7000 words detailing the blockchain innovator: ethereum

Why we think Ether is the world computer.

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Note to editors.

Back in 2013, shortly after entering the world of blockchain, programmer Vitalik Buterin discovered the drawbacks of Bitcoin and argued that Bitcoin should be given a Turing-complete programming language so that anyone could develop decentralized applications on it, rather than just limiting it to the financial sector, and so the blockchain should be given “smart Therefore, blockchain should be given the function of “smart contract”, thus starting the era called “blockchain 2.0”.

It is because of the emergence of Ether that the world of blockchain has started to have richer applications, and it has also given rise to more well-known applications like DApp, NFT and DeFi, so in order to study blockchain, we cannot help but study Ether, and this in-depth report of CBInsights can provide a detailed explanation of the mystery behind Ether with a clear logic, which is suitable for both novices and veterans. It is suitable for novices to learn and for veterans to refresh their knowledge.

And in this report, CBInsights brings us the following sharing.

Explaining what exactly is Ether from blockchain, and what is a smart contract?

Explain what is the relationship between Ether and ETH Token?

How did the famous application Dapp of Ethernet come into being and how it is currently used?

How is the development of the previously hyped “crypto cat” and is NFT a better application?

Why is ethereum so crucial to the current blockchain and what do we need to focus on?

What are the bottlenecks in the current development of ethereum and what are the current solutions?

Here is the complete compilation by Chain Bazaar team for your understanding and learning.

We delved into one of the world’s most popular blockchain networks, Ether, and tried to explain in the simplest way possible what Ether is, its uses and drawbacks, and how it relates to crypto-cats.

One of the most commonly used open source blockchains, Ether, is becoming increasingly mainstream, especially with the explosive popularity of NFTs (the vast majority of which are built using the Ether standard).

As of mid-April 2021, Ether’s market capitalization has increased from $712 million in early January 2017 to $291 billion (as of April 21, 2021).

What is blockchain technology?

To understand Ether, one must first understand what blockchain technology is.

Blockchain technology provides a way for untrusted parties to reach agreement (consensus) on historical data (or ledgers) without the use of a trusted intermediary. Historical data is important because digital assets and transactions are theoretically vulnerable to forgery and/or replication.

Simply put, blockchains are databases, but their key difference from traditional databases is ownership. A public blockchain can be decentralized due to its distributed nature, so that anyone can read it and transact on it, or hold their own copy of the digital ledger, and no single central entity can change the information of past data.

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Also within the blockchain classification there are federated and private chains, but they often have different uses, such as being used by companies to track supply chain data. To get a deeper understanding of Bitcoin and blockchain technology, we have given answers below.

What is ethereum?

Ether is an open source, decentralized blockchain. The special feature is that it has built-in smart contracts. A smart contract is essentially a piece of code that binds the two parties to an agreement and can be executed on its own without an intermediary.

This feature has earned it the title of “world computer” (technically known as an Ether Virtual Machine (EVM)), and thus it can be used for much more than just a payment method or a store of value, which is unmatched by Bitcoin.

The EVM environment enables developers to build decentralized applications on top of it, from social media to games to banking, such as an app store that is not controlled by Apple or Google.

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However, due to the current cost of computing, the promise and potential of Ether remains more expansive than what it is realizing now, as we will discuss later.

What is a smart contract?

To illustrate a smart contract. Let’s assume that two people, Alice and Bob, are playing a game.

Alice thinks the temperature will reach 70 degrees Fahrenheit tomorrow morning, Bob thinks it won’t. They make a bet for 0.01 bitcoins. (In this example, the underlying is bitcoin, but any other underlying can be used.)

If Alice and Bob don’t trust each other, they will have to borrow a trusted third party as an escrow agent. In other words, they would each have to pay the agent that much money, and the agent would distribute the winnings and pledged funds to the winners.

In this case, there is no way to bypass the middleman, even with a crypto marker like Bitcoin. The Bitcoin blockchain also has no way to record this “contract”.

Alice and Bob can agree to use some basic code based on an “if, then” contract. If the temperature is above 70 degrees Fahrenheit, the code will be programmed to pay the underlying to Alice; otherwise, it will pay Bob.

Alice and Bob can then put their “programmed” bets on the Ether blockchain. At this point, the bet is technically binding.

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It is a “contract” because Alice and Bob have agreed to its terms, which translate the code into rules to a certain extent. It is “smart” and “decentralized” because all participants have a copy of the contract.

Just as all Bitcoin “nodes”, or participants in the system, know that Alice sent Bob 0.01 bitcoins, all Ether nodes know that Alice and Bob played this game.

Let’s take a look at the real-time execution of this smart contract.

Alice and Bob play the game and put this bet on the Ether blockchain. All “nodes” on the Ether blockchain now hold copies of this smart contract.

Alice ends up being right – the temperature is above 70 degrees Fahrenheit. The contract “self-executes” based on this information, and sends the funds to Alice’s account.

Since all nodes hold a copy of this smart contract, all nodes independently confirm that the contract has been executed correctly. The new state of this executed smart contract (i.e., Alice as the winner of the game) is added to the Ether blockchain

The entire process is recorded on top of Ether, creating a “common historical data” around the game.

Smart contracts like this are what make Ether so compelling. A smart contract allows Alice and Bob to build a very small “decentralized application” where their game “executes itself” and requires no intermediary involvement.

What if we want to build larger, more complex decentralized applications, i.e., enhanced smart contracts that can accomplish complex tasks?

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As a result, Ether has created a blockchain that can support any programmable use case, which we examine in depth in the DApp below. This is completely different from the Bitcoin blockchain, which was first created as a payment application.

What exactly is Ether/ETH?

Ether (ETH) is a cryptographic token built into the Ether blockchain.

In order to trade or run decentralized applications, users of the blockchain must pay ETH. (The Bitcoin network denominator is called Bitcoin, or BTC; again, users must use BTC to trade on the Bitcoin network). The higher the computational cost of an ethereum-based application, the more ETH it takes to run it. Like other crypto markers, ETH is traded by speculators and can be exchanged for dollars or other currencies. (Editor’s note: If you think of Ether as a computer, then making a transaction or running a decentralized application requires the use of the resources of that computer, and Ether can be seen as the cost of buying that use of resources, and the more you use, the higher the cost)

Note that because every operation on Ether is performed by its nodes, the computational cost is high. So the best current use case for Ether is to run business logic “if this, then that.”

Other use cases can be prohibitively expensive. More computationally intensive programs will find it both difficult and expensive to operate due to the scalability and scale issues of the current Ethernet blockchain. We’ll delve into that later.

The dollar value of Ether depends on the supply and demand mechanism of the market. If investors find value in the Ether blockchain and developers are developing more useful decentralized applications, then demand for Ether could rise, which in turn could lead to an increase in its price. The opposite could also happen.

Ultimately, the price of Ether depends heavily on secondary exchanges, and the supply and demand for those secondary exchanges.

What are DApps?

DApps are decentralized applications managed by smart contracts, rather than specific individuals or companies. Once a smart contract is deployed, it cannot be changed unless it is later upgraded or a new fork is used, which will be completely separated into a new blockchain. For example, a traditional bank may be able to reverse a transaction, but anything recorded on the blockchain cannot be reversed.

While developers also have the option to develop DApps on other blockchains, most existing DApps are now built on Ether.

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Current DApps encompass a variety of use cases, including finance, storage, insurance, and health. Examples include

Compound, which allows users to borrow and lend digital assets.

Uniswap, which allows users to swap cryptocurrencies through liquidity pools.

Etherscan, which allows users to read Etherscan transaction records.

Decentraland, a virtual space in which users can buy and sell virtual land, assets, interact with others, etc.

OpenSea, a marketplace for digital assets including NFT.

Insureum, a protocol designed to more directly connect insurers to users.

According to the Ether Developer Handbook, notable features of DApps include

Zero downtime: Once the smart contracts at the heart of the application are deployed to the blockchain, the entire network will always be able to serve customers who wish to engage in contractual interactions. As a result, malicious actors cannot launch denial-of-service attacks against individual DApps.

Privacy: There is no need to provide a real identity to deploy or interact with a DApp.

Resistance to censorship: There is no entity on the network that can prevent a user from initiating a transaction, deploying a DApp, or reading data in the blockchain.

Data Integrity: Data stored on the blockchain is immutable and indisputable due to cryptographic algorithms called primitives, and malicious actors cannot forge transactions or other data that has been made public.

Untrustworthy computing with verifiable behavior: Smart contracts can be analyzed and guaranteed to execute in a predictable manner without the need to trust a central authority, which is not the case in traditional models. For example, when we use online banking systems, we trust that financial institutions will not misuse our financial data, tamper with records, or be hacked.

However, all of these benefits depend on well-established smart contracts. Bugs or vulnerabilities in smart contracts can be easily hacked and are difficult to fix because the characteristics that are recorded on the blockchain are constant.

Other potential problems with DApp development include network congestion (if the DApp requires too much computing power), poor user experience (given the difficulty of developing DApps), and unintentional centralization in the pursuit of more user- or developer-friendly applications.

In 2017, a vulnerability in the ethereum wallet Parity froze over 500,000 ethereum, worth over $150 million at the time and now worth over $1 billion.

Regardless, there are more than 150,000 active users using a total of more than 3,500 DApps every day.

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Many teams building on top of Ether have launched their own “tokens” to provide utilities in decentralized applications. These are specialized tokens built on top of Ether (editor’s note: tokens, meaning encrypted, negotiable digital proofs of interest, can be understood as a cryptocurrency in a broad sense).

A pass-through for a decentralized application may be used for many things. In most cases, it provides utilities within a decentralized application, for example, the privacy-focused web browser Brave uses its own Ether-based pass-through, BAT, to reward and initiate transactions in the browser.

Cat: A Case Study in Ether

Launched by Dapper Labs in November 2017, CryptoKitties (crypto cats) is an ethereum-based game centered on collectible digital cats. According to its website, each cat is “unique and 100% owned by you; it cannot be copied, taken away or destroyed”. The game’s “passes” are the digital cats themselves, which users can buy with ETH.

CryptoKitty is one of the first mainstream uses of irreplaceable passes (NFTs).

Let’s take a look at Jaguar, a crypto cat that was sold for 0.0749 ETH.

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According to its profile, Jaguar has unique “attributes” and is a “Gen 8” cat, or 8th generation cat, and Jaguar’s parents also have parents, a relationship that can be traced back to generation 0.

Ownership of these digital cats is tracked through the EtherChannel blockchain, with predefined smart contracts determining each cat’s unique “genetic and physical” characteristics and allowing users to buy, sell and breed.

According to the ETH Gas station, after only one week of operation CryptoKitty accounted for more than 10% of all transactions on the ethereum blockchain, causing a slowdown in the entire ecological network.

In September 2018, the most expensive crypto cat sold for 600 ETH, equivalent to $173,000. Since launch, more than $43 million of Ether has been used for CryptoKitties, although usage has slowed dramatically since 2017.

Why is Ether important?

In the original whitepaper, Ether founder Vitalik Buterin envisioned three potential branches of application: financial, semi-financial and other applications.

Financial applications, also known as decentralized financial applications (editor’s note: Decentralized Finance, also known as Decentralized Finance, or DeFi for short), primarily handle any transactions managed by traditional financial institutions, such as sub-currencies (sub-currencies), derivatives, loans, wallets and wills.

There is currently $5.6 billion locked up in DeFi applications, which are essentially based on the ethereum blockchain. One of the largest representative apps, MakerDAO, accounts for about 16%. On MakerDAO, users can lock collateral to generate stable coins anchored to the U.S. dollar.

Then there’s Compound, which allows users to borrow crypto bids against collateral or lock their assets to earn interest. And Aave as another lending protocol. Some investors have been able to earn interest rates of up to 100 percent in apps like Compound and Aave using a process called “liquidity mining.

(Editor’s note: Liquidity mining means that when you provide liquidity to one of these DeFi projects, you get a pass for the project, which provides an incentive for people to empower the project more. (We can understand it in layman’s terms as when you buy Maotai, you get Maotai shares, which will then incentivize people to buy more Maotai.)

Semi-financial applications involve money, but they also have non-monetary needs, a category that includes applications such as insurance and art trading.

For example, in insurance, a smart contract could use external data to ensure that conditions are met, and then properly issue compensation without the need for third-party insurance, becoming an insurance product without an insurer.

Finally, the third segment will contain all other applications that have no major relevance to traditional finance. This includes file storage, such as the decentralized Dropbox (editor’s note: a well-known foreign cloud storage product), and decentralized autonomous organizations DAO (editor’s note: DAO, the full name is Decentralized Autonomous Organization).

While traditional companies or organizations usually have several levels of governance, DAOs consist of a distributed network of stakeholders, each with a certain amount of power.

Another way to think about this is that while Bitcoin helps users bypass banks, Ether helps users bypass various platforms, from Facebook to Amazon to any number of more sophisticated intermediaries.

In the old days, game developers or developers of collectibles like CryptoKitties might launch Farmville (a game called Happy Farm on Facebook) style games on Facebook or physical products on Amazon.

Today, developers can use Ether to create their own decentralized applications – like CryptoKitties – rather than doing so on Facebook or Amazon or building their own blockchain from scratch, as they used to do.

CryptoKitties highlights exactly how Ether works, a game that is completely decentralized and where everyone knows the owner of each digital cat.

While Ether is decentralized, it is still vulnerable to hacking, as is the case with any blockchain that utilizes a proof-of-work (PoW) consensus mechanism to validate its blocks. Although decentralization makes it impossible to delete recorded transactions, hackers can still theoretically appear in the form of a 51% attack (editor’s note: 51% attack, meaning that when more than 51% of the people involved in recording the blockchain ledger are theoretically under the control of a subject, that subject can tamper with the blockchain ledger in a malicious manner).

In such an attack, the hacker takes up more than half of the entire network mining capacity. Such an attack is difficult and requires a huge cost; today it costs more than $400,000 per hour to launch such an attack on ethereum.

But bugs and vulnerabilities can still get into smart contracts.

In 2016, a hacker stole $60 million worth of ETH from The DAO, one of the first decentralized autonomous organizations built on Ether. the hacker exploited a vulnerability in The DAO’s smart contract, sending the then-still-nascent Ether community into a panic.

Eventually, stakeholders voted by a majority to “hard fork” the blockchain and split it into two versions: one that went back retroactively to where the hack didn’t happen and the funds were returned to investors (this is known as Ether ETH, which most people use today); and one that went straight back to the original blockchain (now known as Ether Classic ETH). Now known as Ether Classic ETC, it is expected to die out, although some people still use it).

What’s wrong with Ether?

In order for Ether to work, many participants need to hold up-to-date copies. This means that the same database is kept by thousands of nodes. This is quite inefficient.

Let’s compare this to cloud computing: cloud computing allows multiple nodes to interact on a single database. These nodes do not need to keep private copies of their own databases.

Ethernet, and blockchain technology in general, usually implements the opposite approach. All nodes must hold a copy of the ethereum blockchain. By April 2020, it will take 4 terabytes of space to run a complete archived Ethernet node. By comparison, laptops typically offer 256 GB, 512 GB or up to 1 TB of internal storage.

In addition, Ethernet nodes constantly receive updates on the latest “status” of the Ethernet blockchain. Due to the worldwide distribution of nodes, blocks tend to have high latency (the time it takes for data to move through the network).

As a result, Ether is a relatively slow decentralized computer. Each node takes a while to process each transaction, and the maximum transaction speed of Ether is about 20 transactions per second. By comparison, Visa can process over 1,500 transactions per second.

Taken together, Ether’s size and transaction speed make it difficult to scale. From a long-term perspective, consider again that at one time CryptoKitties accounted for more than 10% of all transactions on the Ether blockchain. This is not a problem per se, but this kind of traffic usually slows down the Ethernet blockchain.

Another issue of greatest concern is the huge impact of the PoW consensus mechanism on the environment. According to Digiconomist, as of April 2021, the annual carbon emissions of the Ethernet network alone amounted to 17.6 megatons of CO2 – the equivalent of Guatemala’s carbon emissions – while it consumed more than 37 terawatt-hours, which is comparable to Bulgaria’s electricity consumption.

While individual transactions do not increase energy consumption, the carbon emissions of the entire PoW-based blockchain remain a highly debated inefficiency.

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In response, some object to the idea of equating the direct environmental impact of each transaction to the underlying layer emissions. While many transactions still occur on the main chain, the goal of Layer 2 applications is to provide more scalable transactions that are outside the main chain, increasing transaction speed and reducing costs.

(Editor’s note: Layer 2 is the next layer relative to Layer 1, and Ether is the Layer 1 layer. When too many transactions on it cause congestion, many of these transactions can be handed over to the next layer, Layer 2, to be processed, and then the processing results are returned to Ether on Layer 1, thus achieving increased transaction speed and reduced costs)

Next step Ethereum 2.0

In its current form, Ethereum has encountered many problems.

According to its own words, “high demand is driving up transaction fees, which makes Ether very expensive for the average user. The amount of disk space required to run an Ether client is growing rapidly. And the proof-of-work consensus algorithm that secures the secure and decentralized foundation of Ether has a big impact on the environment.”

Nonetheless, the outlook for Ether remains positive.

Ethereum 2.0 is an upgraded version designed to make the blockchain more scalable, secure and sustainable, a vision the community has been working on since 2014.

In December 2020, the ethereum community released the first upgrade to Ethereum 2.0: the beacon chain, which introduced to the network proof-of-stake (PoS), considered by ethereum developers to be more sustainable and secure than proof-of-work (PoW) mining.

At the same time the fractional chain splits the database into new chains, thus reducing network congestion and increasing the number of transactions that can be processed per second. The sharded chain is expected to be operational in 2021.

The final step to complete Ethereum 2.0, known as docking, will merge the current ethereum blockchain with the previous 2.0 upgrade and is expected to be delivered between 2021 and 2022.

The Ethereum 2.0 vision has evolved over the years, but belief in the platform has grown as more real-world applications have been developed. While the question of market value remains up in the air, many remain optimistic that greater scalability will drive usage and demand, which could propel Ethereum towards its own vision of a world computer.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/7000-words-detailing-the-blockchain-innovator-ethereum/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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