Ethereum (ETH) is a decentralized blockchain platform that makes digital money, global payments, and applications possible using open-source software and smart contract functionality.
Ethereum does this all by not being controlled by a central authority.
Vitalik Buterin, the co-founder of Ethereum, wrote an introductory white paper in 2014 outlining his vision for smart contracts and a decentralized application platform.
Ethereum was officially launched in 2015, co-founded by Vitalik Buterin, Gavin Wood, Charles Hoskinson, Anthony Di Iorio, and Joseph Lubin.
Launching after Bitcoin, Ethereum founders hoped to expand its features beyond what Bitcoin was already offering.
The big difference between the two is that Ethereum is programmable, meaning you can build and use decentralized apps on the network.
That means the Ethereum blockchain can be programmed to do virtually anything.
While both Bitcoin and Ethereum let you use digital money without a middleman (like banks or payment providers), Ethereum goes beyond being a payment network by offering a marketplace of services, like gaming, social networks, and of course, financial services.
Ethereum’s native cryptocurrency is called ether (ETH), which is used to pay for certain activities and services on the network.
Ethereum does the following things:
- Banking, lending, borrowing, and saving for everyone
- Allows you to move money directly to anyone, using a peer-to-peer network
- It keeps governments are 3rd parties out because of its decentralized design
- All you need is an Ethereum wallet, which requires the Internet and a device – nothing else
- Apps are composable, meaning they can be used to build new apps, like legos.
Smart contracts are what sets Ethereum apart from other blockchains.
These simple computer programs only run when triggered by a user or another contract.
That makes the entire network super flexible in what it can do.
Some popular examples of smart contracts include
- lending and borrowing apps like Aave, Compound and Oasis
- token swap apps like Uniswap and 1inch
- trading apps like Loopring and dYdX
- payment apps like Tornado cash and Sablier
- portfolio apps like Zapper and Rotki
Ethereum exists completely decentralized across over 10,000 nodes, scattered all over the world.
The majority of the nods, almost 50% are located in the U.S.
Due to its decentralized nature, no one company or government can say it controls the Ethereum network.
The network is run by volunteers who run their own nodes or computers with a copy of the Ethereum blockchain on it.
Anyone can run a node, not just miners and validators.
Like Bitcoin, Ethereum uses the Proof-of-Work (PoW) consensus protocol.
The nodes on the network use PoW to agree on the state of all of the data recorded to the blockchain while also preventing network attacks.
Ethereum will soon replace PoW with Proof-of-Stake (PoS), which will happen with The Merge.
The Merge is set to take place in September 2022, which opens the network up to scaling upgrades and reduced energy consumption.