Ethereum, created in 2015, is a blockchain platform that goes beyond the use case of digital currency. Though most individuals associate Ethereum with its own cryptocurrency, Ether (ETH), the true value is in the potential for smart contract execution—self-executing code that facilitates decentralized applications (DApps). The aim of Ethereum is to create a permissionless, trustless network where applications may operate without central management or third parties.
Ethereum vs. Bitcoin: Going beyond digital money
At first glance, Ethereum and Bitcoin seem to be one and the same in that they both use blockchain technology as well as possess a currency of their own. While Bitcoin was created to be a decentralized alternative to money, Ethereum was conceptualized as a decentralized platform for computation. Think of Bitcoin as virtual gold, and Ethereum as the platform for decentralized software. Their authors wanted to build a world where contracts and apps would be able to make themselves execute automatically, with no intermediaries like banks or tech companies involved.
What are smart contracts?
Smart contracts are Ethereum's selling point. They are computer programs living on the blockchain that will automatically execute when given certain conditions. For example, a smart contract could transmit a digital asset automatically when payment is received—no lawyer, bank, or escrow agent necessary. Since the contracts are unalterable and running in the blockchain, they are tamperproof and transparent.
Smart contracts eliminate the need for trust among parties, as the rules are programmed and clear to all. This paved the way for decentralized finance (DeFi), non-fungible tokens (NFTs), and various other innovations.
Decentralized applications (DApps)
DApps are Ethereum-based applications developed through the use of smart contracts. Unlike conventional apps, DApps operate on a decentralized network of computers, which makes them censorship-resistant and less prone to downtime. Well-known DApps include decentralized exchanges such as Uniswap, lending protocols such as Aave, and games such as Axie Infinity.
All DApps exist independently and are controlled by code instead of a central power. One accesses these applications through Ethereum wallets such as MetaMask, which offer control over funds and digital identities.
Why Ethereum matters
Ethereum's influence in the world can already be seen in various industries ranging from finance to gaming. Its open-source platform leads to innovation and allows any coder to create their own applications. In the long term, Ethereum aims to reorganize the internet from corporate control to user- and developer-controlled systems.
In 2022, Ethereum also transitioned to proof-of-stake through the "Merge," which significantly reduced its energy consumption and became more scalable and sustainable—making it the developers' blockchain of choice.
Ethereum has revolutionised what blockchain can do. It's no longer about sending and receiving money digitally—it's about creating a new foundation for the digital economy. With smart contracts and DApps at its core, Ethereum remains an essential driving force in the creation of decentralised technologies.
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