Ethereum is the second most popular digital currency after Bitcoin. This year it became 5 years old. During this time, it went through the process of formation and development. And very soon, its first hard fork is expected. It will make Ether even more attractive and create good competition for Bitcoin.
What Ethereum Is
The idea of creating Ethereum originated back in 2011. But at that moment, the author's ideas were too revolutionary and were rejected. Active work and development bore fruit and in the summer of 2015, the first version of the Ethereum system was launched. In the beginning, it was hard to mention special differences from the primary system because of the following things:
- There is mining.
- There are coins.
- Fast coin transactions are made.
- The commission is present.
- Miners also validate blocks and earn rewards on this.
- Ethers can be used as a full-fledged payment instrument in places where crypto coins are accepted.
But there are still differences because resources are managed through smart contracts. These are codes written in the Solidity programming language. The point is that a scenario is set, and the scheme of its construction is based on the if-then principle. The blockchain nodes execute the program automatically and record every operation. This made it possible to create applications based on Ethereum. And they work clearly as the algorithm tells. No glitches, censorship, and third party fraud are present.
How Ethereum Works
In the context of Ethereum, the blockchain functions as a public ledger that records everything that happens on the network. Certain key technologies used by bitcoin make Ethereum work as well. But the essence remains the same. A copy of each transaction is distributed throughout the network and each node stores a history.
Such a distributive digital register can be easily synchronized due to a large-scale decentralized network. That is, Ethereum remains available to everyone who has access to the Internet.
In the network of cryptocurrencies, there are blocks of data that consist of transactions. Also, there is a smart contractor. The blocks are linked together and from the very first block, they are a complete record of Ethereum's history. The latter is created by a number of users. And it is distributed among others, who check them for the correctness and confirm it.
Ethereum Virtual Machine
Until the moment Ether appeared, crypto money had a very limited range of functions. At that time, developers needed to expand the functionality of bitcoin. But it was technically difficult to do this on the existing blockchain. Alternatively, it was required to create a new platform.
An Ethereum developer started creating the EVM. Its main task was to eliminate denial of service attacks. Each time a program or transaction is activated, the network starts processing the data. At the same time, contracts are written in different programming languages. They are turned into bytecode and the EVM is able to decipher and execute it.
Each Ethereum node executes contracts using its own EVM. That is, the invention of this thing made it possible to create a more efficient interaction. Therefore, there is no need to form an individual blockchain for each project.
The most secret component of Ethereum is the smart contract. This is a computer program that controls the transfer of digital assets between parties in case certain conditions are met.
How Ethereum Was Growing
After its emergence, Ethereum was able to gain public confidence. And the Ethereum Foundation, a non-profit organization, was formed to guide its development. The initial coin offering involved the issuance of its own token called Ether (ETH). It is the currency that is used in the Ethereum system. The controlling organization conducted an initial distribution through a sale. It was possible to collect 18 439 086 dollars, which were equal to 3 591 bitcoins or 60 102 216 ETH.
At the end of 2014, a network with a large number of nodes was formed. That is, these were PCs running the Ethereum protocol. And consequently, this attracted a lot of developers. And they started developing many various applications that work with this blockchain. At the moment, about 1000 projects are working on Ethereum. The initial technology got several improvements. And the ETH token, which cost a few cents, rose in price to $ 1,500. But then it gradually fell in price. Despite this, today it remains the second cryptocurrency after Bitcoin.
Ether Is Not Bitcoin
The young Ethereum project was first presented at the Bitcoin conference. And many began perceiving it as an improved version of the first crypt. They were compared, contrasted, and very often confused. Newcomers in this area still have problems with this.
But Ethereum quickly acquired its own identity and completely stood out from its main competitor. But to this day, it could not catch it up in terms of monetary rate. First of all, the developers positioned the new currency as a tool for quick transactions, for which Bitcoin is categorically not suitable, even with its crazy rate.
Nowadays, there are more than 5,000 cryptocurrencies and tokens operating on different blockchains. But the most popular is still Ethereum.
And the fact is that every fifth token launched into turnover is created on the basis of Ethereum.
Record Price
Catching up the Bitcoin rate is still an unrealistic task for any currency. But it is Ether that has been occupying the second position for a long time. The prospects for the exchange rate of this digital currency are optimistic and may reach $ 500. After the collapse in the spring of 2020, there is a steady and systematic increase. The rare beats more and more new levels. This trend will continue until there is actual acceleration. And it is seen in the case of the launch of the Ethereum 2.0 hard fork.
Ether 2.0 Will Be a Breakthrough
The update in order to scale cryptocurrencies has been thought over for a long time because the system simply cannot cope with user requests. And competitors are coming closer and closer. Phase 0 of the launch of Ether 2.0 is the first part of such an anticipated update. The most important change is the transition to the Proof of Stake protocol, which will significantly increase the speed of transactions. Here, instead of the miners involved in the current Proof of Work, there will be validators. They are not just users or miners. They are the ones who have at least 32 coins. This is a required deposit to run a validator node.
It Is Trusted by Banks
It is Ethereum that financial institutions choose. One Dutch bank has been working to improve the cryptocurrency system. And its platform is involved in several projects that are used to organize trade documents. There are plans to introduce Ether as a payment instrument for that bank.
Popularity Is Growing
No other cryptocurrency has managed to come close to the leader on the market. But Ethereum fans are sure that this particular currency is № 1 today. At least this can be said if we judge by the interests of users. One of the proofs is the record fees paid by participants for using the blockchain. One of the analytical resources names the amount of 800 thousand dollars a day.
Forecasts for the near Future
According to forecasts, Ethereum, as the second cryptocurrency which comes after Bitcoin, will not lose its positions. Even more, the update and launch of Ether 2.0 are likely to improve the rate. And all due to the appearance of additional resources.
It is also believed that after a prolonged fall, the price of Ether can literally skyrocket. And it can happen very soon. The boldest predictions tell that it will be $ 3,000 per coin. There is a hope that such bold predictions will come true for half at least. Because after a series of negative events, the second most popular cryptocurrency in the world will be able to overcome the line of psychological resistance. At the beginning of 2020, there was such a welcome rapid growth in the altcoins market. Therefore, Ether has every chance to continue its existence for many years.