Introduction

This is the first article in a series, explaining everything the beginner needs to know about Ethereum. In this series I’ll be covering a few things:

  1. What is Ethereum?

  2. How does it work?

  3. How do I use it?

  4. What are transaction fees?

  5. What are Ethereum Tokens?

  6. What is Ethereum 2.0?

  7. What is EIP-1559?

By the end of this series, you should know almost everything you need to know about how Ethereum works, it’s current status, and where it’s going.

What is Ethereum

Ethereum is a next-generation platform for the exchange cryptocurrency that seeks to decentralize many of our internet-based applications. In addition to having a fully-exchangeable cryptocurrency, like Bitcoin, it takes advantage of the blockchain’s properties to build decentralized applications. While normal applications, such as facebook or Microsoft Office, are centralized (having a single trusted source), Ethereum allows you to build decentralized applications known as Dapps. By writing Smart Contracts, anyone can build and deploy a completely permissionless and decentralized application to the Ethereum blockchain.

In this blockchain, the native currency is Ether. Ether is a fully-exchangeable, permissionless, private, and decentralized cryptocurrency that allows you to pay for both real-world assets and computing power on the Ethereum blockchain.

History

Ethereum was created in 2015 by a team of programmers led by Vitalik Buterin, and Dr. Gavin Wood. Buterin was an early-adopter of Bitcoin, going on to co-found Bitcoin Magazine. It was there that he realized the potential of blockchain technology, severly underutilized by Bitcoin. Through a crowd-funded ICO and years of development, Ethereum launched and has since grown to become the 2nd-Largest Cryptocurrency by Market-Cap

Ethereum was the first Cryptocurrency to implement a system of Smart Contracts, which has since been adopted by many other coins. This empowers the creation of thousands of different applications and use-cases including: Financial Instruments, NFT’s, Decentralized-Governance, etc.

It is important to note that, Ethereum is the name of the platform. However, Ether, is the name of the native coin that powers the network. If you understand how Bitcoin works, even at a basic level, you understand roughly ~50% of how Ethereum works.

I highly recommend in addition to this blog, you find videos of Vitalik speaking, and visit His Blog, as he is an incredibly articulate and gifted writer and public-speaker.

Today, development of Ethereum is handled by the Ethereum Foundation, a Non-Profit led by Buterin and based in Switzerland. To prevent centralization, they take a very hands-off approach. They are responsible for development and research of the underlying protocols and algorithms that govern Ethereum. They also provide services such as grants to build much-needed applications. They do NOT control the monetary policy of ethereum, and almost all major-decisions and changes are handled by a community-wide vote. In fact, several of the node-softwares, used to run the network, such as Nethermind’s C# Client, are developed by 3rd-Parties, following the Ethereum Foundation’s blueprints and working-alongside eachother to prevent centralization.

Unlike Bitcoin, whose creator’s identity is unknown, Vitalik plays an active role in shaping the public perception and development of Ethereum. He does not make unilateral decisions, and is an integral part of its public perception and research. He is the single largest holder, but owns roughly only ~0.3% of all Ethereum. The Ethereum foundation holds ~2% of all Ethereum, which it uses primarily for community-grants and operating costs.

Enough about history, continue to the next article and we’ll discuss in depth how it works.

Ether Classic

If you’ve been on a website such as Coinbase, you may have seen a coin known as Ether Classic. This is NOT THE SAME AS ETHEREUM. Ether Classic is a separate currency, created from the original Ethereum, after a major security breach.

In 2016, a major hack occured on an entity known as The DAO where $50 Million worth of Ether was stolen due to a contract bug. This left a major problem for the community and for the project. As a result, the entire Ethereum community came together and voted to roll-back the transaction, as if it had never occured. However, this was not without major controversy. This resulted in a compromise known now as Ether Classic, a hard fork. This is where the two paths diverged. Two separate blockchains were created, completely identical up until that transaction. The Ether Classic blockchain would not roll back the hack-transaction, and would continue independently infinitely into the future. It would continue independently, with its own development community and protocols. It has the symbol $ETC. The original Ethereum chain rolled-back the transaction and continued its work as normal, and is the one most people currently use. If you owned Ethereum before the fork occured, you also own an equal amount of Ethereum Classic. This is similar to the fork of Bitcoin that created Bitcoin Cash.

When you buy this, you are buying a totally separate coin, with its own history, price, and development community. It is not underdoing an update like Ethereum 2.0, and due to its smaller size, has been 51% attacked multiple times. It is not recommended you buy this, despite its lower price.