Why Ethereum Deserves Your Attention
What is Ethereum?
Launched in 2015, Ethereum is the community-run technology powering the cryptocurrency, ether (ETH) and thousands of decentralized applications. With its open-source, blockchain-based software, Ethereum enables Smart Contracts and Distributed Applications (ĐApps) to be built and run without any downtime, fraud, control, or interference from a third party. It has emerged as one of the most exciting and proven projects in the cryptocurrency space. As the second-largest cryptocurrency by market cap, Ethereum proposed to utilize blockchain technology not only for maintaining a decentralized payment network but also for storing computer code which can be used to power tamper-proof decentralized financial contracts and applications. Ether was intended to complement rather than compete with bitcoin, but it has nonetheless emerged as a competitor on cryptocurrency exchanges. Transactions on the Ethereum network may contain executable code, while data affixed to Bitcoin network transactions are generally only for keeping notes. Other differences include block time (an ether transaction is confirmed in seconds compared to minutes for bitcoin) and the algorithms that they run on (Ethereum uses ethash while Bitcoin uses SHA-256).
The Ethereum community includes talented people of many different backgrounds. From developers, to artists, to accountants, there are countless ways to get involved. Here’s a list of resources to get you started:
- r/ethereum — all things Ethereum
- r/ethfinance — the financial side of Ethereum, including DeFi
- r/ethdev — focused on Ethereum development
- r/ethtrader — trends & market analysis
- r/EtherMining — focused on securing the Ethereum Network (mining)
- Chat rooms
- Eth R&D Discord server
- Ethereum Hackers — Discord chat run by ETHGlobal: an online community for Ethereum hackers all over the world
- The Ethereum community is very active on Twitter — not sure where to start?
- List of influential Ethereum twitter accounts
How is the project governed?
Ethereum works as an open software platform functioning on blockchain technology. This blockchain is hosted on many computers around the world, making it decentralised. Each computer has a copy of the blockchain, and there has to be widespread agreement before any changes can be implemented to the network.
In October 2015, a development governance was proposed as the Ethereum Improvement Proposal (EIP), standardized on EIP-1. The core development group and community were to gain consensus by a process regulated EIP. An EIP is a design document providing information to the Ethereum community, or describing a new feature for Ethereum or its processes or environment. The EIP should provide a concise technical specification of the feature and a rationale for the feature. The EIP author is responsible for building consensus within the community and documenting dissenting opinions.
Ethereum tokenomics began to shift as it has been undergoing major upgrades since 2020. We have Eth2, EIP 1559, and increasing adoption of Layer 2 scaling solutions in prominent Ethereum protocols. These changes aim to increase Ethereum’s scalability, manage network congestion, lower the inaccessibly high gas fees, and improve network efficiency. These changes are happening in the background of the increasing demand for NFTs and DeFi which has led to surging fees and the success of competing chains like Solana and Binance Smart Chain, and ethereum layer 2’s like Polygon.
First, we have to talk about ETH2 which is broken down into 2 main updates: Proof-of-Stake and sharding. ETH is shifting away from PoW where blockchain transactions are verified by miners who solve cryptographic problems that require high computational power and energy. Meanwhile, in PoS, users stake and lock in 32 ETH to become a validator, which creates and validates blocks like miners under PoW. However, they do not have to compete to solve a problem, but are rather chosen at random to create blocks and receive rewards. Rewards are thus received in proportion to the amount of ETH staked. Not only does PoS reduce energy consumption of the network but also support decentralization by reducing expensive hardware requirements.
The scalability aspect, meanwhile, is addressed by Eth2’s sharding which is splitting large databases into smaller parts called shards. This increases scalability as validators do not need to store data for the entire network, but just for the shard they are allocated to.
Ethereum is top dog for developers. The Ethereum community includes tens of thousands of developers, technologists, users, miners, HODLers, and enthusiasts all over the world. Ethereum has 4x more developers than any other crypto ecosystem. Code commit volume is consistent and there is still plenty of room for expansion. Smart contracts account for 40% of all developers with applications taking the second most. Over the past few years, Defi and infrastructure developers have both increased significantly. “More than 300 new developers per month are joining Ethereum,” Maria Shen, a partner at Electric Capital:. “Ethereum has continuously grown through Crypto Winter.”