Ethereum Price (ETH)
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About Ethereum Blockchain
Ethereum is the second-largest cryptocurrency by market capitalization after Bitcoin. One of Ethereum’s main innovations was the introduction of smart contracts, which allow for programmable money. Today, Ethereum’s smart contracts underpin everything from decentralized finance (DeFi) to non-fungible tokens (NFTs).
Ethereum is the name of a blockchain that creates the currency known as ether or eth. Like Bitcoin, Ethereum is designed to operate as a decentralized network relying on consensus that is currently achieved by proof-of-work. However, the Ethereum community is in the midst of upgrading the protocol to use proof-of-stake as the consensus mechanism, which would require less energy to operate and scale.
Because of its programmability, Ethereum allows innovators to create and run decentralized apps, (dapps). Ethereum users can create games, applications, and much more on a distributed network.
One of Ethereum’s founders, Vitalik Buterin, is credited with developing the framework and writing the Ethereum Whitepaper in 2013. The original idea for Ethereum came as an effort to address some of Bitcoin’s early scaling and functionality issues.
Buterin and a team of co-founders soon launched the Ethereum Foundation and developed a working prototype of the Ethereum blockchain. In 2015, the team launched the Ethereum network and held the first major initial coin offering in an effort to jumpstart ether’s distribution.
The Ethereum Network
Under the proof of work system, new ether is created via a mining process. To mine Ethereum, computers spread around the world compete to solve cryptographic puzzles. Any miner that successfully solves the puzzle first is being rewarded with ether (ETH).
The mining rewards are designed to pay miners to secure the network, verify transactions, and compensate mining operations for dedicating computing power to the network.
The current mining reward is 2 ether per block plus all transaction and gas fees contained in the block. “Gas fees” are another word for network fees specific to the Ethereum network, and they change dynamically based on network usage and congestion.
A new block is added to the Ethereum blockchain on average every 15 seconds, which is different from Bitcoin’s blockchain, where a new block is added every ten minutes. While Ethereum used to have a supply that was considered unconstrained or unlimited, recent changes to the network have been taking eth out of circulation via gas fees, which overtime might impact the blockchain’s economics, but the long term impacts and supply dynamics are still unknown.
While bitcoin might be the biggest crypto by market capitalization, Ethereum is the world’s biggest cryptocurrency in terms of daily transactions and use.
Ethereum is popular because it has become the standard that other projects build specific functionality on, such as DeFi, NFTs, prediction markets, and gaming.
By building on Ethereum, decentralized applications gain a foothold in an expanding market, are able to benefit from Ethereum’s mature infrastructure and ecosystem (like wallets, for example), and they “interoperate” or easily communicate and work with other ETH-based applications.
One interesting development in the crypto space is that the relationship between Bitcoin communities and Ethereum communities can sometimes be contentious because of the competition for the top spot in the crypto markets. But as more time goes on, the use case and need for both Bitcoin and Ethereum becomes increasingly clear, which will likely lead to long term success for both projects.