas, which incentivizes network security and efficiency.
But let’s backtrack a little. What’s smart contracts?
Smart Contracts & Decentralized Applications (DApps): Building Blocks of Ethereum
Imagine a world where agreements are automatically enforced without human intervention. That’s precisely what smart contracts offer. Smart contracts are self-executing programs with predefined conditions. When these conditions are met, the contract executes, ensuring transparency and trust.
These smart contracts are the building blocks of decentralized applications (DApps); while smart contracts are individual pieces of code that automate specific agreements or processes, DApps are complete applications, similar to the apps we use on our smartphones today. Unlike traditional centralized applications, however, DApps operate in a decentralized manner, meaning they function without a single central authority.
This revolutionary concept caught the attention of developers, entrepreneurs, and corporations alike. Startups began leveraging the power of smart contracts to create decentralized applications, leading to a massive boom of funding and activity in the world of crypto, otherwise known as DeFi Summer 2020.
What Happened the Summer of 2020?
DeFi Summer refers to a significant and explosive surge in the popularity and adoption of decentralized finance (DeFi) platforms and applications during the summer months of 2020–even as the entire world went into Covid lockdowns.
During this period, the decentralized finance space experienced a strong growth spurt, attracting a large influx of users and investments. Most of it was centered around financial services, such as lending, borrowing, yield farming, and decentralized trading all powered by smart contracts on the Ethereum blockchain. It was also during this same period that Non-Fungible Tokens (NFTs) caught mainstream attention.
The surge in activity and interest led to substantial increases in the total value locked (TVL) in DeFi protocols, propelling DeFi Summer to become a pivotal moment in the ongoing evolution of decentralized finance.
However, it was also this sharp spike in activity that led to slowdowns in the Ethereum blockchain. Buterin and the Ethereum community recognized the need for a more scalable solution to accommodate the growing demands of a global decentralized ecosystem.
ETH 2.0
In response to these challenges, Ethereum embarked on a journey towards Ethereum 2.0 in 2022, a major upgrade that would transition the network from a proof-of-work (PoW) consensus mechanism to proof-of-stake (PoS). The original system, while secure, was resource-intensive and limited in terms of transaction throughput. This upgrade aimed to enhance scalability, security, and energy efficiency, ensuring that Ethereum remained a sustainable and accessible platform for future generations of developers and users.
Getting Started with Ethereum
Now that you’ve been properly introduced to Ethereum, what’s next? Here’s a roadmap for beginners.
Step 1: Buy Ether (ETH) from reputable cryptocurrency exchanges like CoinW.
- Create an account: Sign up for an account on the exchange’s website or app. You’ll need to provide identification and complete the verification process.
- Deposit funds: Deposit funds into your exchange account using fiat currency (e.g., USD, EUR) or other cryptocurrencies.
- Buy ETH: Locate the trading pairs on the exchange and select the one that matches your deposit currency (e.g., ETH/USD). Enter the amount of ETH you want to purchase and confirm the transaction.
Step 2: Obtain an Ethereum Wallet
To store and manage your Ethereum, you’ll need a wallet. There are various types of wallets available, each with its own characteristics. The two main categories are:
- Hardware Wallets: These physical devices store your Ethereum offline, providing robust security against online threats. Popular hardware wallets include Ledger Nano S, Ledger Nano X, Trezor, and KeepKey.
- Software Wallets: These wallets come in the form of mobile, desktop, or web applications. They are convenient for daily use but may be less secure than hardware wallets. Popular software wallets for Ethereum include MetaMask and Trust Wallet.
Step 3: Interact with DApps
Once you have an Ethereum wallet set up, you can start interacting with decentralized applications (DApps). DApps are applications that run on the Ethereum blockchain and offer various functionalities, from decentralized finance (DeFi) services to gaming and NFT marketplaces. To use DApps, follow these steps:
- Install a DApp-Compatible Wallet: Some DApps require specific wallets to interact with them seamlessly. For example, MetaMask is a popular browser extension wallet that supports most Ethereum-based DApps.
- Fund Your Wallet: Ensure you have enough Ether (ETH) in your wallet to cover transaction fees and participate in DApp activities.
- Visit the DApp: Go to the DApp’s website or access it through a DApp aggregator platform like DAppRadar or Dapp.com.
- Connect Your Wallet: On the DApp’s website, you’ll find a button to connect your wallet. Click it, and a popup window will prompt you to authorize the connection.
- Confirm Transactions: When interacting with DApps, you may need to approve and sign transactions. Always review the transaction details and confirm them through your wallet.
A Parting Shot
When engaging with decentralized applications (DApps), prioritizing personal safety and security is of utmost importance.
One significant threat to be aware of is phishing emails. Exercise caution and NEVER click on links or provide sensitive information in response to unsolicited messages.
Before interacting with any DApp, thoroughly research its reputation, legitimacy, and security features. Always use reputable and well-reviewed wallets, such as hardware wallets or trusted software wallets like MetaMask.
Be cautious when granting permissions or signing transactions, ensuring you understand the implications of your actions. Furthermore, avoid sharing sensitive information or private keys with anyone, as it could lead to potential compromises.
By staying vigilant, conducting due diligence, and being mindful of security measures, you can safely and confidently explore the world of Ethereum and DApps while safeguarding your personal and financial well-being.
