What is the Ethereum
Ethereum (ETH) is widely traded around the world as the second coin after Bitcoin (BTC).
It is popular because of its unique characteristics and is widely recognized as one of the virtual currencies (cryptographic assets), but surprisingly it seems that its true appearance is not well known. Therefore, this time we will introduce the origins, features, and future prospects of Ethereum.
- What is Ethereum?
Ethereum is the second largest cryptocurrency with a market capitalization (as of February 2020). First of all, I will give you an overview of Ethereum and a detailed introduction to its distinctive feature, “smart contracts .” We will also explain ” DApps (Distributed Applications) ”.
Ethereum was born in July 2015. After that, it quickly became popular all over the world and became a major coin handled by most sales offices and exchanges. But strictly speaking, Ethereum is not a virtual currency itself. It is a decentralized management platform that incorporates a function called “smart contract” into the blockchain .
Until then, blockchains were chains of blocks with keys to store information. However, Ethereum has made it possible to store not only information but also applications in that block. And when certain conditions are met, the application can be started automatically.
The platform that provides such an environment is Ethereum, and the cryptocurrency used in that environment is a virtual currency called “Ether” . However, the name Ethereum is now well established as a term that refers to the virtual currency itself.
- Four benefits of Ethereum (ETH)
Ethereum is by far the most popular altcoin and has a market capitalization second only to Bitcoin (as of October 2020). So, I would like to explain four excellent advantages of Ethereum.
- Remittance speed
- Issuance limit
1. Remittance speed
In cryptocurrencies, the content of a transaction must be approved in order to complete one transaction. The approval work is mining , but in Bitcoin it is done “once every 10 minutes”, whereas in Ethereum it is “once every 15 seconds” . Therefore, speedy payment is possible.
2. Issuance limit
Ethereum has no issuance limit. Also, unlike Bitcoin, there is no “half-life” in which the amount of up supply decreases as the number of issued coins increases . Therefore, it has the advantage that it is easier to maintain a stable price than Bitcoin .
The blockchain technology used in virtual currencies is resistant to data tampering and is inherently highly reliable. By combining it with smart contract technology, it can be operated as a more robust system . Even if operational security holes are targeted, it can be said that the Ethereum system itself is unlikely to be hacked.
Originally created for the purpose of application development, Ethereum has a wide variety of uses, including the DApps mentioned above.
Here, we will introduce DeFi (decentralized finance) and NFT (non-substitutable token), which are as well known as DApps, among the systems based on Ethereum .
- Two disadvantages of Ethereum (ETH)
Ethereum has many advantages like those, but it also has disadvantages like other coins.
Therefore, I would like to explain two disadvantages of Ethereum.
- Scalability issues
- Harmful effects of smart contracts
1. Scalability issues
As explained in the benefits of Ethereum, Ethereum can approve transactions in a short amount of time. However, even if one block of the blockchain can be processed in about 15 seconds, if the number increases, approval will still take time.
Moreover, since Ethereum writes not only transaction information but also a program that executes smart contracts in the block, the amount of information inevitably increases, and as a result, the transaction speed decreases.
These problems have become so serious and surfaced that Ethereum is widely used. The only way to solve this is to increase the processing speed of the network, that is, the block generation speed, and countermeasures for that are being examined and verified.
2. Harmful effects of smart contracts
Blockchain is resistant to hacking and data cannot be tampered with. And smart contracts have made that security even more robust. However, on the contrary, if there is a mistake in the program or information provided in Ethereum, it will be very difficult to deal with it.
For example, in the past, Ethereum has experienced an incident in which 3.6 million ETH was stolen due to operational deficiencies. At this time, there was a lot of discussion about how to deal with the situation, but the management group turned the hands of the clock backwards and “did not have all the subsequent transaction data including the theft case. I made the decision.
The reason why we had to take such measures is probably because of Ethereum’s “high resistance to tampering”. The Ethereum community was divided into pros and cons over this hard-line approach, resulting in a split coin called the “Ethereum Classic.”
Therefore, in the future, if a similar incident occurs, or if a bug or information error occurs, it is possible that the same situation will develop and cause confusion.
- How Ethereum works
Features of smart contracts and Dapps
DApps using smart contracts have the advantage that all transactions can be executed programmatically, so the cost is low, and the contents of transactions and contracts are always protected, so the risk of fraud such as currency escape can be reduced.
It also has the following features.
- Operation in a decentralized style that does not require a central administrator
- Anyone can use and refer to it for free (highly transparent)
- Ensuring safety with blockchain
- It will be a very easy-to-use online development platform.