Ethereum is one of the most important blockchains in the world of cryptocurrencies and responsible for many of the revolutionary technologies that seek to transform the world as we know it.
the cryptocurrency Ethereum, is one of the largest cryptocurrency project in the cryptocurrency industry. Ethereum itself is a digital platform that is based on blockchain technology. Its goal is to become a blockchain capable of running decentralized applications.
To achieve this, this project has a blockchain and a cryptocurrency with unique characteristics. Among them the ability to use and create smart contracts and new tokens. Both are powerful functionalities, which allow it to establish itself as one of the most complete and powerful blockchains in the crypto world.
The network’s currency is called Ether (ETH), and like Bitcoin (BTC), Ether is characterized by being a cryptocurrency that can be used as a payment method between pairs. Another of the similarities with Bitcoin and other cryptocurrencies is that it is not controlled by any government or regulatory body. Its development is marked by the Ethereum Foundation, its Core Team and the community it supports and supports. Another important point is that it uses the Proof-of-Work (PoW) consensus protocol, using the Ethash algorithm. Although this may change in the short term with the launch of Ethereum 2.0 and the jump to being a cryptocurrency using the Proof of Stake (PoS) protocol.
The development of this blockchain began thanks to the work of Vitalik Buterin in 2013.
Ethereum technical characteristics
Mining
Ethereum is a cryptocurrency that works thanks to the PoW consensus protocol using the Ethash algorithm. This algorithm is designed to be highly demanding and targeted for GPU mining. For this reason, mining was initially highly decentralized and diverse.
Ethash uses the Keccak hash function, also known as SHA-3. In this way, the algorithm seeks to use highly secure cryptographic elements. At the same time, Ethash is intended to be memory and cache intensive. Both characteristics are aimed at offering resistance to ASIC mining and avoiding its centralization.
Cryptocurrency issuance
This cryptocurrency currently has an annual issuance limited to 18 million Ethers per year. In other words, each year the mining activity can generate a maximum of 18 million new coins. However, the total emission is infinite. To achieve the issuance, the network has a rather peculiar coinbase transaction system. In the first place, if a miner finds the solution to a block, he receives 2 ETH as a reward. But if another miner also finds a solution to that block at that time, that miner also receives a reward. In this way, the coins are issued on the Ethereum blockchain.
The initial issuance of Ether on the blockchain was related to the pre-sale that was made to promote the project. Back then, a total of 60 million Ethers were created. Of these, 12 million were used to create a development fund, this is the beginning of the well-known Ethereum Foundation.
However, Ethereum is an ever-evolving blockchain. One of the major changes that will be seen in Ethereum in the coming years will be the abandonment of PoW to move to a PoS mining system. With this change, Ethereum will start to create cryptocurrencies for its blockchain in a completely different way than the current one, avoiding the use of miners and encouraging greater economic participation in the blockchain.
Gas, the basis of everything
Gas is a concept very typical of the Ethereum network. This is used to measure the work done within the blockchain. Each action in the blockchain as an operation or a set of operations has a specific cost that is given in Gas units.
Among the functions of Gas within the blockchain we can mention:
- Assigns a cost to the execution of tasks. Gas is used as a unit to measure the cost of performing a certain action within the blockchain. Each action has a cost in Gas and a set of actions carried out adds the total cost of said operation. In this way, we can see Gas as the price to pay for performing actions within the blockchain.
- Helps improve system security. As each action has a price, this helps prevent the blockchain from stopping its operation and undermining its security. This is possible because Gas helps protect the network from spam attacks. For this, the gas implies an expense that prevents DDoS attacks from being easily carried out on the network, attacks that can leave millions of users without service.
- Reward the miners. Actions on the blockchain depend on their execution on the hardware that is in the hands of the miners. To pay for this use there is Gas.
Block size and generation time
Ethereum is characterized by calculating the size of its blocks in a somewhat particular way. Unlike Bitcoin, where its size is limited to 1 MB, in Ethereum its size is limited to a specific amount of Gas. To be more precise, the Ethereum block size limit is 12,500,000 Gas (as of February 2021). This means that each block can contain a total of operations as long as it does not exceed the specified Gas limit.
In general, a block can contain about 500 payment transactions between accounts, the simplest of the possible transactions. In the case of a smart contract, the operations of one of them can easily reach the Gas limit of each block.
Another difference with Bitcoin is the block generation time. In Bitcoin, each block is generated every 10 minutes, while in Ethereum this value is variable. In principle, each block was generated approximately every 16 seconds. This value increased to 30 seconds in 2017, and currently stands at 14 seconds on average. This means that it is generally faster in providing confirmations than Bitcoin, which has a positive impact on its capabilities as a payment system.
Smart Contracts
A smart contract or smart contract is a computer program that executes certain pre-established actions in its code under certain conditions. Actions that have been reviewed and accepted by the different parties that have “signed” said contract. In this way, the smart contract enforces its programmed conditions by presenting a response according to its clauses in a completely autonomous way.
Smart contract technology is one of the fundamental bases of Ethereum and the operation of many of its characteristics. A situation that can be seen especially in the tokens and DApps of this blockchain.
Ethereum Virtual Machine
The Ethereum Virtual Machine (EVM), is a software whose objective is to serve as an abstraction layer in the execution of code that is stored in the blockchain. With this, it is sought to prevent a malicious programmer of a DApp or smart contract from threatening the security of the network nodes and with the network itself.
To achieve this, EVM performs a complete abstraction of the system, managing access to computer resources and limiting its actions in a controlled environment or virtual machine. But in addition to this, EVM also seeks to simplify the development and update of applications and features available for DApps. In other words, EVM was created both to protect and to allow to extend the functions of Ethereum in a simple way.
EVM allows the operation of smart contracts and DApps thanks to the use of the Solidity programming language. This language allows you to program all the logic behind DApps and smart contracts while allowing decentralized execution of your code using EVM.
Ethereum uses
Ethereum is one of the cryptocurrencies and blockchain with the greatest variety of uses that exist today, among them we can highlight:
Accept and receive payments quickly and safely
One of the great features since its inception has been its ability to handle payment much faster than Bitcoin. This is due to the short block production period that ranges from 10 to 30 seconds and the scalability of the blockchain.
Realization of ICO
Although the creation of tokens and ICOs was not initiated by Ethereum, but by the so-called colored coins, the truth is that this project offered tools to greatly facilitate this work. With the creation of the ERC-20 token, Ethereum became the “Father of ICOs” and with reasons for it. With the creation of ERC-20, creating a token was no longer a highly complex task.
Currently, it is enough to carry out a smart contract following the ERC-20 token model and you had the job done. This gave an important boost to the blockchain and allowed the diversification of the cryptocurrency market, opening up new possibilities.
In fact, there are currently at least 191,000 ERC-20 tokens created, each with unique characteristics running on its blockchain.
Smarts contracts and DApps
Smart contracts and DApps are one of the biggest uses for Ethereum. The capabilities of these two tools are practically endless. Since the creation of smart contracts to buy-sell or negotiate goods or services, its usefulness is only limited by imagination. On the other hand, DApps are a revolution. These are capable of creating completely decentralized, uncensored, secure and financially self-sustaining applications. We can also mention the oracle platforms that are built on this network, as in the case of Augur.
Companies using Ethereum
Ethereum’s capabilities to use smart contracts, easily build tokens, and deploy DApps has captured the attention of many companies globally. This has meant that the development of Ethereum has had the direct or indirect support of a large business group interested in developing its technology. All this group of companies have created the so-called Ethereum Enterprise Alliance (EEA) which has more than 100 members. They stand out from them
- Accenture, a dedicated technology services and consulting company.
- AMD, a leading company in the development of chipset, CPU and graphics cards.
- BBVA, a Spanish bank with a worldwide presence.
- Banco Santander, another Spanish bank with a worldwide presence.
- BP Ventures, the investment arm of the oil company BP.
- Cisco, the world’s largest networking company.
- Delloite, one of the world’s largest legal and financial consulting, auditing services companies.
- GoChain, one of the most important companies in the development of DApps.
- Hyperledger, the world’s largest open source and enterprise blockchain development project.
- JP Morgan, one of the largest financial firms in the world.
- Microsoft, the world’s largest software development and technology company and responsible for Windows development.
- VMWare, the most important company in the development of virtual machines and virtual environment integration solutions.
Ethereum advantages
- It is a multipurpose blockchain thanks to its ability to integrate and use smart contacts.
- The use and development of EVM confers a high level of security to execute smart contracts and DApps in a completely decentralized and secure way.
- It has a fast production of blocks which allows it to have a speed of confirmation of transactions much faster than Bitcoin and other cryptocurrencies.
- Development is not controlled by any central authority, its Development Core is completely decentralized and decisions are made by consensus. In addition, the community has a high impact on decisions about the development of the blockchain.
