What is Ethereum(ETH)? Ethereum History
What is Ethereum(ETH)? What is the difference between Bitcoin and Ethereum? Learn all about Ethereum and ETH coin tokenomics now!
There is a truth that: When asked “What is Ethereum?” 90% of crypto market participants answered ETH. However, isn’t that true?
In this article, I have designed and arranged the knowledge about Ethereum and ETH coin in the most understandable flow for newcomers to this cryptocurrency market.
What is Ethereum(ETH)?
Ethereum is an open-source, distributed computing platform based on blockchain technology that has the ability to execute smart contracts – that is, the terms written in the contract will be executed automatically when the previous conditions are met. that is satisfied, no one can interfere.
At the same time, Ethereum also allows developers to build decentralized applications (DApps) and decentralized autonomous organizations (DAOs).
- Decentralized applications (DApps – Decentralized Applications) are independently deployed software, not on a single server, but distributed in a distributed manner on decentralized repositories and can be written in any language.
- Decentralized Autonomous Organizations (DAOs) are organizations run by members based on a set of rules that are encoded in code. All members have the right to vote on important decisions of the DAOs. In return, members participating in DAOs must have a reward for participating in the operation of DAOs.
The idea was born with Mastercoin
In October 2013, Vitalik Buterin, a young programmer and Bitcoin enthusiast, proposed an improved solution for the Mastercoin (now OmniLayer) project.
In that proposal, Vitalik came up with a solution that allows MasterCoin to support more types of contracts without having to add complex features.
Although the Mastercoin development team was impressed with Vitalik’s proposal, they did not apply the solution to their project.
Vitalik Buterin – the father of Ethereum
The Beginning of Ethereum
After MasterCoin failed to adopt his solution, Vitalik continued his research and realized that: Smart contracts can be completely generalized.
In November 2013, Vitalik first shared the outline whitepaper of Ethereum. Only a few dozen people had access to and pre-read this sketch.
They then give feedback, allowing Vitalik to finalize the whitepaper for Ethereum.
Since sharing the whitepaper, Vitalik has added a teammate to build Ethereum and that person is: Gavin Wood.
Gavin Wood was the first to proactively contact Vitalik and offer to help with his C++ programming skills.
In the summer of 2014, Gavin Wood published a yellow paper for Ethereum. At the same time, Vitalik also announced that Ethereum will be developed by the non-profit organization Ethereum Foundation.
After a year of construction and development, in June 2015 the first block of Ethereum was mined.
It marks the official formation of the Ethereum Blockchain – One of the most important blockchains in the entire cryptocurrency ecosystem today.
The DAO Hack Incident
Ethereum has been operating for about a year and has begun to form its own ecosystem. In it, it is impossible not to mention The DAO project – the first decentralized autonomous investment fund built on Ethereum.
The DAO was established and raised capital in May 2016 with a total value of up to 150 million USD.
But after 1 month, The DAO encountered an extremely serious problem that caused the Ethereum blockchain to split later. That incident was called: The DAO Hack.
On June 17, 2016, a hacker activated a split vulnerability in the code of The DAO smart contract.
It allows the hacker to set up a “child DAO” from The DAO and transfer about $50 million into the wallet of the “child DAO”.
The smart contract of The DAO stipulates that: The money in the wallet will have to be locked for 28 days before the owner of the wallet officially has the right to use it.
Because it is forked from The DAO, the “child DAO” will have the same smart contract structure as The DAO. Therefore, the $50 million in the wallet of the “child DAO” had to wait 28 days before the hacker had full access to this asset.
The DAO Hack incident with a loss of up to 50 million dollars
Faced with that situation, Vitalik could not stand to see the image of Ethereum deteriorate in the eyes of the community.
Vitalik had a solution through a soft fork proposal, blocking all transactions from The DAO and “child DAO” wallet addresses.
It also urges miners to still confirm transactions as usual and be ready to install when the soft fork is approved.
The soft fork update made it impossible for hackers to withdraw after 28 days of waiting. Phase 1 has been completed by freezing the funds in the “child DAO” wallet.
Then how to get the money back from the “child DAO” wallet?
Hard Fork Ethereum
Hours before the soft fork was approved, a few community members discovered a bug that made Ethereum’s network vulnerable to DoS (attack of service) attacks.
To protect the network, the Ethereum community has agreed to the only option: The Hard Fork Ethereum – change the rules and regulations being applied on the Ethereum blockchain to make blocks, transactions translations confirmed by the old rule become invalid.
Hard fork is the last resort to both recover the stolen funds in the “child DAO”, and help the Ethereum network to avoid the risk of DoS attack.
The entire Ethereum community has decided to conduct a hard fork at block 1,920,000. This is the block before the “child DAO” split from The DAO.
Although the lost funds were recovered, the consequences of the hard fork caused Ethereum’s network to split in two – Ethereum and Ethereum Classic.
How Ethereum Blockchain Works
Before understanding Ethereum, you need to understand how Blockchain works.
Basically, Ethereum’s Blockchain is similar to other Blockchains, it is composed of a network of computers called Nodes.
To participate in the network, nodes need to install Ethereum Client software such as Geth, Parity,…
When installing the Ethereum Client, it means that the nodes will have to run a virtual machine program, the Ethereum Virtual Machine (EVM). EVM will be responsible for executing Smart Contracts (smart contracts).
When developers want to build decentralized applications (dapps) on Ethereum, they need to deploy smart contracts through the Solidity programming language.
How Ethereum Virtual Machine (EVM) works on Ethereum Blockchain
And to trigger the execution of operations such as smart contracts, transaction orders, etc., the network needs a fee called “Gas.” Gas fees in the Ethereum network will be paid in digital currency called “Gas”. Ether (Ξ or ETH).
When the transaction is executed, this is when it is necessary to confirm the transaction is valid or not.
In Ethereum’s network, the component responsible for confirming this transaction is called – Miner Node.
In order for the network to operate independently and consistently, miner nodes must obey the consensus law Consensus (also known as the consensus mechanism).
Ethereum uses a consensus mechanism called Proof of Work (PoW), which means that the miner nodes have to prove the work they have completed and notify the entire network.
Then, other miner nodes in the network confirm whether this proof is valid or not. Jobs here could be:
- Generate new block by finding the solution through algorithm – Ethash.
- Confirm transactions on the network.
Once the proof is passed (ie valid), the transaction data will be written to the Ethereum Blockchain and cannot be changed.
Detailed information about ETH coin
What is ETH?
ETH or Ether (symbol: Ξ) is the official cryptocurrency of the Ethereum blockchain. In Ethereum’s network, ETH acts as the fuel to execute transaction-related activities (Gas fees).
Just think simply: The Ethereum blockchain is like a machine. In order for the machine to run smoothly, it needs fuel that is “ETH”.
ETH rate today
Currently, you can track the ETH token price on idolmeta.net right here: https://idolmeta.net/
Key Metrics ETH
- Token Name: Ethereum.
- Ticker: ETH.
- Blockchain: Ethereum.
- Token Standard: ERC-20.
- Type: Utility.
- Max Supply: Unlimited.
- Circulating Supply: 116,569,797 ETH.
Initial Token Supply Distribution
As I said above, the development team has pre-mine more than 72 million ETH and distributed as follows:
- Ethereum Dev Team holds 12 million ETH.
- The rest will be sold to investors through ICO.
The chart shows the Supply of ETH. Source: https://etherscan.io/stat/supply
The process of selling Ethereum’s ETH coin takes 42 days with different prices from time to time:
- The starting price is specified 1 BTC buys 2000 ETH.
- In the end, 1 BTC can only buy 1337 ETH.
The chart shows the amount of ETH sold each day. Source: https://slacknation.github.io/medium/001/
As a result, after the sale rounds, Ethereum sold nearly 60 million ETH for more than 31.5 thousand Bitcoins (BTC), with a value equivalent to 18 million dollars at that time.
Token Use case
ETH will be used for the following purposes:
Gas Fees: Like BTC, ETH is used to pay for Gas fees in the Ethereum network. This fee is not fixed but it depends on the network status of Ethereum. If the network is overloaded, gas fees will increase and vice versa. However, the normal gas fee is quite cheap, only about $0.2 – $0.7, much cheaper than the transaction fee of Bitcoin.
Ethereum Confirmation Time and Gas Fee
However, around the end of 2020, due to the popularity of Uniswap, Yield farming, homeowners began to use services on Ethereum a lot, leading to very high gas fees, averaging around $20 – $30 per one transaction.
Then, in early 2021, the MEV problem began – when miners began to abuse their power to prioritize transactions that pay higher fees, not in order. Priority will be given to those who come first to process the transaction first.
Therefore, bots began to compete with each other to pay higher gas for the right to include transactions in the block. This once again pushed gas up very high, averaging a transaction costing $50-$60, culminating in several hundred dollars.
But then, there were measures to deal with MEVs, helping to reduce gas quite cheaply.
Other fees: ETH is used as a fee to pay for other services.
Block Reward: Ethereum uses Proof of Work (PoW) consensus so the block reward in Ethereum’s network is ETH. Initially this block reward is 5 ETH. Through many network upgrades, Ethereum’s current block reward is at 2 ETH per block.
Ethereum Token Standards (Token Standard)
ERCs (Ethereum Request for Comments) are the set of rules needed to deploy tokens on the Ethereum network. These standards are used by developers to deploy smart contracts on the Ethereum Blockchain platform.
Before becoming an adopted standard on the Ethereum blockchain, ERC must be modified, commented on, and accepted by the community through the EIP (Ethereum Improvement Proposal).
What is ERC20?
ERC20 is a set of general rules and regulations for the issuance of tokens on the Ethereum platform, first proposed by Vitalik Buterin in June 2015.
The advent of the ERC20 standard has helped developers have a common standard when deploying Fungible Tokens on the Ethereum platform.
At the same time, ERC20 makes it easier than ever to create a token on the Ethereum blockchain. That, combined with the explosion of the ICO crowdfunding movement in 2017.
Below is the set of ERC20 rules, with 6 mandatory and 3 optional.
6 mandatory rules, including:
- TotalSupply: Total number of tokens issued.
- BalanceOf: Check the balance of tokens in each Ethereum wallet.
- Transfer: This function will manage the transfer of tokens to the user’s wallet address.
- TransferFrom: Allows token holders to exchange with each other.
- Approve: Check each transaction and compare with the total supply to make sure there is no shortage or excess of tokens.
- Allowance: Check the balance of tokens to see if the wallet address has enough tokens to transfer.
3 optional rules, including:
- Token Name: Token name.
- Symbol: Token code.
- Decimal (up to 18): The smallest decimal number.
To check information the basic rules of a particular token under ERC20. Guys follow these steps:
- Go to Etherscan, find the token you want to see.
- Then click on the Read Contract tab, here you will see all the required information of that token.
For example, the picture below is Konomi (KONO):
Basic Rules of KONO
What is ERC721?
ERC721 is a set of standards for the issuance of Non-Fungible Tokens (NFTs) on the Ethereum platform, proposed by William Entriken, Dieter Shirley, Jacob Evans and Nastassia Sachs in January 2018.
NFT (short for Non-Fungible Token) is understood as a type of token that represents something unique. Therefore, one NFT cannot be swapped with another NFT. Example: A token representing a Spiderman movie ticket is not interchangeable with a token representing an Avenger movie ticket.
Thanks to the ERC721 standard, developers on Ethereum have opened up a new ecosystem of dapps using NFTs. With the first HIT, it is impossible not to mention CryptoKitties, a cat-based DApps on the Ethereum platform that has caused a fever in the crypto community for a long time.
CryptoKitties – Ethereum-based cat-raising DApp according to ERC721 standard
Some other ERC standards
In addition to ERC20 and ERC721, Ethereum also has 2 other token standards that I think you should know about, including:
- ERC777: The standard improves the problems encountered by ERC20 and it is expected to overtake ERC20 by its superiority.
- ERC1155: Standard for multiple tokens including Non-Fungible Token and Fungible Token. This is a combination of the ERC20 and ERC721 standards, proposed by the CTO of the Enjin Coin project to the Ethereum community in June 2018.
In addition, you can go to https://eips.ethereum.org/erc to refer to the new EIPs and ERCs of Ethereum.
Compare Ethereum vs Bitcoin
The most basic difference between Ethereum and Bitcoin is the vision of these two Blockchains.
While Bitcoin was founded with the vision of becoming a peer-to-peer payment system, Ethereum has a vision of becoming the foundation that makes it easier to develop Dapps.
Learn more about what Bitcoin is with all the details about the history, nature, mechanism of action and how to invest Bitcoin!
Bitcoin vs Ethereum Comparison Table
In addition, as seen on the comparison table, there are some technical differences between Ethereum and Bitcoin such as:
- Total Supply: While Bitcoin’s total supply is fixed at 21 million BTC, Ethereum’s total supply is not fixed.
- Algorithm: Although the Proof of Work (PoW) consensus mechanism is similar, Ethereum uses the Ethash algorithm, which is different from Bitcoin (SHA-56).
- Transaction per seconds: Bitcoin’s transaction speed is only about 7 TPS / sec, this number of Ethereum is about 20-25 TPS / s, nearly 3 times that of Bitcoin.
- How it first appeared: The first Bitcoin appeared after Satoshi Nakamoto mined the first block (Genesis Block) of the Bitcoin blockchain. Meanwhile, Ethereum came through ICO crowdfunding after pre-mining nearly 72 million ETH.
- Creator: The founder of Bitcoin is Satoshi Nakamoto, an anonymous individual or organization. The founder of Ethereum is Vitalik Buterin, a Canadian programmer (identifier).
Organizations of Ethereum(ETH)
These are organizations that play an important role in promoting the development of the entire Ethereum ecosystem. This includes the following three organizations:
- Ethereum Foundation: This is the non-profit organization responsible for developing the features of the Ethereum Blockchain. It was founded in 2014 and has its headquarters in Switzerland.
- Enterprise Ethereum Alliance: This is the organization that will be responsible for promoting and expanding the use of Ethereum blockchain technology for ALL businesses.
- Consensys: This is an important company for Ethereum in particular and Crypto in general. For Ethereum, Consensys is like a nursery for projects running on Ethereum’s platform.
Should you invest in Ethereum (ETH)?
To answer this million dollar question. My brothers and I went to analyze the use cases that can affect the price of ETH. From there, you will have a look and evaluation of ETH before investing in it.
ETH is used to pay transaction fees in the Ethereum network. The transaction fee will be borne by the miners who mine ETH in the Ethereum network.
In order for the total amount of transaction fees to increase, the amount of transactions must increase, and this is shown by the trend of the number of Dapps growing on the platform of Ethereum.
But, even a sharp increase in total transaction fees does not really affect the price of a project worth tens of billions of dollars. It’s really too different, when every day the total fee in the network of Ethereum is about 64 thousand dollars, while the total value of ETH is up to 16 billion dollars.
Not to mention the case that miners will sell the fees collected to cover the cost of their ETH mining.
ETH is the block reward in the Ethereum network.
This is what causes more people to participate in ETH mining which will increase the hashrate, leading to a secure Ethereum network.
The current Ethereum reward is 2 ETH/block. It is estimated that in 2020 there will be about 4.8 million ETH mined.
After mining ETH, miners will have to sell ETH to the market to pay for operating costs such as electricity, machine maintenance costs, staff salaries, etc.
As such, you see ETH mining as a case in point causing the circulating supply of ETH in the market to increase to around 4.8% in 2020.
2021 is a year marking the acceptance of Crypto to the world, when countries begin to accept payments in BTC.
Not stopping there, funds compete to buy Crypto as investment assets, such as Microstrategy, Grayscale, etc. And ETH is also a top priority of them. So this is also a solid basis for the growth of ETH.
In addition, ETH is likened to the origin of DeFi, when almost the top names of DeFi are Uniswap, MakerDAO, Sushiswap, etc., all belong to the Ethereum network.
And if DeFi is the future of the world, ETH will be a very important asset because of its uses.
Learn more about what DeFi is, its nature, and its potential and future investment opportunities with DeFi.
Where to trade and buy Etherium(ETH)?
You can buy and sell ETH at exchanges, in Crypto there will be 2 types of exchanges:
- Centralized Exchange (CEX): An exchange that has a 3rd party to control and act as a bridge to exchange crypto assets. Usually, you have to create an account with an ID and password to log in to follow the government’s KYC (Know your customer) regulations. For example: Binance, Huobi, Bittrex, Gate.io, Kucoin, BitMax, etc.
- Decentralized exchange (DEX): An exchange built & operated in a decentralized manner based on the foundation of blockchain.
- DEX is different from CEX in that, users can trade and exchange coins right on their wallet, without having to move out, only when the user is authorized, the transaction will happen. The private key is held by the user. For example: Uniswap, Sushiswap,…
Reputable Ethereum information update sites
So how can we make the right and accurate Ethereum investment decisions? The answer is that you need to constantly update information and knowledge about the market.
Now we have another problem that on the Internet there are many pages providing information, how to choose the latest and most complete information sources? Here are some reputable Crypto websites:
- The fastest news updates: Telegram, Twitter, Facebook.
- Update market information: Coindesk, Congecko, Coinmarketcap, MarginATM.
- Provide in-depth research information: Idolmeta.net, Messari, The Block, Dephi Digital, Medium, Binance Research.
Where to store Etherium(ETH)?
What is an Ethereum wallet?
An Ethereum Wallet is a tool that allows users to create an Ethereum wallet address to store tokens issued on the Ethereum blockchain, including ETH.
Ethereum Wallet Address
This is a string of characters, usually starting with the character “0x” and can be looked up on the Etherscan tool.To access the Ethereum wallet address, you need to have a string of characters called Private Key. .
Private Key on Blockchain will not be changed, each wallet address will only have 1 fixed private key. Therefore, you need to keep your private key carefully and not let anyone know this string of characters.
Just think simple:
- Ethereum wallet address as bank account.
- Private Key is the password of the bank account.
Example of an Ethereum wallet address: 0xBE0eB53F46cd790Cd13851d5EFf43D12404d33E8 – is one of the Ethereum wallets of the Binance exchange.
You copy this wallet address to Etherscan, you will be able to look up all the transaction history of this wallet address.
Information about the transaction history of an Ethereum wallet address on Etherscan
Popular Ethereum wallets to store ETH
Ethereum wallets are divided into 4 popular types, including:
Paper Wallet: True to its name, this is an Ethereum wallet that has all the important information such as the Private Key chain, Public Key and wallet address printed on paper.
Although, it has the advantage that it will not be hacked or disappear when your phone or device is lost.
However, paper wallets are difficult to use when transacting and are easily damaged, burned, and destroyed.
Paper wallets store information about wallet address and Private Key
Hardware Wallet: This is a type of wallet that stores Private Key in a hardware device, very easy to use and safe.
To use this wallet, users need to use money to buy. Some reputable Ethereum storage hardware wallets: Ledger Nano S, Ledger Nano X, Trezor, KeepKey.
Some hardware wallets on the Crypto market today
Software Wallet: This is a type of wallet that stores Ethereum on the hard drive of your computer or phone.
Easy to use but also vulnerable to hackers and not secure with hardware wallets
Some reputable Ethereum storage software wallets:
- Desktop: Jaxx, Coinomi, Etherwall, Exodus…
- Mobile: Coin98 Wallet, Trust Wallet, Coinbase Wallet, imToken…
Web Wallet: This is a web-hosted wallet that acts as an interface for users to easily create and use an Ethereum wallet address. However, Web wallets rely on providers, the security is not equal to hardware wallets. Some popular Web wallets: MyEtherWallet (aka MEW wallet), MyCrypto, Metamask.
- To store Ethereum most securely, you should use a hardware wallet.
- For simple and fast use, you can use web wallet or mobile wallet.
Note for the safest Etherium(ETH) security
As you can see, among the most secure Ethereum storage wallets are hardware wallets, but they are not very convenient. While mobile and web wallets are very convenient, they are vulnerable to attacks and theft of private keys.
Here are some security tips so you can store Ethereum as securely as possible.
Back-up important information
Do not save the private key, seed phrase on computer software, but you should save it offline as on paper (write out many copies) and store it in an easy-to-remember place where you can’t lose it.
Avoid scam sites
- Double check the website address of the Ethereum wallet before logging in to the Ethereum wallet address.
- Do not click on search ads on google to avoid getting into fake websites.
- Before making a transaction, always double check the address you transfer money to. Once transferred, there is no way to stop the transaction or return.
Avoid being hacked, keylog, virus
- Do not log in to your Ethereum wallet address using public WiFi such as cafes, milk tea, hotels, etc.
- Do not access strange websites and links to avoid keylock and viruses.
- Always use Two-Factor Authenticator (2FA) security for Ethereum wallet apps.
So we have understood what Ethereum is and all the information about the ETH coin.
Hopefully from the information provided in the article, you can realize for yourself the opportunities and risks before making an investment decision in Ethereum, ETH.
If you have any other questions or comments, please comment below and join the Idolmeta.net Chat group to discuss and exchange ideas with admins and many other brothers!