What is Ethereum(ETH)?

Welcome to the Bixiaobao Blockchain Open Course! Our topic today is: What is Ethereum?

If Bitcoin is the king of blockchain 1.0 era, then Ethereum can be referred to as the pioneer of blockchain 2.0.

Like an old-fashioned cell phone, bitcoin cannot install third-party applications. Ethereum, on the other hand, is like the current Android system, where users can develop various decentralized applications based on the Ethereum network.

Ethereum is a global open-source blockchain platform and can be considered as a blockchain operating system. Everyone can develop applications on Ethereum.

I. The Birth of Ethereum

In November 2013, Vitalik Buterin, the founder of Ethereum, published a white paper on Ether. Like Vitalik, his father is also a programmer, and under the influence of his father, Vitalik started to learn programming when he was 5 years old. By chance, V-God came to know Bitcoin and gradually developed an interest in this new thing.

As V-God got a deep insight into Bitcoin, he found some disadvantages of it, such as in spite of a large amount of computing power invested in mining, only a little will be rewarded Bitcoin, which is a waste of resources. In addition, as an increasing number of people are using Bitcoin, the Bitcoin network is often congested. As a result, Vitalik began to think about optimizing the Bitcoin network, and visited Bitcoin communities around the world to help Bitcoin transformation.

Despite optimization, Vitalik found Bitcoin’s inherent deficiency: the inability to build blockchain applications on Bitcoin. He wanted to build a universal blockchain platform on which developers could deploy blockchain applications. After days of conceptualization, he submitted his plan to the Bitcoin community full of expectation, but turned out to be rejected.

Reluctantly, Vitalik decided to start his own business, and in July 2014, the Ethereum project launched its crowdfunding, raising $18.4 million in just 42 days.

In July 2015, the main net of Ethereum was officially online, marking the beginning the blockchain 2.0 era.

II. Advantages

Compared with bitcoin, Ethereum has several advantages as follows.

Faster transfer. Ethereum generates a block every 18 seconds on average, compared to 10 minutes for Bitcoin, so theoretically, the Ethereum network is faster when transferring. However, due to network congestion and other problems, sometimes a transfer can take several hours.

Supporting smart contracts. Smart contract is a kind of computer program that can be executed automatically when certain conditions are met, and it cannot be intervened by human. In practical applications, different smart contracts can be developed according to different business scenarios. Therefore, the emergence of smart contracts has greatly broadened the scope of blockchain usage.

Immediate coin issuance. Before the advent of Ethereum, issuing tokens had a high technical threshold. Since its arrival, with just a few dollars, anyone can issue their own ERC20 tokens in 5 minutes, and such tokens can flow anywhere on the Ethereum network without restrictions. Since issuing tokens became so easy, the number of global cryptocurrencies exploded after the emergence of Ethereum, and according to statistics, the number of global cryptocurrencies increased 50 times after the emergence of Ethereum, with more than 6,000 currencies in the world.

DAPP deployment. As mentioned above, Ethereum is a blockchain operating system like Android. You can use DAPP (decentralized application) on the Ethereum network. In this way, Ethereum is undoubtedly revolutionary.

POW+POS mechanism. Ether is currently using POW consensus mechanism, which is similar to Bitcoin. However, after Ether 2.0, Ether will shift to POS consensus mechanism, which lowers the threshold of miners’ participation and reduces the waste of resources.

III. Crazy ETH

The arrival of Ethereum gave rise to ICO, a new financing model. ICO, also known as initial coin offering, is similar to IPO in stocks. ICO model quickly became popular since its advent. Due to the strong speculative effect, 10x coins and 100x coins were common, which directly brought about the super bull market in cryptocurrencies in 2017.(click check ETH price)

With the outbreak of the bull market, the price of ETH, the native token of Ether, began to skyrocket. According to incomplete statistics, the price of ETH was about $0.3 when it was crowdfunded in 2014, and after just under 4 years, it surprisingly skyrocketed to $1,400!

In 4 years, the increase was more than 4500 times! The huge return rate made some team members start to get excited and cash out the Ethereum in their hands. Although the founder Vitalik repeatedly reminded the risk of ETH, the market was too hot and participants were too enthusiastic.

There is no market that only bull but not bare.

The short term skyrocketing led many people to sell with profits, and the huge selling pressure gradually gathered into a powerful force, which became the major slasher of ETH price.

When there is an avalanche, no snowflake is innocent.

ETH started to fall, and the fall further induced a crash. The cryptocurrency market is extremely sensitive to the market environment as ETH prices are extremely sensitive to the market environment as it is an endlessly globalized market.

In January 2018, ETH hit a single-day maximum amplitude of 32%, and after the subsequent minor rebound, ETH continued to fall, and by December 2018, ETH fell below $100 and settled as low as $80, a drop of up to 16 times compared to the peak price.

IV. the Rise of the Ethereum Ecology

In 2017 Ethereum had speculative hype, but in 2020 it set a steady and stable pace. After a 2-year bear market, many blockchain projects turned to technical research and development, which led to the explosion of the Ethereum ecology.

Data shows that there are currently 3,876 DAPPs (decentralized applications) worldwide. But at the same time, currently Ethereum has the world’s largest decentralized blockchain application ecology, which includes financing, games, tools and so on.

In June 2020, compound, which has been silent for a long time, was the first to open liquidity mining. Then YFI, YFII, Curve, Sushi and other types of mining broke out, and in September, Uniswap had no choice but to launch the largest airdrop in history and opened liquidity mining simultaneously, pushing the Defi boom to a new high.

The biggest beneficiaries of the Defi boom are not farmers, but Ethereum miners. Since the current round of Defi is mainly in the Ethereum network, the ETH price has also risen along with the trend.

In the Ethereum rush in September, Ethereum often saw sky-high processing fee (GAS), and even the processing fee reward of a block exceeded the block reward. Compared with the ordinary price of 20 Gwei, the price of GAS once exceeded 600 Gwei when it was popular, and the price of GAS skyrocketed nearly 30 times. Therefore, the miners of Ethereum earned a lot.

The world of blockchain is decentralized, but there is also the Matthew effect. While the Ethereum ecology exploded, the ecology of other public chains were sterile. The once sensational EOS barely relies on guessing to maintain its basic business; while TRON, despite lower fees, faster transaction and good marketing, can hardly compete with Ethereum due to the lack of ecological precipitation. Other popular domestic public chains like Quantum Chain and NEO experienced disappointing development. It is foreseeable that in the future, with the arrival of Ethereum 2.0 era, this head effect will be amplified.

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References:

1. www.bixiaobao.com

2. Blockchain Technology and Application by Huawei

3. Debank