The progenitor of a tokenized world
The ‘Ether’ (or ‘Aether’), as per literature, stands for “the upper regions of air beyond the clouds,” and it’s the personification of the “upper sky.” It embodies the pure upper air that the gods breathe, as opposed to the normal air breathed by mortals.
It represents the area where the sky is pristine blue with its limitless boundaries for the mind to wander through.
But we are not here to talk about astronomy although, we will learn about another kind of Ether.
So buckle up, and let’s re-enter planet earth’s atmosphere and deep dive into the digital world, where Ethereum is powering the change that will revolutionize the Internet as we know it, the ‘Web 3.0’ revolution.
Ethereum is often referred to as the second most popular cryptocurrency, after Bitcoin. But unlike many of its ‘colleagues in the crypto-verse, Ethereum is intended to be much more than simply a medium of exchange or a store of value.
Instead, Ethereum calls itself a decentralized computing network built on blockchain technology.
Let’s unpack what that means…
Welcome into the realm of ETHEREUM
THE QUEST OF ETHEREUM
Ethereum wasn’t always the second-largest blockchain project in the world.
Vitalik Buterin actually co-created the project to answer Bitcoin’s shortcomings. Buterin published the Ethereum white paper in 2013, detailing smart contracts
— automated, immutable “if-then” statements —enabling the development of decentralized applications.
While Decentralized Applications (or DAPPs) development already existed in the blockchain space, platforms weren’t interoperable. Buterin intended Ethereum to unify them.
To him, unifying the way DApps run and interact was the only way to maintain adoption.
Of course, building such a network isn’t cheap. So, Buterin and his co-founders — Gavin Wood, Jeffrey Wilcke, Charles Hoskinson, Mihai Alisie, Anthony Di Iorio, and Amir Chetrit — held a token presale to raise USD 18,439,086 in Ether, funding Ethereum’s present and future developments.
The group also founded the Ethereum Foundation in Switzerland, with the mission to maintain and develop the network. Soon after, Buterin announced the foundation would run as a nonprofit, which caused some
co-founders to leave.
ETHEREUM WORKING MECHANISM
Like all cryptocurrencies, Ethereum works on the basis of a blockchain network. A blockchain is a decentralized, distributed public ledger where all transactions are verified and recorded.
It’s distributed in the sense that everyone participating in the Ethereum network holds an identical copy of this ledger, letting them see all past transactions.
It is decentralized, and therefore the network isn’t operated or managed by any centralized entity — instead, it’s managed by all of the distributed ledger holders.
(for a more in-depth look at Blockchain technology, I recommend my articles of the ‘Blockchain 101’ series:
“Introducing the Blockchain”
Blockchain transactions use cryptography to keep the network secure and verify transactions. People use computers to “mine” or solve complex mathematical equations that confirm each transaction on the network and add new blocks to the blockchain that is at the heart of the system. Participants are rewarded with cryptocurrency tokens.
For the Ethereum system, these tokens are called Ether (ETH).
Ether can be used to buy and sell goods and services. It’s also seen rapid gains in price over recent years, making it a de-facto speculative investment.
But what’s unique about Ethereum is that users can build applications that “run” on the blockchain like software runs on a computer. These applications can store and transfer personal data or handle complex financial transactions.
Ethereum is currently a proof-of-work (PoW) blockchain but is making the move to proof-of-stake (PoS) with Ethereum 2.0 for scalability purposes and for a more environmentally friendly approach.
(more on the PoW and PoS in the article ‘Consensus Mechanism’:)
The computational capability turns a store of value and medium of exchange into a decentralized global computing engine and openly verifiable data store.
ETHEREUM ADVANTAGES & DRAWBACKS
Cryptocurrencies are still extremely volatile, resulting in both increased gains and numerous losses for users invested in the ecosystem.
Because of its tech potential, investing in Ethereum is a popular financial venture, both in the short and long term, but it carries with it a range of pros & cons that every potential investor and developer has to keep in mind to make a prudent decision trying to minimize the risks of such investment.
- Large, existing network. Ethereum has billions of value in trading hands; it has a large and committed global community and the largest ecosystem in blockchain and cryptocurrency.
- Wide range of functions. Besides being used as a digital currency, Ethereum can also be used to process other types of financial transactions, execute smart contracts, and store data for third-party applications.
- Constant innovation. A large community of Ethereum developers is constantly looking for new ways to improve the network and develop new applications.
An important aspect to consider is the recent interest followed up by an intense flow of institutional capital into the project, adding immense liquidity and causing its value to surge.
- Avoids intermediaries. Ethereum’s decentralized network promises to let users leave behind third-party intermediaries, like lawyers who write and interpret contracts, banks that are intermediaries in financial transactions or third-party web hosting services.
- Rising transaction costs. Ethereum’s growing popularity has led to higher transaction costs. Ethereum transaction fees, also known as “gas,” hit record high values per transaction in February 2021, which is great if you’re earning money as a miner but less so if you’re trying to use the network.
This is because, unlike Bitcoin, where the network itself rewards transaction verifiers, Ethereum requires those participating in the transaction to cover the fee.
Ethereum posts new highs as DeFi gas fees go through the roof
- Potential for crypto inflation. While Ethereum has an annual limit of releasing 18 million Ether per year, there’s no lifetime limit on the potential number of coins. This could mean that as an investment, Ethereum might function more like dollars and may not appreciate as much as Bitcoin, which has a strict lifetime limit on the number of coins.
The implementation of the upgrade called EIP-1559 brought substantial changes to Ethereum’s fee market mechanism leading to a reduction in gas prices, but not to a concrete solution to the (still) high fees.
What is EIP-1559? How Will It Change Ethereum? | ConsenSys
- Steep learning curve for developers. Ethereum can be difficult for developers to pick up as they migrate from centralized processing to decentralized networks.
- Unknown future. Ethereum continues to evolve and improve, and the ongoing development of Ethereum 2.0 holds out the promise of new functions and greater efficiency. This titanic, major update to the network however, will require many new validators for Ethereum 2.0 to function, de facto creating uncertainty for apps and deals currently in use rising the question, “Will the migration work?”
CREATION AND BLOCKCHAIN
Ethereum has led to the creation of new products and services that can improve different areas of our lives.
We’re still in the early stages, but there’s a lot to be excited about.
Many of these visionary changes are now part of our lives, and they influence our day-by-day living, fuelling innovation and empowering people and organizations towards the future digitalization of the world.
- DeFi (aka ‘Decentralized Finance’) — A more open financial system that gives its users control over their money and unlocking new possibilities via the fusion of Blockchain and Financial world: the resulting product open up financial services to anyone with an internet connection and they’re largely owned and maintained by their users.
- NFT (aka ‘Non-Fungible Token’) — A way to represent unique items as Ethereum assets that can be traded, used as proof of ownership, and unlocking wide opportunities for creators. They can be considered as “Digital Property,’ and they are at the core of the future vision of a ‘Tokenised Society.’
The Future Will Be Tokenised
- DAOs — A new way to collaborate and set up online communities with shared goals and pooled funds.
(more about DAOs in my two-part article ‘The Way of the DAO’:)
- The Way of the DAO
- The Way of the DAO
BEYOND THE ETHER
Ethereum isn’t just a cryptocurrency to be traded; its real value lies in its purpose. Ethereum’s purpose is to allow the owner to use the distributed world computer that several thousand nodes are powering.
Ethereum is an ambitious project that intends to overtake our current internet infrastructure by automating many processes that still require intermediaries, such as using an app store or working with fund managers. ETH is used more as a way to interact with the network than as a way to transfer money, though it can do that too.
Wherever there’s Internet, there will be Ethereum.
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Beyond the Skies of ETHER was originally published in The Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.
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