Ethereum (ETH)
What is Ethereum in crypto?
Ethereum is a decentralized blockchain platform that allows developers to build and run smart contracts and decentralized applications (dApps) without relying on central authorities. Launched in 2015 by Vitalik Buterin and other co-founders, Ethereum introduced the concept of programmable money, going beyond simple transactions like Bitcoin to support complex agreements and applications directly on the blockchain.
The native cryptocurrency of Ethereum is Ether (ETH), used to pay transaction fees (Gas) and participate in network activities like staking.
What makes Ethereum unique in crypto?
Smart contracts – Self-executing programs that run automatically when conditions are met.
Decentralized applications (dApps) – Apps that run on the blockchain without centralized servers.
Ethereum Virtual Machine (EVM) – A powerful runtime environment that executes smart contracts.
DeFi and NFT ecosystems – Ethereum is the foundation for DeFi (Decentralized Finance) and NFT (Non-Fungible Token) markets.
Transition to Proof of Stake (PoS) – Ethereum moved from Proof of Work (PoW) to PoS with The Merge in 2022, reducing energy consumption.
Key features of Ethereum
Feature | Description |
|---|---|
Smart contracts | Code-based agreements running without intermediaries. |
dApps | Blockchain-based applications (e.g., DeFi, gaming, NFTs). |
Ether (ETH) | Native currency used for transactions and fees. |
Gas fees | Payments for network computation and transaction validation. |
Decentralized network | Thousands of nodes globally maintaining security. |
Pros and Cons of Ethereum
Pros | Cons |
|---|---|
Largest platform for smart contracts | High Gas fees during network congestion |
Strong developer and user community | Scalability issues (being addressed by Layer 2 solutions) |
Backbone of DeFi and NFT markets | Complex for beginners to use smart contracts |
Regularly updated and improved | Regulatory scrutiny as adoption grows |
Moving toward eco-friendly Proof of Stake | Competition from other smart contract blockchains (e.g., Solana, Avalanche) |
Ethereum vs Bitcoin
Aspect | Ethereum | Bitcoin |
|---|---|---|
Purpose | Smart contracts, dApps | Digital currency, store of value |
Native currency | Ether (ETH) | Bitcoin (BTC) |
Consensus mechanism | Proof of Stake (PoS) after The Merge | Proof of Work (PoW) |
Transaction complexity | Supports complex contracts and apps | Simple value transfers |
Supply limit | No fixed maximum supply | 21 million BTC cap |
Ethereum’s role in DeFi and NFTs
DeFi – Platforms like Uniswap, Aave, and MakerDAO run on Ethereum, enabling decentralized lending, borrowing, and trading.
NFTs – Major NFT marketplaces like OpenSea and Rarible are built on Ethereum, with standards like ERC-721 and ERC-1155 for digital collectibles.
Token standards – ERC-20 for fungible tokens (used in ICOs and DeFi), ERC-721 for NFTs.
Important Ethereum upgrades and milestones
Event | Year | Description |
|---|---|---|
Ethereum launch | 2015 | Genesis block created, network goes live. |
DAO hack and fork | 2016 | Led to split between Ethereum (ETH) and Ethereum Classic (ETC). |
Constantinople upgrade | 2019 | Improved efficiency, prepared for PoS. |
Ethereum 2.0 Beacon Chain | 2020 | Launched PoS coordination chain. |
The Merge | 2022 | Transition from PoW to PoS, reducing energy usage by over 99%. |
Current challenges for Ethereum
High Gas fees during peak demand.
Scalability limits, leading to slower transaction times.
Competition from faster Layer 1 blockchains (e.g., Solana, Avalanche, BNB Chain).
Regulatory pressures as Ethereum-based DeFi grows.
Solutions and future development (Ethereum roadmap)
Layer 2 solutions (Arbitrum, Optimism) – Off-chain scaling to reduce costs and improve speed.
Sharding – Future upgrade to divide the network into smaller pieces (shards) for better scalability.
Continued PoS development – Strengthening network security and reducing environmental impact.
Rollups – Bundling many transactions into one to save space and Gas fees.
Conclusion
Ethereum is the most widely used blockchain for decentralized applications and smart contracts, powering massive sectors like DeFi and NFTs. Its transition to Proof of Stake makes it more energy-efficient, and ongoing upgrades aim to address scalability challenges. Ethereum remains a key player in shaping the future of decentralized finance and Web3, with a robust ecosystem and active community.
