What is Ethereum (ETH) - A Comprehensive Overview

Are you wondering, 'What is Ethereum?' and looking to learn more? You're in the right place.

This Ethereum blockchain presentation closely examines the network, how it works, its use cases, and Ethereum staking.

What is Ethereum?

Ethereum is a Layer 1 blockchain that serves as an open-source, distributed computing platform for developing and deploying smart contracts and decentralized applications.

It extends the attributes of blockchain technology conceived by Bitcoin, emphasizing security and decentralization to expand its use cases.

Ethereum initially used the Proof-of-Work (PoW) consensus mechanism but transitioned to a Proof-of-Stake (PoS) system in 2022 through an upgrade called The Merge. This reduced its energy consumption by 99.95%, making Ethereum a low-carbon network.

Ethereum Core Features for Developers

Ethereum provides powerful tools for developers, such as the Ethereum Virtual Machine (EVM) and smart contracts.

These features enable the creation and deployment of interoperable decentralized assets, services, and applications (dApps).

Smart contracts are auto-executing codes recorded on the blockchain and serve as the backbone for dApps.

As a decentralized network, Ethereum allows users to maintain control over their assets and identities. Its peer-to-peer (P2P) architecture facilitates coordination, agreements, and the transfer of digital assets.

Ether (ETH), the second largest cryptocurrency by market capitalization, is the native token used for transactions on the Ethereum blockchain.

How Does Ethereum Work?

Ethereum is a global, decentralized computing platform designed to enhance the security and openness of blockchain technology, as pioneered by Bitcoin.

Its architecture supports a wide range of applications, including financial tools, complex databases, and games.

Proof of Stake in Ethereum

The Ethereum blockchain serves as the backbone of the network, recording and storing all transaction and smart contract data. It employs a Proof-of-Stake (PoS) consensus mechanism, which requires nodes to deposit and stake 32 ETH to become validators.

This migration from PoW allows Ethereum to implement shard chains, improving data processing and network throughput.

The blockchain's transparent, reliable, and censorship-resistant nature ensures it has no single point of failure, providing security and resilience.

Other blockchains, such as Akash, dYdX Chain or even Sui Network also use PoS to secure their networks, each with variations to optimize scalability and decentralization.

Ethereum Virtual Machine (EVM)

EVM is Ethereum's native processing system. It spells predefined rules for creating smart contracts and facilitates their seamless interactions with nodes.

EVM operates as a state machine, executing scripts block by block to create new valid states based on predetermined rules.

When a user executes a smart contract, the EVM interprets the contract's inherent code and uses the information to perform the specified task. The EVM ensures that smart contracts’ codes are executed precisely as specified.

The Core Concepts of Ethereum

Bitcoin introduced blockchain technology. As the first decentralized network, it solved the challenge of double-spending, a critical flow that allows systems to duplicate money.

Furthermore, Bitcoin enables users to establish value without authority. However powerful as this innovation was, it limited blockchain to only a handful of use cases.

How Smart Contracts make Ethereum flexible

Bitcoin’s PoW network struggles to scale, limiting BTC, its native token, to serve mainly as a store of value. On the other hand, Ethereum has upgraded the current internet infrastructure, leveraging smart contracts to automate day-to-day processes.

Ethereum Smart contracts are computer codes that facilitate, enforce, and verify the negotiation and delivery of agreements. In other words, they are auto-executing, programmed agreements recorded on the Ethereum blockchain, designed to operate upon an if-then logic.

This means they define an action y that will happen if all the subsets of an action, x, are met.

Ethereum’s features allow users to perform far more sophisticated processes, such as borrowing, lending, and earning interest, and far more complex financial transactions, without relying on intermediaries such as banks and brokerage agents.

What is Ethereum 2.0?

Ethereum 2.0 (or ETH2) represents a major upgrade to the Ethereum network, aimed at significantly improving scalability, security, speed, and overall efficiency. This upgrade was introduced to allow Ethereum to grow while addressing its existing limitations.

The transition, known as 'The Merge', was successfully implemented in September 2022, combining the original Ethereum blockchain with the ETH2 blockchain.

Why is Ethereum 2.0 Necessary?

Migrating a popular crypto asset to a new platform is no small feat, but it was necessary for Ethereum to adapt and evolve.

The Proof-of-Work (PoW) method used by the ETH 1.0 blockchain for transaction verification led to bottlenecks, increased fees, and substantial resource consumption (especially electricity).

Ethereum Use Cases

Ethereum's versatility has led to a variety of practical applications across different industries. Below, we explore some of the most impactful use cases of the Ethereum blockchain.

Decentralized Finance Applications (dApp)

These protocols provide financial services and instruments via smart contracts anchored on a programmable, permissionless blockchain network. They eliminate intermediaries such as banks, brokerages, and exchanges when providing services.

Non-fungible tokens (NFT)

These digital assets cannot be replaced or replicated and are unique to the items they represent.

They symbolize ownership of various assets, including artwork, real estate, collectibles, and in-game items.

Self-Sovereign Identity (SSI)

Guarding identity and private information online is critical to prevent unauthorized access or identity theft. SSI provides a safer way to store such data and provisions for secure sharing.

Traceability and Supply Chain Management

A supply chain describes the path of goods from the source to the intended customer.

Traceability tracks the flow of these goods between the two key points. The Ethereum blockchain's transparent ledger can secure the supply chain by locking out counterfeits.

Development of DAOs

Decentralized Autonomous Organizations (DAOs) enable decentralized decision-making in sectors like Web 3, gaming, and venture capital.

DAOs use smart contracts to automate voting, investments, and returns distribution, ensuring transparency without third parties.

Understanding Ethereum's Security Model

Ethereum's security is maintained by a decentralized network of nodes, making it highly resistant to attacks.

Validators, who stake ETH, play a crucial role in securing transactions and maintaining the integrity of the blockchain. The more ETH that is staked, the stronger and more resilient the network becomes, as it deters potential threats and increases the cost of any attack.

By requiring validators to stake 32 ETH, Ethereum creates strong incentives for honest behavior, ensuring that validators are financially motivated to act in the network's best interests.

ETH Staking and Restaking

Ethereum Staking

To become a validator and secure the Ethereum network, users need to stake 32 ETH. This staking process not only contributes to network security but also rewards participants.

Users can also join staking pools or use centralized exchanges that offer staking services for smaller amounts, making it more accessible for those without the full 32 ETH.

Ethereum Restaking

Ethereum restaking allows users to reuse their staked ETH to secure additional services and protocols beyond the core network, effectively enhancing the utility of their assets.

Platforms like EigenLayer, Symbiotic, and Karak offer restaking solutions, providing stakers with opportunities to maximize returns while contributing to the broader Ethereum ecosystem.

Who created Ethereum Blockchain?

Ethereum was co-created by the Russian-born Canadian computer programmer Vitalik Buterin alongside Gavin Wood, Jeff Wilke, Joseph Lubin, Charles Hoskinson, Mihai Alisie, Amir Chetrit, and Anthony Di Iorio. All but Vitalik have since left Ethereum to pursue other interests.

Gavin went on to create Polkadot and Kusama and authored the Solidity programming language. Joseph is the founder of Consensys, an Ethereum investment incubator, while Charles is the co-founder and CEO of Input Output Global (IOG).

Amir contributes to the Colored Coin project, while Anthony founded Jaxx crypto wallet and Decentral. Mihai created Akasha and co-founded Bitcoin Magazine.

Through the Ethereum Foundation, the platform received approximately $18 million from an online crowd sale conducted in 2014.

FAQs about Ethereum

What is Ethereum (ETH)?

Ethereum is a Layer 1 blockchain built as an open-source, distributed computing platform for creating and deploying decentralized applications (dApps).

What is Ethereum 2.0 (ETH2)?

Ethereum 2.0 is a major upgrade to the Ethereum network aimed at improving scalability, security, and efficiency. It involves transitioning from Proof-of-Work (PoW) to Proof-of-Stake (PoS) to address previous network limitations.

What are the benefits of Ethereum 2.0?

Ethereum 2.0 improves scalability, reduces energy consumption by transitioning to Proof-of-Stake, and allows for more efficient processing of transactions through shard chains.

What is the core concept of the Ethereum blockchain?

Ethereum has upgraded the internet infrastructure, leveraging smart contracts to automate day-to-day processes.

Ethereum’s features allow users to perform far more sophisticated processes, such as borrowing, lending, and earning interest, and far more complex financial transactions, without relying on intermediaries such as banks and brokerage agents.

What is Ethereum Restaking?

Ethereum restaking allows users to reuse their staked ETH to secure additional services and protocols beyond the core network, providing enhanced returns and supporting the broader Ethereum ecosystem. Platforms like EigenLayer, Symbiotic, and Karak facilitate restaking.

Who created Ethereum?

Ethereum was co-created by the Russian-born Canadian computer programmer Vitalik Buterin alongside Gavin Wood, Jeff Wilke, Joseph Lubin, Charles Hoskinson, Mihai Alisie, Amir Chetrit, and Anthony Di Iorio.

What are the use cases of the Ethereum blockchain?

The Ethereum blockchain is ideal for hosting DeFi applications, NFTs and digital collectibles, running smart contracts and dApps that automate financial services, and facilitating traceability and supply chain management.