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Ethereum (ETH)

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The Blockchain Project that Defined Decentralized Finance.

Ethereum (ETH) Fact Sheet

  • Ethereum is an open-source smart contract and decentralized application platform featuring it’s own cryptocurrency Ether (ETH).
  • Ethereum’s primary purpose is to enhance and expand the technical capabilities of cryptocurrencies, introduced by Bitcoin (BTC) in 2009.
  • Ethereum’s introductory paper was originally published in 2014 by Canadian programmer Vitalik Buterin titled “Ethereum - A Next-Generation Smart Contract and Decentralized Application Platform.”
  • The driving cryptocurrency of the Ethereum network is Ether (ETH), and users pay network transaction fees in the form of "gas" fees, typically calculated in "Gwei."
  • Since the Ethereum blockchain was launched on July 30, 2015, it has relied on the Proof-of-Work (PoW) consensus mechanism. However, the Ethereum team plans to migrate to the Proof-of-Stake (PoS) consensus model in late 2022.
  • Ethereum (ETH) is the second-largest cryptocurrency and blockchain in global market capitalization, right behind Bitcoin (BTC).
  • Through the utilization of the smart contract capabilities found within the Ethereum network, developers have created decentralized applications (dApps), which paved the way for decentralized finance (DeFi) and non-fungible tokens (NFTs), something competing projects would follow.

Ethereum Historical Data Price Chart in the U.S. Dollars (USD)


Ethereum Historical Data Price Chart in the U.S. Dollars (USD). Source: TradingView

What is Ethereum (ETH)?

Ethereum is an open-source smart contract and decentralized application platform featuring its native cryptocurrency, Ether (ETH).


A better way to perceive Ethereum is as a computing platform that brings power to developers and allows them to build and deploy decentralized applications (dApps) that can run without the requirement of a centralized authority.


Smart contracts are computer protocols that provide developers with numerous functions, such as the ability to facilitate, verify and even enforce specific rules and an agreement without the involvement of a third party. They are digital contracts stored on the blockchain, executed automatically whenever a particular action meets its predetermined conditions.


The primary role of smart contracts is to automate the execution of a specific agreement so that all participants can be immediately sure of the outcome.


Work-based instances can also trigger specific actions, leading to a higher level of functionality.


Furthermore, Ethereum uses a peer-to-peer (P2P) network. Instead of being run by a central server, individual users connect their computers, spread out on a global scale, to form a network that can exchange data.


As of June 2022, Ethereum still utilizes its default Proof-of-Work (PoW) consensus mechanism since its launch.


Its role is to allow the network to come to a consensus, which means that it can agree on the account balances, and the order of the transactions to prevent "double spending," which can happen if someone spends the same amount of money twice.


Transactions on the Ethereum blockchain are processed into blocks, where each block features “block difficulty,” “mixHash,” and “nonce”:

  • Block difficulty is the measure of how difficult it is to essentially mine a block within the Proof-of-Work (PoW) consensus system. If a cryptocurrency has a high difficulty, it will require more computing power to mine the same number of blocks, making the network more secure.
  • mixHash is a 256-bit hash that can prove that a block has carried out enough computation when combined with a nonce.
  • A nonce is a hash that, combined with the mixHash, proves that a block has done enough computation. The nonce, in this case, is the number of transactions sent from a given address.

Ethereum’s PoW protocol is known as Ethash and requires miners to compete against one another through trial and error to find the nonce for a specific block. Those that find a valid nonce can add blocks to the chain. A nonce is the number of transactions sent from a specific address.

How is Ethereum (ETH) Used?

Ethereum, at its core, is a network made up of multiple server nodes responsible for the process of mining the Ether (ETH) cryptocurrency by verifying that the transactions are legitimate.


Smart contracts brought another dimension to the entire use-case surrounding Ethereum.


The testing environment for smart contracts is the Ethereum Virtual Machine. The EVM is designed to operate as a runtime environment that can compile and even deploy the Ethereum-based smart contracts.


Any application developed on Ethereum is coded in the native language specifically built for the network known as Solidity. The EVM operates in a sandbox, meaning anyone can deploy their environment and utilize it as a testing ground for their smart contracts or dApps. They can then test them, verify them, and deploy them on the Ethereum mainnet.


Smart contract code is typically written via high-level programming language, such as Solidity.


Solidity is the most popular language used to write smart contracts, as it is purpose-built for that specific task.


The code is then compiled into the “EVM bytecode” and deployed on the Ethereum blockchain.


The EVM bytecode is a low-level programming language compiled from other languages, such as Solidity.


The Ethereum Virtual Machine (EVM) is a virtual machine placed between OS and application layers to mitigate the operating system's dependency.


Bytecode is a computer object code that an interpreter can convert into binary machine code so that a computer’s hardware processor can read it.


Bytecodes are a form of instruction set designed for efficient execution through the utilization of a software interpreter.


Every Ethereum node that comprises the network stores an entire history of all the transactions, a history of the smart contract, and the handle to the current state of the smart contracts.

Gas is required to power the smart contracts. Each user must pay gas through the Ether (ETH) cryptocurrency to process the transactions.


Each transaction that gets executed through the usage of a smart contract deployed on Ethereum will require a gas fee.


Throughout its time in the crypto space, Ethereum has been used for:

  • Decentralized Applications (dApps)
  • Decentralized Finance (DeFi)
  • Non-Fungible Tokens (NFTs)
  • A core network on top of which many Layer-2 blockchains have been launched.

Use-Cases of Ethereum (ETH)

Ever since Ethereum was initially released in 2015, developers have devised multiple use-cases for the technology.


From finance to gaming, advertising, identity management, and even supply-chain management, thousands of projects are launched on the Ethereum network stack.


Typically, the Ethereum blockchain has been utilized as a network with which developers create their Layer-2 projects. These projects essentially post their transaction data onto Ethereum and rely on the network for data availability and security.


Throughout the years, many projects strived to increase the scalability and transaction speed, alongside transaction throughput in the network, without sacrificing decentralization or security.


However, some projects took things further, and the community built entire decentralized exchanges (DEXs) on top of Ethereum.

Some of the most popular projects that are built on top of Ethereum include:

  • Uniswap (UNI) - Uniswap is a decentralized exchange (DEX) platform that enables peer-to-peer (P2P) market-making, providing users the opportunity to trade cryptocurrencies without the need or involvement of a centralized third party.
  • Aave (AAVE) - Aave is a decentralized lending protocol to earn interest, borrow assets, and build applications, launched in 2017 as ETHlend. Through this protocol, users are allowed to lend or borrow cryptocurrencies without needing to utilize a centralized intermediary. The interest rates here are based on the utilization rate of the used liquidity pool.
  • Curve Finance (CRV) - Curve is a popular automated market maker (AMM) platform that offers an efficient way to exchange tokens while maintaining low fees and low slippage by accommodating liquidity pools of similarly behaving assets. Curve differs from similar projects because it emphasizes stability over volatility. It aims to offer tangible ways through which people can exchange tokens while also maintaining low fees and low slippage.

With the increase in popularity surrounding digital art represented in non-fungible tokens (NFTs) and the Metaverse, more highly-popular projects emerged based on the Ethereum network:

  • CryptoPunks - created by Larva Labs, CryptoPunks represents 10,000 unique collectible characters that feature proof-of-ownership, which gets stored securely on the Ethereum blockchain. Since the project launched in June 2017, it paved the way for global NFTs popularity, and some of the CryptoPunks have sold for millions of dollars (USD).
  • Bored Ape Yacht Club (BAYC) - is another popular 10,000 NFT collection of non-fungible tokens (NFTs). This project was developed by Yuga Labs and utilized the Ethereum blockchain to secure the NFTs.
  • The Sandbox (SAND) - is a multiplayer Metaverse where players can create, monetize, and participate in blockchain-based gaming experiences fueled by SAND tokens based on the Ethereum network. Sandbox is one of the most extensive 3D Metaverse projects built on Ethereum that lets users interact with the virtual environment and each other. The Sandbox real estate is represented as LAND NFT parcels, all of which have a market value.

Through the examples of these projects, we can see that Ethereum as a network has a vast and varied use case.

Usability & Primary Features of Ethereum (ETH)

The most popular token standard utilized within the Ethereum network is ERC-20.


ERC is short for "Ethereum Request for Comment," and this standard saw its introduction in 2015.


ERC is the standard embraced by the developers for creating and issuing smart contracts on the network.


Tokens in the Ethereum network can represent anything – from financial assets to reputation points, character skill points in a game, lottery tickets, FIAT currencies like USD/EUR/GBP/AUD, an ounce of gold, or anything else the developers associate it with.

FIAT money is any government-issued currency that is not backed by a physical community, such as gold or silver, for example,


Some of the key functions found within the ERC-20 token standard include:

  • the ability for the cryptocurrency to be transferred from one account to another account;
  • the ability to get the current token balance of an account;
  • the ability to get the total supply of the token that is available on the network;
  • the ability to approve if an amount of a token from a specific account can be utilized by a third-party account.

A smart contract follows the ERC-20 token contract whenever it implements these methods.

Protocol

Ethereum is a decentralized blockchain platform capable of establishing a peer-to-peer (P2P) network that can securely verify and execute application code. In other words, its smart contract support can enable protocols to be built on top of it. These basic sets of rules allow data to be shared across the network.

Ledger

The Ethereum ledger's primary use-case surrounds the fact that it can maintain data relating to the identity of the participants anonymously and track their overall cryptocurrency balances.


Through Ethereum's ledger and a blockchain explorer, we can access records of all of the genuine transactions that have been executed.


Etherscan is one of the most popular Ethereum blockchain explorers that can provide us with this data, where we can review the latest blocks, latest transactions, mining difficulty, hash rate, transactions, and market cap, among other things.


The Ethereum Blockchain Explorer. Source: Etherscan

Smart-Contract Support

Smart contracts play a pivotal role within the broader functionality and utility of the Ethereum ecosystem.


Each smart contract has a balance and can send transactions across the network, not controlled by any user. Smart contracts are deployed on the Ethereum network and run as they are programmed. They execute at points in time when pre-programmed conditions are met.

Tokenomics & Supply Distribution

When we look at the tokenomics and supply distribution, initially, Ethereum had the ICO, which is considered Phase 0. The Ethereum ICO was conducted in the first half of 2015 for 60 million ETH, collected in the Bitcoin (BTC) cryptocurrency.


The Ethereum network began with a supply of 72 million Ether (ETH), where the aforementioned 60 million were distributed to those who purchased ETH. The remainder of the 12 million was distributed at the launch of the network in 2015, where half of it was split across 83 early contributors to the protocol.


As of June 27, 2022, the total supply is 119.48 million Ether (ETH).


Total Ethereum Supply. Source: YCharts

Team & History

Ethereum was initially conceived in 2013 by a programmer known as Vitalik Buterin.

Vitalik Buterin published articles for Bitcoin Magazine before beginning work on the Ethereum whitepaper in 2013 for the first time.


However, there were additional co-founders, including:

  • Gavin Wood – the creator of Polkadot (DOT) and Kusama (KSM).
  • Charles Hoskinson – the founder of the Cardano (ADA) blockchain.
  • Joseph Lubin – the founder of ConsenSys, a full-stack, global blockchain company.
  • Anthony Di Iorio – the founder and CEO of a blockchain company Decentral which created Jaxx Wallet.
  • Stephan Tua was originally the CCO of Ethereum before leaving in 2015. He is also the founder of Atlas Neue and the CCO of Slock.
  • Mihai Alisie, another co-founder of Ethereum, was an editor at the Bitcoin Magazine before working on Ethereum.
  • Jeffrey Wilke is one of the top contributors to Ethereum, even though he originally left the project in 2017.
  • Amir Chetrit – the co-founder of Bitcoin Magazine.

The Ethereum whitepaper, titled “Ethereum - A Next-Generation Smart Contract and Decentralized Application Platform” was released by Buterin on November 27, 2013.


The initial sales round of Ether (ETH) cryptocurrency went officially live from July 22 to September 2, 2014, for 42 days and could be bought through the Bitcoin (BTC) cryptocurrency.

On July 30, 2015, the "Frontier" release went live – an active but barebone implementation of the Ethereum project. The following “Olympic” testing phase proved successful, and the Ethereum network went operational.

Activities & Community

Ethereum is the second-largest blockchain in value and market capitalization after Bitcoin (BTC), meaning it has one of the largest developer communities, constantly testing and improving the codebase. This fact, combined with the smart contract capabilities, Ethereum Virtual Machine (EVM,) and Solidity development tools, makes Ethereum the go-to choice for many developers.

Development Activity and GitHub Repositories

According to dApp statistics, as of June 28, 2022, Ethereum has a total of 2.970 decentralized applications (dApps).


Total Ethereum decentralized applications. Source: stateofthedapps


When we look at the Ethereum GitHub repositories, however, one of the most popular repositories is the official Go (Golang) implementation of the Ethereum protocol.

There have been 784 contributors to the Ethereum codebase from December 29, 2013, to June 28, 2022.


Furthermore, there were 37 active pull requests, 17 active issues, and 15 authors pushed 11 commits to master, as well as 17 commits to all branches. On master, 82 files were changed, with over 2,600 additions and 2,567 deletions.


Ethereum open-source contributions to the official Go (Golang) implementation. Source: GitHub


Many current Ethereum developments focus on switching to Proof-of-Stake (PoS) as part of the Ethereum 2.0 (ETH 2.0) roadmap.


Ethereum has numerous testnets – live testing networks for upgrading the Ethereum blockchain before releasing it on the main network.


The Merge project dedicated to switching from Proof-of-Work (PoW) to Proof-of-Stake (PoS) was successful on Ropsten and Sepolia testnets.

On-Chain Activity

According to data from Etherscan, there are a total of 199,578,957 unique addresses on the Ethereum network as of June 27, 2022.


Ethereum Unique Addresses Chart. Source: Etherscan.io

Activities and Partners

Because Ethereum has been in the crypto space since 2015, the project has formed many partnerships, culminating in the form of The Enterprise Ethereum Alliance (EEA) – the member-led industry organization that has the primary goal of driving the use of Ethereum technology as an open standard.


Some of the most Ethereum partners include:

  • JP Morgan Chase Bank, N.A. – one of the largest investment banks and financial services holding companies operating in the USA.
  • Chainlink – a decentralized oracle network that aims to bring off-chain data to the blockchain network through tamper-proof inputs, outputs, and smart contracts.
  • API3 Foundation - technology that allows developers to create trustless applications that interact with web application programming interfaces (APIs).
  • Advanced Micro Devices (AMD) – an American multinational semiconductor company that is a dominant force in developing computer processors, graphics processing units, and related technologies.

References & Reports

References

Market Reports

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