What is Ethereum (ETH)?

Ethereum is one of blockchain the world's most important cryptocurrencies, and responsible for many of the revolutionary technologies that seek to transform the world as we know it.

What is Ethereum?

La cryptocurrency Ethereum is one of the largest cryptocurrency projects in the cryptocurrency industry. Ethereum itself is a digital platform that is based on the technology blockchain or blockchain. Its goal is to become a blockchain capable of running decentralized applications.

To achieve this, this project has a blockchain and a cryptocurrency with unique characteristics. Among them the ability to use and create Smart contract and new Tokens. Both are powerful functionalities, which allow it to establish itself as one of the most complete and powerful blockchains in the crypto world.

The network currency is called Ether (ETH), and like Bitcoin (BTC), Ether is characterized as a cryptocurrency that can be used as a peer-to-peer payment method. Another similarity with Bitcoin and other cryptocurrencies is that it is not controlled by any government or regulatory body. Its development is marked by Ethereum Foundation, its Core Team and the community it supports and supports. Another important point is that it uses the consensus protocol Proof-of-Work (PoW), using the Ethash algorithm. Although this may change in the short term with the launch of Ethereum 2.0 and the jump to being a cryptocurrency using the protocol Proof of Stake (PoS).

The development of this blockchain began thanks to the work of Vitalik Buterin 2013 the year.

Ethereum technical characteristics

Mining

Ethereum is a cryptocurrency that works thanks to the PoW consensus protocol using the algorithm Ethash. This algorithm is designed to be highly demanding and targeted at GPU mining. For this reason, mining was initially highly decentralized and diverse.

Ethash uses the Keccak hash function, also known as SHA-3. In this way, the algorithm seeks to use highly secure cryptographic elements. At the same time, Ethash is planning to have intensive memory and cache usage. Both features are aimed at offering resistance to mining by ASIC and avoid centralizing it.

Cryptocurrency issuance

This cryptocurrency currently has an annual issue limited to 18 million Ethers per year. In other words, each year the mining activity can generate a maximum of 18 million new coins. However, the total emission is infinite. To achieve the emission, the network has a coinbase transactions quite peculiar. Firstly, if a miner finds the solution to a block, he receives a reward of 2 ETH. But if another miner also finds a solution to that block at that time, that miner also receives a reward. In this way, the coins are issued on the Ethereum blockchain.

The initial issue of Ether on the blockchain was related to the pre-sale that was made to drive the project. Back then, a total of 60 million Ethers were created. Of these, 12 million were used to create a development fund, this is the beginning of the well-known Ethereum Foundation.

However, Ethereum is an ever-evolving blockchain. One of the major changes that will be seen in Ethereum in the coming years will be the abandonment of PoW to move to a PoS mining system. With this change, Ethereum will start to create cryptocurrencies for its blockchain in a completely different way than the current one, avoiding the use of miners and encouraging greater economic participation in the blockchain.

Gas, the basis of everything

El Gas It is a concept very typical of the Ethereum network. This is used to measure the work done within the blockchain. Each action in the blockchain as an operation or a set of operations has a specific cost that is given in Gas units.

Among the functions of Gas within the blockchain we can mention:

1. Assign a cost to the execution of tasks. Gas is used as a unit to measure the cost of performing a certain action within the blockchain. Each action has a cost in Gas and a set of actions carried out adds the total cost of said operation. In this way, we can see Gas as the price to pay for performing actions within the blockchain.
2. It helps improve system security. As each action has a price, this helps prevent the blockchain from stopping its operation and undermining its security. This is possible because Gas helps protect the network from spam attacks. For this, gas involves an expense that prevents them from being DDoS attacks easily over the network, attacks that can leave millions of users without service.
3. Reward the miners. The actions on the blockchain depend on its execution on the hardware that is in the hands of the miners. To pay for this use there is Gas.

Block generation time and size

Ethereum is characterized by calculating the size of its blocks in a somewhat particular way. Unlike Bitcoin, where its size is limited to 1MB, on Ethereum its size is limited to a specific amount of Gas. To be more precise, the Ethereum block size limit is 12.500.000 Gas (as of February 2021). This means that each block can contain a total of operations as long as it does not exceed the specified Gas limit.

Generally, a block can contain about 500 payment operations between accounts, the simplest of possible operations. In the case of a smart contract, the operations of one of them can easily reach the Gas limit of each block.

Another difference from Bitcoin is the block generation time. In Bitcoin, each block is generated every 10 minutes, while in Ethereum this value is variable. In principle, each block was generated approximately every 16 seconds. This value increased to 30 seconds in 2017, and currently stands at 14 seconds on average. This means that it is generally faster in providing confirmations than Bitcoin, which has a positive impact on its possibilities as a payment system.

Smart Contracts

Un Smart contract or smart contract is a computer program that executes certain actions pre-established in its code under certain conditions. Actions that have been reviewed and accepted by the different parties that have "signed" said contract. In this way, the smart contract enforces its programmed conditions by presenting a response according to its clauses in a completely autonomous way.

Smart contract technology is one of the fundamental foundations of Ethereum and the operation of many of its features. A situation that can be seen especially in the tokens and DApps of this blockchain.

Ethereum Virtual Machine

La Ethereum Virtual Machine (EVM), is a software whose objective is to serve as abstraction layer in the execution of code that is stored in the blockchain. With this, it seeks to prevent a malicious DApp or smart contract programmer from threatening the security of the nodes. from the network and with the network itself.

To achieve this, EVM performs a complete abstraction of the system, managing access to computer resources and limiting its actions in a controlled environment or virtual machine. But in addition to this, EVM also seeks to simplify the development and update of applications and features available to the DApps. That is to say, EVM was created both to protect and to allow to extend the functions of Ethereum in a simple way.

EVM allows the operation of smart contracts and DApps thanks to the use of the programming language Solidity. This language allows you to program all the logic behind the DApps and smart contracts while allowing decentralized execution of your code using the EVM.

Ethereum 2.0, the long-awaited promised future for Ethereum

Ethereum, like most blockchains, has a huge problem: it cannot scale correctly to serve the millions of users that its network has at the moment. This network architecture problem is something your developers are aware of and desperately seeking to fix, and such a solution is called Ethereum 2.0.

Ethereum 2.0 is a project that began its development in 2017 with the arrival of Ethereum Metropolis and its two updates Byzantium and Constantinople. At that time, the transformation of Ethereum began to seek to provide it with a better ability to scale, reduce commission costs and control the mining of the cryptocurrency that already accused of problems such as “the Ice Ages”, those dangerous moments in which the Ethereum mining would be so complex that it would be impossible for the network to carry it out.

Early efforts (in 2017) led developers to play with options like Proof of Authority (PoA) and Proof of Stake (PoS) on the Ethereum code. Projects such as PoA Newtork and PoC that gave birth to Casper, the protocol that would be chosen to replace PoW on Ethereum, and turn Ethereum into a PoS network.

However, everything seems to indicate that the objectives of the Ethereum devs with Casper are, at least, of such high complexity that the launch of this new update has been delayed several times, while the current network suffers more and more from its pressing limitations. In fact, in 2019 the PoA Network was fully operational and the long-promised Ethereum 2.0 was not yet out. This situation was taken advantage of by the competition, which now presents more worked and functional solutions today, such as the case of Polygon, RSK and Binance Smart Chain.

The start of change

But not everything is bad, in 2020 the Ethereum devs finally take the first step by activating the Beacon Chain, the first step to Ethereum 2.0, laterally activating this network and creating the basic structure for its operation. However, the official launch of Phase 1 of Ethereum 2.0 will not take place until the fourth half of 2022 (according to the latest data from devs). This is due to serious problems detected in the mechanisms of The Merge, which will unite the PoW and PoS networks of Ethereum, to start Ethereum 2.0.

In any case, only when the basic functions of the network are considered stable will The Merge start and among those functions are:

1. Casper protocol tested together with the entire economic and staking that will provide security to the network. This will lead to the abandonment of PoW and mining, to exchange it for PoS and its betting system in the network.
2. The arrival of the basic structures of Sharding to the network, to significantly accelerate network capacity up to 1000 transactions per second. This is the most anticipated improvement of Ethereum 2.0, although it comes a bit late considering that there are already networks with that capacity and more, working today (such as FLOW o Polygon).
3. The construction of the bases for the parallelization of the EVM, a capacity that will not be ready until the launch of Phase 2 of Ethereum 2.0, still with an unknown date.
4. The union of ETH1 and ETH2 in the same blockchain, and not as two separate networks as it happens now.

In any case, after six years of Ethereum 2.0 development, it is still the dream expected by many in the community and although the technology it plans to deploy is immense, its users and community will have to continue waiting for that dream to come true.

Why does Ethereum 2.0 switch to Proof of Stake (PoS)?

The main reason for the change of Ethereum 2.0 from the Proof of Work model to Proof of Stake is related to energy consumption. Proof of Work on Ethereum consumes large amounts of energy because such activity depends on thousands of GPUs and ASICs running in parallel to be able to perform all the necessary calculations to complete the cryptographic puzzles proposed by the Ethereum mining system and its Ethash algorithm.

This is a situation that has been attacked by many people in the community, indicating that it is not friendly to the environment and a waste of valuable resources. With that in mind, Vitalik Buterin and his team decided that the best solution to the problem is to transform Ethereum into a blockchain supported by the Proof of Stake protocol, where thousands of computationally weak nodes could be created, but they would only participate by having a small amount of money. stake within them that would give it power to vote and validate blocks within the network. In this way, Ethereum would become a network hundreds of times more energy efficient.

The measure has been applauded by much of the community, while others attack it. The attack on this change is not irrational, because PoS is a more insecure protocol than PoW and also tends to lead networks to a huge centralization that is already beginning to be seen in the Beacon Chain of Ethereum 2.0, where only 13 addresses control more than 50% of network validators currently.

Why was PoS not used from the beginning on Ethereum?

One of the main reasons Ethereum didn't use the PoS algorithm in the first place was security. At the time of Ethereum's creation in 2015, the reigning consensus protocol was Proof of Work. The algorithm was not only heavily tested, but had been debugged and improved over the years, making it extremely reliable. But with the advent of more and more PoS networks, the algorithm has been put to the test and confidence in the algorithm has increased as a result.

Uses of Ethereum

Ethereum is one of the cryptocurrencies and blockchain with the greatest variety of uses that exist today, among them we can highlight:

Accept and receive payments quickly and safely

One of the great features since its inception has been its ability to handle payment much faster than Bitcoin. This is due to the short block production period ranging from 10 to 30 seconds and the scalability of the blockchain.

ICO realization

While creating tokens and ICOs was not started by Ethereum, but by calls colored coinsThe truth is that this project offered tools to greatly facilitate this work. With the creation of ERC-20 token, Ethereum went on to become the "Father of ICOs" and with reasons for it. With the creation of ERC-20, create a token It was no longer a highly complex task.

Nowadays, it is enough to carry out a smart contract following the model of the ERC-20 token and you had the job done. This gave a significant boost to the blockchain and allowed the diversification of the cryptocurrency market opening up new possibilities.

In fact, there are currently at least 191.000 ERC-20 tokens created, each with unique characteristics running on its blockchain.

Smarts contracts and DApps

Smart contracts and DApps They are one of the biggest uses Ethereum has. The capabilities of these two tools are practically endless. Since the creation of a smart contract to buy or sell or negotiate goods or services, its usefulness is only limited by the imagination. On the other hand, DApps are a revolution. They are capable of creating completely decentralized, uncensored, secure and economically self-sustaining applications. We can also mention the platforms of oracles that are built on this network, as in the case of Augur.

Companies using Ethereum

Ethereum's capabilities to use smart contracts, easily build tokens and deploy DApps has captured the attention of many companies worldwide. This has meant that the development of Ethereum has had the direct or indirect support of a large business group interested in developing its technology. All this set of companies have created the call Ethereum Enterprise Alliance (EEA) which has more than 100 members. They stand out among them

• Accenture, a company dedicated to technology services and consulting.
• AMD, a leading company in the development of chipset, CPU and graphics cards.
• BBVA, a Spanish bank with a worldwide presence.
• Banco Santander, another Spanish bank with a worldwide presence.
• BP Ventures, the investment arm of oil company BP.
• Cisco, the world's largest networking company.
• Delloite, one of the largest audit, financial consulting and legal services companies in the world.
• GoChain, one of the most important companies in the development of DApps.
• Hyperledger, the world's largest enterprise and open source blockchain development project.
• JP Morgan, one of the largest financial firms in the world.
• Microsoft, the world's largest software development and technology company and responsible for Windows development.
• VMWare, the most important company in the development of virtual machines and integration solutions for virtual environments.

Ethereum Advantages

1. It is a multipurpose blockchain thanks to its ability to integrate and use smart contacts.
2. The use and development of EVM confers a high level of security to execute smart contracts and DApps in a completely decentralized and secure way.
3. It has a fast production of blocks, which allows it to have a much faster transaction confirmation speed than Bitcoin and other cryptocurrencies.
4. Development is not controlled by any central authority, its Development Core is completely decentralized and decisions are made by consensus. In addition, the community has a high impact on decisions about the development of the blockchain.

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