Ethereum Cryptocurrency Review | 2019 Edition
Bitcoin is the legacy, original cryptocurrency that launched an entire industry of innovation built on blockchain technology and its supplementary field of technical and economic mechanics. Primarily intended as a store of value and medium of value exchange outside of the power of governments or third entities, Bitcoin’s application focuses on providing individual economic independence through creating a novel financial technology.
Nevertheless, the utilization of blockchain technology, cryptography, distributed computing, and economics in a system such as Bitcoin’s only was the tip of the iceberg to a future industry of immense potential. Ethereum unlocked the door to the potential of utilizing blockchain technology for a wide variety of applications.
What is Ethereum
Ethereum is an open-source, public blockchain and decentralized computing platform featuring turing-complete smart contract functionality. Proposed in late 2013, by Vitalik Buterin, as a platform that could theoretically leverage the blockchain to store and perform computer programs across an international network of distributed nodes, Ethereum has become the most well-known and established cryptocurrency outside of Bitcoin.
Ethereum has a long, controversial, and highly noteworthy history that has had a major effect on shaping the modern cryptocurrency sphere. The white paper proposed by Vitalik in late 2013 was the commencement of the Ethereum era.
Outlined as a distributed world computer for executing and storing computer programs, the goal was to make a distributed computing platform that took full advantage of the potential afforded by blockchain technology.
Smart contracts are the main feature of Ethereum and are fundamentally self-executing programs that facilitate the exchange of anything of value on the network, immutably stored on the blockchain. They execute when specific conditions are met and are outside the influence of third entities or censorship and have no downtime, as long as the Ethereum network is functioning.
The general ambition of the project outlined in the white paper fascinated the attention of many in the cryptocurrency space. The platform’s core innovation became known as the “Ethereum Virtual Machine” (EVM) and is a turing-complete software that runs on the Ethereum network, allowing anyone to run any program, regardless of the programming language, on the Ethereum blockchain. The result is the potential to create a massive array of decentralized applications all on a single platform.
The initial development of Ethereum began in early 2014 with Vitalik and a small team including Anthony Di Iorio, Charles Hoskinson, and Mihai Alisie. The project began through the Swiss company Ethereum Switzerland GmbH and later through the Swiss non-profit Ethereum Foundation.
At the time, Joseph Lubin was the COO at Switzerland GmbH and helped to found the Ethereum Foundation. He remains a prominent figure in the cryptocurrency community as the founder of ConsenSys.
In July 2014, Ethereum undertook a crowd sale where more than $14 million was raised from July-August. In September of the same year, the Ether (the Ethereum currency) was circulated to the investors and development team, while the remaining funding went to the Ethereum Foundation.
In July 2015, the first mainnet, experimental release of Ethereum was launched and branded the “Frontier” release. The first major upgrade to the Ethereum platform was released in March 2016 as “Homestead” and was the first upgrade to be considered stable, focusing on gas pricing, security, and transaction processing.
At the time, critics of Ethereum were still suspicious about its security and stability as although being a Turing complete platform offers a substantial amount of potential development applications, it also brings with it some serious and potentially lethal security concerns.
How does It Work?
The Ethereum Virtual Machine (EVM) is a Turing-complete software that runs on the Ethereum network. It executes scripts across a distributed network of computers and enables the execution and storage of everything from smart contracts to DAOs. Functionally, Ethereum allows developers to build decentralized applications on top of it. This can include games, distributed registries, organizations, and many more.
The design behind Ethereum, based on the white paper, is intended to follow the philosiphies of simplicity, universality, modularity, agility and non-discrimination/ non-censorship.
Benefits of Ethereum
The benefits of Ethereum not only as a blockchain-based platform itself but also compared to other blockchain-based platforms includes:
- Immutability – A third party cannot make any changes to data.
- Corruption/Tamper Proof – Censorship is impossible with the PoW consensus of the huge and decentralized network agreeing on its global state.
- Security – The combination of the PoW consensus, cryptographic techniques used in the transaction model, and lack of a central point of failure protects the network against hacking and manipulation.
- No Downtime – Applications, smart contracts, organizations, etc all running on the Ethereum blockchain are always running and cannot be turned off.
Ethereum mining is in countless ways similar to Bitcoin mining. Yet, there is a main difference where the Ethereum blockchain not only stores the transaction list of the blockchain, but also the most recent state of the network.
Ethereum also employs the use of Patricia Trees rather than Merkle Trees as part of its blockchain state regulation. Patricia Trees are a modified form of Merkle Trees that enables Ethereum to efficiently store and adjust the state of the blockchain in each block.
Ethereum currently employs a modified Nakamoto Consensus Proof-of-Work (PoW) consensus model. The PoW consensus in Ethereum is extremely secure as the network consists of thousands of decentralized nodes across the world.
Mining in the PoW model of Ethereum utilizes the Ethash (DAG) algorithm which is intended to hash a fast verifiability time. Furthermore, large scale miners get relatively small benefit from larger operations due to the large memory requirements of the algorithm.
Ethereum seems consistently placed, alongside Bitcoin, as the epicenter of the cryptocurrency world. With ideals being proposed and executed on the Ethereum network, a gigantic and dedicated community of developers and various other contributors behind it, and a vocal, talented leader in Vitalik Buterin leading the way, the Ethereum future looks bright and optimistic.
Ethereum also lists a number of future technologies they are actively or potentially developing that include:
- Saving Wallets
- Crop Insurance
- Decentralized Data Feed
- Multisig Escrow
- Cloud Computing
- P2P Gambling
- Prediction Markets (i.e. Augur)
- Decentralized Marketplaces (i.e. 0x)
Ethereum is one of the most imperative and prevalent platforms in the blockchain/cryptocurrency industry nowadays. As tech talent continues to migrate to the space, adoption becomes more mainstream, and scaling solutions are implemented, Ethereum looks to remain the distributed world computer for the decentralized applications of tomorrow.