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Ethereum (ETH) - network and token in one

Ethereum (ETH) - network and token in one

created Michał SielskiDecember 10, 2019

The Ethereum network was launched in mid-2015. It quickly gained popularity and today it is - not counting Bitcoin - the basis of one of the most famous cryptocurrencies. Its advantage over others is that it is a separate programming language on which the unit of account - Ether is based.

The principle of operation of Ethereum (ETH) is the same as that of most cryptocurrencies - the system blockchain it is distributed and the code is open. Miners add more blocks to it. There is a fee for each transaction, but a very small one. It is collected in Gwei units. 1 billion Gwei comprises 1 ETH.

How it arose Ethereum

Vitalik Buterin ethereum

Vitalik Buterin. Source: Wikipedia

In December, 2013 Vitalik Buterin, a programmer from Canada with Russian roots, published the manifesto "Ethereum: The Ultimate Smart Contract and Decentralized Application Platform" in the form of code. It was based on Bitcoin code, but gave opportunities that BTC does not have: creating decentralized applications thanks to script programming.

When the public sale of tokens took just over a month in 2014, it was considered a huge success. And it was a success, because few people expected that after a few years, raising capital for new altcoins could be counted in ... minutes. The first ETH tokens were sold at 0,3 BTC for 2000 ETH (approximately PLN 1 per 100 tokens). After two weeks, the price increased to 1337 for 1 BTC. After the end of the issue, it turned out that over 31 thousand. BTC. According to the rates at that time, it was USD 14 million.

Read also: 51% attack on Ethereum Classic - lost 200 thousand USD

30 July 2015 of the year Ethereum was ready, but many were not missing that it turned out to be a misfire relatively quickly. October 25 October 2016 more than 3,6 million ETH tokens have been lost. A vulnerability was found in the code, which ended in hacking and, as a result, the creation of a new, repaired Ethereum chain. Interestingly, the previous one remained on the market and is today called Ethereum Classic.

Ethereum and Ether - what happenedówith her

For many people not fully familiar with the cryptocurrency market, the words Ether and Ethereum are synonyms. Nothing could be more wrong. Briefly speaking: Ethereum is a platform, programming language, network; while Ether - altcoin operating on its basis.

Currently, Ethereum operates on the basis of the Proof of Work algorithm, but 150 companies associated in the network development organization argue that it will soon be possible to switch to Proof of Stake. Why is it so important? The cost of digging 1 ETH is still growing, which reduces the possibilities and, above all, the speed of the operation. The main reason is that ETH can be mined all the time so the blocks are getting bigger and bigger. Therefore, more and more time and energy are needed to dig them, which translates not only into lower miners' earnings, but also overloads the network. With the introduction of the Proof of Stake protocol, it will be possible to enter the Ice Age. The "Ice Age" is to be a period in which ETH mining will no longer be possible. Today, you can only carry out 25 ETH transactions per second. This would change either by switching to a new protocol or applying a second layer solution - the same as it is Lightning Network for BTC.

Not only the Ice Age, Difficulty Bomb will help ETH?

Freezing the possibility of digging another ETH is not the only idea to reduce the load on the network. Another is the so-called Difficulty Bomb. This is an algorithm aimed at increasing the difficulty - and thus profitability - of digging ETH. It is he who is to gradually lead to the abandonment of mining ETH in favor of other cryptocurrencies. It has been operating since August 2015, but its capabilities are not used and ETH extraction is still profitable. When in October 2017 the hard fork once again postponed the launch of the Difficulty Bomb, the average block time decreased by approx. 50%. up to 15 seconds.

Trade and quotations of Ethera

Due to its popularity, Ether can be bought on virtually every cryptocurrency exchange, even the smallest. What's more, it often becomes not only part of a pair of cryptocurrencies that can be traded, but is also used for shopping. More and more new tokens, sold as part of the ICO, accept payments only in ETH.

Currently, Ethereum still ranks second - in terms of capitalization - on the cryptocurrency market, behind the undisputed leader, which of course is Bitcoin. In the first days of its existence it was listed below USD 1 per unit. The peak reached in January 2018 year, when it was paid 1432 USD. At 09.12.2019, the price is 150,9 USD, and those who bought it during the issue can still celebrate. Today's ETH capitalization reaches 16,4 billion USD.

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About the Author
Michał Sielski
Professional journalist for over 20 years. He worked, among others, in Gazeta Wyborcza, recently associated with the largest regional portal - He has been present on the financial market for 18 years, he started on the Warsaw Stock Exchange when the shares of PKN Orlen and TP SA were just being introduced to the market. Recently, his investment focus has been exclusively on the Forex market. Privately, he is a parachutist, a lover of Polish mountains and a Polish karate champion.