Ethereum
What Is Ethereum
Ethereum is a decentralized platform where developers can build and run smart contracts and decentralized applications (dApps). It was launched in 2015 by Vitalik Buterin and a team of co-founders to expand blockchain technology beyond just digital currency transactions, like Bitcoin.
Ethereum's native cryptocurrency is called Ether (ETH) and it is used to pay for transactions and computational services on the Ethereum network. When developers create dApps or execute smart contracts, they must pay in Ether for the computational power required to process these actions. This payment, known as "gas," varies depending on the complexity of the transaction and the demand on the network.
How Does Ethereum Work
A key component of Ethereum is the Ethereum Virtual Machine (EVM), a decentralized computing environment that executes smart contracts on the network. Each Ethereum node, a computer in the network, runs the EVM, ensuring that smart contracts execute consistently across the network. This decentralized approach allows developers to build applications without a central control point, enhancing reliability and security.
Ethereum initially used a Proof of Work (PoW) consensus mechanism, where miners solved complex puzzles to validate transactions and add blocks to the blockchain. However, with the Ethereum 2.0 upgrade, it has transitioned to Proof of Stake (PoS). In PoS, validators are chosen to create new blocks and confirm transactions based on the amount of Ether they hold and are willing to "stake" as collateral. This shift aims to improve scalability, security, and energy efficiency.
Smart contracts are another fundamental feature of Ethereum. These self-executing contracts have terms written directly into code, automatically executing and enforcing agreements when conditions are met. For example, a smart contract can release funds once a task is completed without having to rely on intermediaries, which ensures trust, reduces the risk of abuse, improves efficiency, and enhances security.