Ethereum - The Beginning of Smart Contracts
What is Ethereum
Ethereum is a smart contract platform created by Vitalik Buterin in 2015. While Bitcoin focuses on being a digital currency, Ethereum is a programmable blockchain capable of running various decentralized applications (dApps).
Ether (ETH), Ethereum's native currency, is the second-largest cryptocurrency by market cap.
Smart Contracts
Smart contracts are programs that automatically execute when predetermined conditions are met.
For example:
- "When A sends 1 ETH to B, automatically transfer B's NFT to A"
- "On a specific date, automatically distribute deposited funds"
All these processes execute automatically on the blockchain without intermediaries.
Differences Between Bitcoin and Ethereum
| Aspect | Bitcoin (BTC) | Ethereum (ETH) |
|---|---|---|
| Launch | 2009 | 2015 |
| Purpose | Digital currency, store of value | Smart contract platform |
| Consensus | Proof of Work (PoW) | Proof of Stake (PoS) |
| Block Time | ~10 minutes | ~12 seconds |
| Total Supply | Fixed at 21 million | No limit (with burn mechanism) |
| Programming | Limited | Turing-complete (EVM) |
If Bitcoin is digital gold, Ethereum can be compared to a digital operating system.
Ethereum Virtual Machine (EVM)
The EVM (Ethereum Virtual Machine) is a global computer that executes smart contracts. Developers write smart contracts in Solidity and run them on the EVM.
Key EVM concepts:
- Gas: The unit of fees required to execute smart contracts
- Gas Fee: The actual fee, which varies based on network congestion
- Gas Limit: The maximum amount of gas to use for a transaction
Ethereum's Major Transition: The Merge
In September 2022, Ethereum transitioned from Proof of Work (PoW) to Proof of Stake (PoS). This was called "The Merge."
What Changed
- 99.95% reduction in energy consumption: No mining required
- Staking introduced: Participate as a validator by depositing 32 ETH
- Reduced ETH issuance: New issuance significantly decreased, enabling deflationary potential
The Ethereum Ecosystem
DeFi (Decentralized Finance)
Most decentralized financial services operate on Ethereum. Uniswap, Aave, and MakerDAO are prominent examples.
NFTs
Non-fungible tokens (NFTs) are most actively issued and traded on the Ethereum blockchain.
Layer 2
Solutions to address Ethereum's scalability issues. Arbitrum, Optimism, and Base provide faster and cheaper transactions on top of Ethereum.
DAOs
Decentralized Autonomous Organizations are governance systems based on smart contracts.
Ethereum's Challenges
- Gas fee volatility: Fees can spike during network congestion
- Scalability: Layer 2 solutions are evolving but not yet complete
- Competition: Growth of competing platforms like Solana and Avalanche
Track Ethereum on BitInsight
On BitInsight, you can check Ethereum's real-time prices, price differences across major exchanges, and on-chain data.