It is easy to speak of Bitcoin and Ethereum in the same breath – To the layman, they are both cryptocurrency, with Ethereum being placed second to Bitcoins lead in value. But Ethereum was designed to be more than a digital gold or silver and is instead a decentralized computing network on the blockchain which hosts a number of smart contracts and decentralized applications (known as dapps) that have unlimited capabilities.
Anybody can create an application on Ethereum’s network due to its decentralized nature. Due to its open nature, Ethereum developers are in big demand. It is of course also used as a store of value for investors and cryptocurrency enthusiasts.
“Ethereum serves two purposes: One, it acts as money and can be a store of value,” says Bill Noble, chief technical analyst at Token Metrics, a cryptocurrency analytics platform. “But Ethereum is also like a highway for decentralized finance.”
Ethereum was invented by programmer Vitalik Buterin in 2015. “He realized that Bitcoin is like a pocket calculator, designed to do one thing, and it does it really well, but you can’t do anything else with it,” says Ollie Leech, learn editor at Coindesk, a cryptocurrency news outlet.
So Buterin created Ethereum, a blockchain network with an associated cryptocurrency called ether (ETH), with the potential to do far more.
In many conversations, especially with those approaching the subject from a pure investment aspect, ‘Ether’ and ‘Ethereum’ are used interchangeably, but by definition, this is not technically true.
Ethereum itself is perhaps best thought of as a smartphone. Developers can create new and exciting applications for it, many of which are geared toward cryptocurrency enthusiasts.
“It’s all powered by this idea of smart contracts,” Leech said. Smart Contracts are programs that run autonomously on the blockchain. Smart Contracts are seen as game-changer by many as they perform all the functions that normally some third-party would have to take care of.
One example of smart contracts in use is in peer-to-peer lending, which has proven to be a popular dapp running on Ethereum. This allows individuals to lend each other money without having to rely on a bank, as a Smart Contract takes the place of the bank.
In this case, the contract lends the money when the collateral is placed into the correct wallet or account. Potential benefits of using a smart contract instead of a traditional lender include the speed of execution, lack of human error or bias, and lower fees.
This is just one example of a smart contract function, and today the possibilities still seem to be endless. But there are also categories of dapps for things like buying and selling digital artwork, gaming, and developer technology.
This is seen most commonly today with NFTs, or non-fungible tokens. These digital tokens are powered by Ethereum and are used to represent ownership of unique items, according to Ethereum’s website.
NFTs are known to most in the form of digital art, but they are expanding to include rental contracts, property ownership deeds, music, and more.
The Gas Problem
Ethereum’s biggest problem comes from its own success – Gas fees.
When making a transaction on the Ethereum network, there is a small transaction fee, called a gas fee. This fee funds the network, it is comparable to paying for a subway, or going through a road toll.
Gas fees increase when the network becomes busier, and raises the price of Ether. This is beneficial to investors but creates an oftentimes unusable system for entry-level users.
One notable example came in mid-2021, during a gold rush for NFTs. At the timer, an artist might want to mint an NFT and sell it for the equivalent of $200. However, gas fees were so high that they would need to pay $400-600 just to make their work sellable.
This led to both artists and collectors minting, trading, buying, and selling during ‘off-hours’ and slow days and in the middle of the night.
Though high gas fees indicate that Ether is healthy and that there is a lot of interest in Ethereum, it can present too many obstacles to onboarding users.
This has been taken into account ahead of the launch of Ethereum 2.0.
Ethereum 2.0, Eth2, refers to the set of interconnected upgrades to make the Ethereum network more secure and sustainable. The key change is to move from proof-of-work (PoW) to proof-of-stake (PoS). Further, Eth2 has three stages, with the first one (the Beacon chain) already successfully implemented.
The implementation of the remaining two stages (“the merge” and “Shard chains”) should occur in 2022 and 2023. Since this set of upgrades will enable the platform to process thousands of transactions per second and scale globally, it is expected to also reduce gas fees significantly.
The new proof-of-stake model should reduce high power consumption, which will result in lower fees.
Protecting Your Ether and Ethereum Dapps
Cryptocurrency and the blockchain stand to be a major driving factor in the technology of the future. However this popularity has attracted an element of cybercrime. There are several tools internet users should use to increase their online protection. One of these tools is SaferNet.
SaferNet is the perfect solution to the cybersecurity issues that individuals, families, and businesses face today. It not only connects every device using a secure, 24/7 always on, military grade VPN, but it also stops outside cyberthreats, malware and viruses as well. On SaferNet, all users are protected anywhere in the world, all the time, on any cellular or Wi-Fi network. In addition to SaferNet’s VPN and cyber protection, it also offers a range of employee or parental/family internet controls including internet filtering, monitoring, scheduling, and blocking access to websites or even entire website categories
Typically, a user would need 3 separate services for a VPN, Malware Protection, and Internet Controls; SaferNet offers all 3 features in one service. SaferNet truly is an endpoint security presence that can be implemented in minutes around the world, on phones, laptops, tablets, and computers at an economical price point that caters to all internet users. SaferNet guarantees a smooth setup and installation process that takes only minutes, and an easily accessible control hub for you to monitor all your employee’s or family members devices; including activity, time spent online, and threats blocked.