Ethereum

Definition

Ethereum is a decentralized, open-source blockchain platform that enables developers to create and deploy smart contracts and decentralized applications (dApps). It stands out as a prominent cryptocurrency, alongside Bitcoin, offering a more versatile environment for building digital assets, particularly through its unique capability of executing code on the blockchain.

5 Must Know Facts For Your Next Test

1. Ethereum was proposed by Vitalik Buterin in late 2013 and went live in July 2015, introducing a broader application for blockchain technology beyond simple transactions.
2. Unlike Bitcoin, which primarily functions as a digital currency, Ethereum enables developers to build complex applications and manage their operations through smart contracts.
3. Ethereum uses a cryptocurrency called Ether (ETH) as its native token, which is used to pay for transaction fees and computational services on the network.
4. The platform has undergone significant upgrades, including Ethereum 2.0, which aims to improve scalability, security, and sustainability by transitioning from proof-of-work to proof-of-stake consensus mechanism.
5. Ethereum's ecosystem supports a wide range of projects including decentralized finance (DeFi), non-fungible tokens (NFTs), and more, making it a vital player in the digital asset landscape.

Review Questions

• How do smart contracts enhance the functionality of the Ethereum platform compared to traditional agreements?
  • Smart contracts improve Ethereum's functionality by automating transactions without the need for intermediaries. This not only speeds up processes but also reduces costs and minimizes human errors. By encoding agreements into code on the blockchain, smart contracts ensure that all parties adhere to the terms automatically, creating trust and transparency in transactions.
• Discuss the significance of gas fees in the Ethereum network and how they affect users and developers.
  • Gas fees are crucial for the Ethereum network as they determine how much users must pay to execute transactions or run applications. These fees incentivize miners to validate transactions and secure the network. For developers, understanding gas prices is essential for managing costs associated with deploying smart contracts and dApps, impacting their design choices and overall user experience.
• Evaluate the impact of Ethereum 2.0 on the future of decentralized applications and digital assets.
  • Ethereum 2.0 is set to significantly impact decentralized applications and digital assets by enhancing the network's scalability and sustainability. The transition to proof-of-stake will reduce energy consumption and increase transaction throughput, making it easier for more users to participate. This upgrade not only fosters innovation within dApps but also positions Ethereum as a more competitive platform in the evolving landscape of blockchain technologies.

Related terms

Smart Contracts: Self-executing contracts with the terms of the agreement directly written into code, allowing for automated and secure transactions on the Ethereum platform.

Decentralized Applications (dApps): Applications that run on a peer-to-peer network, utilizing blockchain technology to function without a central authority, often built on Ethereum.

Gas: The unit of measurement for the computational work required to execute operations on the Ethereum network, which users pay for when using the platform.