Project Name: Ethereum
Ticker: ETH
Website: ethereum.org
Twitter: twitter.com/ethereum
Whitepaper: Click here for the whitepaper.
Introduced by its creator, Vitalik Buterin, at a conference in North America, Ethereum is basically a smart contract platform and a cryptocurrency technology. Ethereum is a reliable, immutable, and decentralized system with a data storage method that works with data located on many devices in an anonymous and distributed manner. Ethereum is not only limited to these features, but it also has a programmable structure and allows applications to be built and run on top of it.
Ethereum was one of the most popular projects in the Initial Coin Offering (ICO) process in the cryptocurrency industry. The Ethereum ICO, which took place in September 2014, raised $16M in a brief time. At the ICO, 1 ETH was worth $0.311. The reasons for such high demand were Ethereum's great technology and features that could provide the infrastructure for many new projects.
Bitcoin and Ethereum have similar features such as having their own blockchains, but there are some differences between them. Ethereum is a project that allows the creation, distribution, and use of smart contracts with its infrastructure. By following certain protocols in certain standards, you can create your own smart contracts on the Ethereum network and develop your own applications. One of the protocols on the Ethereum network is ERC-20.
What Is ERC-20?
ERC-20 stands for “Ethereum Request for Comment”. ERC-20 is a protocol. For example, the websites we visit daily work with "HTTP", which stands for "Hypertext Transfer Protocol". Websites are built according to this protocol and its rules. Like HTTP, ERC-20 is a protocol with standards. ERC-20 allows members of the Ethereum community to create unique tokens, smart contracts, and DApps. Thus, anyone can create and issue tokens in the ERC-20 standard. However, ERC-20 tokens do not have their own blockchain. Instead, they run on the Ethereum blockchain. Today, there are many ERC-20 tokens in the cryptocurrency industry.
Smart Contracts and DApps (Decentralized Applications)
Smart contracts emerged long before cryptocurrencies. In 1997, Nick Szabo introduced smart contracts in his article “Formalizing and Securing Relationships on Public Networks”. Nick Szabo aimed to get rid of the complex, costly and energy-consuming aspects of traditional contracts and make all transactions with a simple, cheaper, and practical digital contract. In fact, we can make a full definition of smart contracts based on this goal. In short, Smart Contracts are applications that eliminate the problem of time, resources and trust by using less resources and providing less interaction between the parties in transactions to be carried out in many different areas. DApp stands for “Decentralized Application”. In the ERC-20 standard we mentioned earlier, developers can create decentralized contracts or applications, making them accessible to everyone all over the world. We call these applications DApps.
Ethereum Virtual Machine
The Ethereum Virtual Machine (EVM) is an algorithm that powers the Ethereum network and runs thousands of computer hardware around the world. The EVM is a working environment for smart contracts. The EVM is the mechanism that runs the Ethereum Bytecodes independently available on all Ethereum nodes. Ethereum contracts are created with advanced programming languages like Solidity and translated into Bytecode, a simpler programming language. Because Bytecodes are distributed to all nodes, contracts always work the same way. Because the codes and information on all nodes are the same.
Ether (ETH)
Ethereum's native cryptocurrency used on the Ethereum blockchain is Ether, most known as ETH. We have already mentioned that decentralized applications (DApps) such as smart contracts can be built and many projects can be developed on the Ethereum blockchain. A cryptocurrency was needed to execute these DApps and contracts, and that cryptocurrency is ETH. Just like Bitcoin, in addition to being a cryptocurrency that can be sent from one person to another in a brief period of time from anywhere in the world, it is also used to pay for services on the Ethereum network and transaction fees called gas fees.
Gas Fees
Gas fees are paid to miners on the Ethereum network to execute transactions. In other words, gas is the fuel which runs the processing power on Ethereum. When you make a transaction, miners receive a gas fee to validate it. If you don’t have enough gas, miners don’t accept your transaction and your transaction will be invalid. For more information on Gas, you can read our article “What Is Gas in Blockchain?”. This process is called Proof of Work. As of November 12, 2020, the Ethereum blockchain is among the blockchain projects that work with the Proof of Work consensus mechanism. Ethereum is expected to move to Proof of Stake with the launch of Ethereum 2.o.
CryptoKitties: A DApp
We mentioned that smart contracts and DApps can be built thanks to the infrastructure that Ethereum provides. One of these DApps is an online game called CryptoKitties. CryptoKitties is one of the best examples of distributed ledger technology. Introduced in 2017, CryptoKitties attracted a lot of attention and caused major slowdowns in the Ethereum network. In CryptoKitties, players can breed, feed, and trade digital kitties with completely unique and unchangeable characteristics. Each kitty in the system has a “DNA”. Although DNAs cannot be changed, they also have features that are passed on to their offspring. In this way, users can create CryptoKittys with rare features and sell them at high prices. The most expensive CryptoKitty exchange took place on September 4, 2018, when a CryptoKitty named “Dragon” was sold for 600 ETH (about $173,000 at the time).
