What is Ethereum and How Does it Work?: A Beginner’s Guide
What is Ethereum?
Ethereum is a decentralized software platform powered by blockchain technology. It has its own native cryptocurrency, Ether (ETH)—the 2nd biggest cryptocurrency by market cap globally.
Ethereum is built to be scalable, and programmable. Ethereum can be used by anyone who wants to create any secure decentralized technology like cryptocurrency, smart contracts, decentralized applications, and DeFi, among many others.
While Bitcoin and Ethereum have similar attributes, Ethereum recently changed from using the Proof of Work to Proof of Stake consensus. With the changed mechanism, Ethereum now doesn’t require energy-intensive computing (mining) when validating blocks. Moreover, it also uses the Casper-FFG and the algorithm LMD Ghost, to monitor the consensus and manage how validators will receive rewards for work or get punished for dishonesty.
What can Ethereum do?
Peer-to-peer Network
Ethereum allows users to move funds or make agreements directly without using any intermediary.
No Government Control
No government or company has control over the Ethereum network. More so, it was launched by Vitalik Buterin and Joe Lubin in 2015.
Certainty and Guarantees
Customers and developers alike are assured to have security guarantees on funds exchange as well as rule implementations.
Composable Products
DApps built on the same network (Ethereum), have the capability to build off each other; resulting in a better product experience.
Advantages of Using Ethereum
- Ethereum provides cheap and fast cross-border payments.
- To send and receive money with external intermediaries.
- Have control over your funds and data.
- Ethereum empowers gamers, developers, and creators.
Source: Ethereum.org
The Future of Ethereum
The transition of Ethereum to Proof of Work is already historic as it is. Now, with Ethereum’s two layers, (execution and consensus layers), the network will grow massively and help address the pre-existing network congestion problems that drive up gas fees.
What’s more, Ethereum is planning to implement Sharding sometime this year, 2023. Sharding will address the scalability of the network and reduce the time needed to reach a sharding consensus.
Notably, according to analysts, Ethereum is set to materialize Web3 and expand its support on Gaming, NFTs, and Metaverse in the future.
Nonetheless, as the history of Ethereum is still being written, we are yet to expect some more upgrades and advancements on the network, for the users. We hope you learned a lot from this Ethereum guide for beginners.
