Ethereum ETH

Ethereum's design is aimed at solving the issue of scalability which again, has become one of cryptocurrencies biggest issues. Most cryptocurrencies have fixed-size blocks (i.e. they can only process a certain number of transactions per second) which makes them quite useless for day-to-day use (e.g. buying stuff online). Because of this, the block size is adjusted periodically (every several years) to keep up with the growing demands placed on it (by increased traffic and use). The problem with this approach is that it puts significant strain on the network (computer scientists term this "scaling on a tightrope"). Ethereum is built on a technology called "sharding" which aims to solve the scalability issue by breaking up the monolithic block into smaller pieces (called "shards") which can be operated independently of each other. This reduces network congestion and improves overall efficiency. Once a transaction is entered into a shard, it can't be modified (immutability) which means that any changes that are made will potentially have to be restarted from scratch (like a contract or a program that is open for feedback).

Ethereum's History

Ethereum first came to light in early 2013 when Redditors began discussing a mysterious white paper they had come across. The document detailed a new cryptocurrency called "ether" (not to be mistaken for the precious metal) and its accompanying blockchain named "Ethereum". This Ethereum blockchain was different from the usual Bitcoin and Bitcoin SV implementations because it employed a new "virtual machine" (a.k.a. "computer code") that allowed for a more complex set of features. Interested parties could learn more about Ethereum from the paper or from the website (ethereum.com).

Ethereum was officially launched on July 30, 2015 with the goal of becoming a "world computer" that could run any decentralized application (DApp). To accomplish this, Ethereum employed an innovative approach to blockchain technology that combined the speed and efficiency of a central processing unit (CPU) with the security and immutability of a distributed ledger.

The Yellow Paper That Inspired Ethereum

Before we dive into Ethereum's technology, let's take a step back and re-acquaint ourselves with one of the most influential papers in computer science. This famous paper was written by Nick Szabo and is credited with laying the groundwork for Ethereum. (If you didn't know about the Ethereum whitepaper, it's probably time you should have.)

The paper discussed an idea called "smart contracts" which are essentially computer programs that can be 'plugged' into a blockchain and performed on the network. (A smart contract is nothing more than a set of if/then statements that are executed when certain conditions are met.) In Szabo's example, a smart contract could be used to perform the following functions:

• identify who owns a pet cat (the cat is identified by a DNA sample taken at the vet clinic)
• get the pet's DNA when it reaches a certain age
• pay the pet's veterinarian when the cat is sick (the vet could scan the cat's ID to see that it is suffering from feline leukemia)
• identify all the registered owners of a Toyota Prius (the owner's name, address and phone number would be stored on the blockchain along with the car's details)
• remove the registration from any owner that breaks the law (the vet would be able to access this information when the car is scanned at a tollbooth)

As you can see, the possibilities for smart contracts are literally endless because they can be applied in practically every field (including real estate transactions and online marketplaces).

Why Is Ethereum Worth Knowing About?

Although the whitepaper for Ethereum was published in 1994, the ideas discussed in it have taken several years to become a reality. One of the most significant developments that made Ethereum possible was the invention of the 'Sharding' technology which was discussed above. (Sharding is Ethereum's answer to the problem of scalability.)

Another major development that made Ethereum possible was the invention of the Ethereum Virtual Machine (EVM). The EVM was designed to work with the smart contracts described in the paper and it allows for the execution of any decentralized application that uses smart contracts (hence the reason why Ethereum can run any DApp). The EVM was also designed to be 'open source' so that anyone could review its code and contribute to its improvement.

With Ethereum (and its associated blockchain), all previous limitations on blockchain size and processing speed have been overcome. The network is now capable of handling billions of transactions per day and it is the preferred platform for ICOs and high-throughput financial applications.

Why Should You Store Your Crypto Coins On Ethereum?

This is an important question and it's one you need to ask yourself before making a decision. Although it's quite easy to store your coins on a wallet application like 'MyEtherWallet' or 'Metamask', doing so carries with it certain risks. One of the biggest risks is that if you store your coins on a third-party system (like a traditional wallet app), then all the risks inherent in trusting a third party are transferred to you. (This is called ‘Third-Party Risk'.)

Because of this, it is highly recommended that you store your coins on a decentralized platform like Ethereum (or Monero) where the risks are minimal and the rewards are significant. As a result of this, if you want to take advantage of the future of cryptocurrencies, then storing your coins on Ethereum is certainly the way to go.

Ethereum's Unique Features

Although Ethereum is built on the same general blockchain technology as Bitcoin, it is 'fundamentally' different from its big brother in almost every way. Here are some of the most significant differences:

• No fixed block size (like Bitcoin)
• No limit on transaction amounts (like Bitcoin)
• No limit on transactions per second (like Bitcoin)
• Immutability — changes to the ledger (i.e. the blocks) are confirmed and permanent
• No mining — every Ethereum block is created automatically by the 'proof-of-work' algorithm
• Built on a sharded technology (like Bitcoin)
• No genesis block — the network begins with a single block (the 'genesis' block)
• No single authority — the ledger is maintained by individuals and organizations who contribute to the network through economic incentives (the 'incentive-based community')
• Open source (like Bitcoin)

Decentralized

As you can see, Ethereum doesn't follow the same general guidelines as Bitcoin and it was specifically designed to handle the unique tasks that Bitcoin cannot. Because of this, if you are looking for a cryptocurrency that can easily be converted to cash, then you should look elsewhere. Ethereum was designed for use in financial markets and for cryptocurrency enthusiasts and pioneers who want to experiment with blockchain technology.