Understand Ethereum, its roots, relevance, and future in the world of Web3
As an open-source blockchain ecosystem, Ethereum has become central to the evolving Web3 space. From facilitating smart contracts to powering dapps, Ethereum brings inimitable utility to the decentralized world. This comprehensive guide will help you navigate Ethereum’s rich ecosystem and the tools DappRadar provides to stay informed. Let’s get started.
- What is Ethereum?
- How is Ethereum different from Bitcoin?
- ETH: the ether token
- From mining to staking: the role of Ethereum validators
- Ethereum’s role in the world of Web3
- Who is on the Ethereum team?
- Developing applications on Ethereum
- ERC-20 and ERC-721 tokens
- What are the most successful projects on Ethereum?
- Future prospects and influence of Ethereum
- Keep up with trending dapps on Ethereum
What is Ethereum?
Launched in 2015, Ethereum is a groundbreaking, open-source blockchain platform that has revolutionized the way we perceive and utilize digital contracts and applications. At its core, Ethereum is a decentralized network, the lifeblood of smart contracts and decentralized applications (dapps) that are designed to function without the fear of downtime, fraud, or interference from any third party.
In the ever-evolving landscape of the internet, Ethereum represents the cutting edge of Web3, dominating a host of sectors, particularly Decentralized Finance (DeFi) and Non-Fungible Tokens (NFTs). Ethereum’s disruptive potential lies in its capacity to support a global, decentralized platform for currency and a new wave of applications, fostering a new generation of digital interactions.
It’s important to mention the role of Ether (ETH), the native cryptocurrency of Ethereum, which serves as the fuel for transactions and computational services on the network. While we’ll delve deeper into Ether and its significance in later sections, its existence remains a key factor in Ethereum’s functionality and appeal.
Throughout this article, we will delve deep into the many layers of Ethereum’s multifaceted ecosystem, exploring its myriad applications, the critical differences from other blockchains like Bitcoin, and its role in the future of the digital world. So buckle up as we embark on a journey into the captivating realm of Ethereum, the backbone of the Web3 industry.
Ethereum’s Evolution: From PoW to PoS via ‘The Merge’
Ethereum’s journey has been marked by continuous improvement and a relentless pursuit of sustainability and efficiency. In its early days, Ethereum utilized a Proof-of-Work (PoW) consensus mechanism, akin to Bitcoin. However, 2022 marked a seismic shift in Ethereum’s evolution as it successfully transitioned from a PoW framework to a Proof-of-Stake (PoS) model in an epoch-making event known as ‘The Merge’.
In September 2022, Ethereum broke new ground by successfully shifting to a PoS blockchain. This wasn’t just a momentous upgrade in Ethereum’s journey, but a transformative event in the history of cryptocurrency as a whole.
While this shift did not directly augment Ethereum’s transaction speeds or reduce fees, it served as a fundamental groundwork for further enhancements aimed at making Ethereum faster, cheaper, and more efficient.
One of the immediate benefits of this transition was a drastic reduction in Ethereum’s carbon footprint by eliminating the need for energy-intensive GPU miners, transitioning from a major energy consumer to a blockchain that’s far more environmentally friendly.
‘The Merge’ also brought significant changes to Ethereum’s daily issuance. Post-transition, approximately 1,700 ETH entered circulation daily, a significant decrease from the previous issuance rate of 13,000 ETH per day under the PoW network.
How is Ethereum different from Bitcoin?
Ethereum and Bitcoin, though both giants in the blockchain realm, differ remarkably in their function and architecture, with each offering unique features and benefits:
- Transaction Speed: Ethereum’s average block time stands at a swift 12 seconds, facilitating faster transactions compared to Bitcoin’s average of 10 minutes.
- Scarcity: Unlike Bitcoin, which employs a scarce economic model with halving block rewards every four years, Ethereum releases a consistent amount of Ether annually.
- Consensus Mechanism: Ethereum has transitioned from a Proof-of-Work (PoW) to a Proof-of-Stake (PoS) consensus mechanism with the recent ‘Ethereum Merge,’ making traditional mining obsolete. Bitcoin, however, continues to utilize the energy-intensive PoW mechanism, where mining power directly influences network competitiveness.
- Dominance in dapps: Ethereum reigns supreme in the world of dapps thanks to its game-changing invention of smart contracts. The blockchain was the first to provide a practical, democratic way for developers to control and monetize their content. This has led to the disruption of numerous sectors, with Ethereum-based dapps playing critical roles in gaming, gambling, DeFi and exchanges, NFTs, marketplaces, and even social media.
Discover more about the impact of Ethereum on various sectors in our Q2 Dapp Industry Report.
ETH: the ether token
Ether (ETH), the native cryptocurrency of the Ethereum network, emerged in 2015 as an integral component of Ethereum’s open-source blockchain platform. Designed not only to act as a digital currency akin to Bitcoin, ETH also operates as the lifeblood for running commands and powering applications on the Ethereum network.
It quickly evolved into a multi-functional token playing a crucial role in the Ethereum ecosystem. ETH is not only used to facilitate transactions but also to compensate for computational services on the Ethereum network, often referred to as “gas.”
Today, ETH forms the economic underpinning of Ethereum-based dapps, incentivizing developers and validators to maintain the network’s security and integrity.
According to DappRadar Token Explorer, ETH’s all-time high reached $4,815 in November 2021, while its all-time low was in October 2015 at $0.4. At the time of writing, the price for ETH stood at $1,868.26. You can manage your Ethereum-based crypto and NFT portfolio on DappRadar, as well as track ETH prices.
From mining to staking: the role of Ethereum validators
Ethereum’s paradigm shift from a Proof-of-Work (PoW) to a Proof-of-Stake (PoS) consensus mechanism has significantly transformed the way the network is maintained and secured. In this new landscape, rather than mining, staking has become the standard. The process entails network participants, referred to as validators, pledging a minimum stake of 32 ETH to be part of the blockchain’s operation.
In contrast to the energy-intensive mining process that Ethereum previously employed, staking is far less demanding on resources. Validators are essentially putting their ETH at ‘stake’, and their chance to validate transactions and earn new ETH is proportional to the amount they have staked. This new approach aligns the validators’ interests with the overall health of the network, ensuring a more sustainable and secure ecosystem.
Ethereum’s role in the world of Web3
As mentioned above, Ethereum plays a significant role in Web3. As the leading smart contract platform, Ethereum powers a wide range of applications, from decentralized exchanges to NFT platforms, making it a central pillar of the Web3 ecosystem.
According to our June industry report, Ethereum dominates 72% of NFT trading volume and 70% of the DeFi sector’s TVL.
Ethereum is a foundational network known as a Layer-1 blockchain. It can handle over a million transactions a day but often faces issues due to high demand. This leads to slower speeds and increased costs for transactions, making it harder for people to use applications built on Ethereum.
They act like an add-on to the Ethereum network to improve its speed and reduce costs. These solutions are particularly popular in the gaming world because they offer faster, cheaper transactions.
Who is on the Ethereum team?
Ethereum was conceived by Vitalik Buterin, but its development and ongoing improvements have been made possible by a team of dedicated developers. The Ethereum team consists of numerous experienced developers worldwide, committed to making Ethereum more secure, efficient, and accessible.
Other notable Ethereum pioneers later started working on their own blockchain projects. For example:
- Charles Hoskinson would later launch Cardano.
- Gavin Wood would create Polkadot.
- Joseph Lubin would launch ConsenSys, the company behind MetaMask.
Developing applications on Ethereum
Ethereum applications are primarily developed using Solidity, a contract-oriented programming language designed specifically for crafting smart contracts and dapps on the platform.
The Ethereum Virtual Machine (EVM) serves as the runtime environment for these smart contracts, providing security and executing them precisely.
EVM compatibility is a desirable attribute for other chains, as it allows for seamless interaction and interoperability with the rich ecosystem of Ethereum applications, thereby extending their capabilities and reach.
ERC-20 and ERC-721 tokens
On the Ethereum platform, two of the most prominent token standards are ERC-20 and ERC-721. Introduced in 2015, ERC-20 tokens streamline the process of creating a new token on the Ethereum blockchain, with popular examples including USDT (Tether) and UNI (Uniswap). These tokens are primarily used for fungible assets, where each token is identical to every other token; this makes them perfect for cryptocurrencies.
On the other hand, ERC-721 tokens, introduced in 2017, allow for the creation of non-fungible tokens (NFTs) like CryptoKitties and Cool Cats, where each token holds unique information and thus can represent distinct digital assets.
This diversity in token standards showcases Ethereum’s adaptability, offering versatile solutions for different digital assets.
What are the most successful projects on Ethereum?
Keeping track of the most popular projects on Ethereum is essential to anyone looking to find the best opportunities in the web3 space. DappRadar offers the best tools to keep up with trends and follow through with market changes. Visit the Top Dapps Ranking to see what’s hot right now.
Exchanges and DeFi on Ethereum
One of the most successful sectors of the dapp industry in 2023 is DeFi. Ever-evolving finance applications continue to rely on the unparalleled security of the Ethereum blockchain to offer their services. Some of the top Ethereum DeFi dapps and DEXs you should know about are:
- Uniswap: protocol for trading and automated liquidity provision on Ethereum.
- Curve: exchange and DeFi savings tool for stablecoins.
- MetaMask: crypto wallet trusted by over 5 million users worldwide.
- dydx: leading DeFi platform for margin and perpetual trading.
- Lido: Ethereum’s biggest liquid staking protocol.
NFT collections on Ethereum
Almost all top-selling NFT collections reside on the Ethereum blockchain. Despite the NFT market’s explosion in 2021 and the high costs of Ethereum transactions, these digital assets continue to hold significant value, often viewed as premium, or “blue-chip,” investments in the web3 arena. Some of the collections on Ethereum with the highest total sales volume include:
- Bored Ape Yacht Club: a famous collection of 10,000 unique Bored Ape NFTs.
- CryptoPunks: the first NFT collection that inspired the Ethereum ERC-721 standard.
- Meebits: 20,000 unique 3D characters with a no-fee trading marketplace.
- CloneX: 20,000 next-gen Avatars of the RTFKT Studios by artist Takashi Murakami.
Games on EVM-compatible chains
While Ethereum is not usually the ideal choice for web3 game developers, many games on EVM-compatible chains also have some functionality, either in-game NFT, DeFi, or token on Ethereum. Among the best gaming blockchains that strongly connect with Ethereum, we can mention:
- Polygon: EVM-compatible PoS Layer-2 with games like The Sandbox.
- Ronin: gaming blockchain home of Axie Infinity.
- Immutable X: one of the leading Layer-2 solutions and chain of Gods Unchained.
- Arbitrum: Layer-2 scaling solution for Ethereum home of the gaming ecosystem TreasureDAO.
Future prospects and influence of Ethereum
Ethereum continues to uphold its strong position in the crypto realm, even amidst rising competition from other blockchains. The pathway ahead for Ethereum is lined with several major upgrades planned post-Merge, marked by increased scalability, efficiency, and innovation.
For a more in-depth understanding of Ethereum, consider exploring its official website and participating in its educational programs. You can find extensive resources, including their whitepaper and roadmap, directly on the site and via their official social media platforms.
Keep up with trending dapps on Ethereum
DappRadar is the best place to keep up with what’s up with the Ethereum dapps. Stay up to date with the latest trends by using the DappRadar Top Dapps Ranking. You can also use DappRadar Portfolio Tracker to manage your Ethereum crypto and NFT portfolio.