Etherium Crypto Currency - how it all begun?
Alongside Bitcoin and the short history of cryptographic currencies, thousands of other platforms and currencies have evolved. Perhaps the seller among them is Ethereum (or the Ether currency), not to mention the currency with the second market value after Bitcoin, almost regularly since it was born.
A little history
In 2013, Vitlik Butrin , a 19-year-old programmer and activist in the Bitcoin community: one of the founders of Bitcoin magazine and an open-source development developer, including Bitcoin, KryptoKit and Dark Wallet, came up with the idea behind Ethereum and drafted a white paper for it. In white paper, Vitalick proposed "build" an alternative protocol to be used to build distributed apps ( Dapps ) using smart contract technology. To do this, he proposed to improve the Bitcoin blockchain, enabling more transactions per second (on the Bitcoin blockchain, 3-7 transactions per second can be made) and making larger and more complex transactions (the size of the blocks on the Blockchain's Bitcoin is limited to 1 MB). After accepting his opposition, Vitlik decided to go his own way, announcing in January 2014 the establishment of Ethereum. Fundraising for the project , Lasted about a month (July-August 2014), raising $ 18 million (approximately), an unprecedented amount at the time. During the fundraising, $ 60 million was offered with the starting price (in the first two weeks) being $ 2000 for one Bitcoin ($ 572- $ 632) and subsequently increased linearly to $ 1337. The project went live a year later, in July 2015. Since its successful launch , the project has grown at an astronomical pace, along the way giant companies such as Microsoft Intel and Toyota have adopted its technology. Alongside these companies, the EEA ( a non-profit organization whose mission is to develop Ethereum's platform and integrate it into a wide range of industries) has gained tremendous momentum , and as of October, the organization has already included over 200 companies ( to its list of members ).
The Ethereum Platform
Ethereum is a decentralized open source based platform that enables smart contracts approval and enforcement. The blockchain-based and P2P-based technology is based on a built-in programming language that enables value transfer and information through smart contracts. The unique nature of the platform simplifies the process of building distributed applications through the use of smart contracts, and allows it to be done independently of a centralized body. That is, the control of apps and information uploaded to the platform is not under the control of a third party. The operation of smart contracts is carried out on EVM technology , and they operate autonomously. That is, apart from actions like value storage, smart contracts can also communicate with other contracts. Each of these operations is priced in gas (“Gas” ), When the user who performed the action has to pay for the fuel through Ether (like a commission for a transaction). In this context, the danger in smart contract technology should be noted. In web development, when a critical error is detected (for example, a bug or information leak), the damage can be prevented, for example, by the server being disconnected. the programmer who created the contract has been no control since it is a distributed platform. ( for further details on ).
The Etherium is based on a public blockchain (permissionless), but its platform can be used to build protocols based on a private blockchain (permissioned). For example, the EEA , among other things, is working to promote integration between Etherium's public blockchain and private blockchain to adapt Etherium's use to the needs of the banks. So is JP Morgan developing Quorum , which is based on Etherium's platform and private blockchain.
The use of Ethereum currency - the Ether
Ether has two main uses. First, the currency is used to trade and transfer value. Heather is the second largest currency after Bitcoin in terms of its market value. Second, the currency is used as a "fuel" for the platform operation. In order for a particular function such as smart contract enforcement, or a transaction to be performed, a "gas" is needed to drive the operation. The fuel is priced and paid for through Ether. So, with the exception of dealers, Heather's target audience is entrepreneurs and developers who intend to build apps on Etherium.
What value does Ethereum offer?
The main value that Ethrium offers is in the field of distributed app building. In this aspect, Ethereum offers value on several levels. First, you can produce token (virtual currency) that represents a particular value and will be traded on the platform. Ethereum is not the only digital currency token platform, but the ERC20 standard developed in 2015 gives it an edge over its competitors and has spurred its use in ICO offerings . Second, smart contract technology, facilitates the hiring process. For example, a contract can be created whereby, if a certain target in the venture is achieved, the money is passed on to the developers, and if the target is not reached, the money is returned to the investors. Third, Ethereum allows a transparent voting process to be held among the holders of a particular organization by implementing the democratic autonomous organization. This application may assist organizations in selecting staff members and in investing in decisions related to company updates. (For a list of projects built on the Etherium).
Mining process
The Ethereum algorithm was developed as a kind of "upgrade" to that of Bitcoin. Like Bitcoin, the Ethereum algorithm is also based on a proof-of-work protocol. That is, the miners are competing with them for cracking a mathematical code that will allow transactions to be created and new blocks, and the miners who succeed in solving the first mathematical problem are rewarded by Ether (a very simplistic explanation, for those who are unfamiliar with the concept, it is advisable to delve a little into the subject). However, Bitcoin mining involves high costs that result from, among other things, the production of ASICs (computer chips manufactured for a particular purpose, in our case, Bitcoin mining). Therefore, the Bitcoin mining process has become centralized. As of this writing, the four largest mining pools dominate about 61.5% of the total market (according to Blockcain.info ). To deal with the problem of concentration, Ethereum developed Ethash , a proof-of-work protocol in which The costly production of ASICs does not provide a significant advantage over reactors with standard processors, and thus, the algorithm incentivizes distributed mining. Ethereum is expected to switch to using casper , a proof-of-stake algorithm in 2018. To expand on the differences between proof of work and proof of stake.
The Ether distribution
As of this writing, there are a total of about 96 million Ether coins, with Ether 72 million created during the IPO (of which 60 were sold to the public and 12 to the development team). Early in pre-sale in 2014, it was agreed that the annual volume would be limited to 18 million , however, as Vitelic Butrin explains in an interview with ETHNews , the annual amount of Ether produced is decreasing, and in fact it stands at 6.3 million (approximately). With Ethereum's expected transition to the casper algorithm (beyond proof-of-stake), the rewards for miners are expected to decline drastically (and, according to Vitalick, may reach 0), and as a result, the annual Ether produced will decrease accordingly.
Attached is a graph describing the growth in Ether. It's hard to see in the picture, but the rate of increase in Ether is declining in the long run. For example, six months ago (May 2017), the amount of Ether produced per day was 28,500, and today (on November 26) it stands at 19,000.
The attack on the DAO and the splitting of the Ethereum Classic ETC
The Decentralized Autonomous Organization (DAO) is essentially a business model that enables organizations to follow predefined procedures without human intervention. That is, the founders of the organization will define in smart contracts procedures that the project will run, and once the contracts are created, the project will be managed autonomously with its founders having no control over its operation. The project continues to exist through fees charged by the contracts themselves for the use of smart contracts. "The DAO" was a project based on the DAO technology issued in May 2016 on the Ethereum blockchain. $ 11.5 million (over $ 150 million). Shortly after the IPO ended, security issues were discovered on the project, and on June 17, 2016, a hacker managed to steal $ 3.6 million (which at the time was over $ 60 million) . for further details on the attack .
The smart contracts on which the DAO is based are set so that Ether can be withdrawn from the contract only after a period of 28 days, therefore, the hacker could not redeem Ether which he stole for that period. Following this, discussions in the Ethereum community began, with one side arguing that hard-forks should be removed by removing the blockchain created since the hacker attack, and returning the money stolen to DAO tokens holders. On the other hand, some were opposed to fragmentation for fear of harming one of the key ideas underlying the blockchain - its immutability. Following the split, a vote was taken among the Ether holders, and the vast majority voted in favor of the hard fork. Therefore, on July 20, the split took place with Ethereum Classic continuing with the original non-forked chain, and Ethrium with the post-hard fork blockchain. Expandable on the subject .
The smart contracts on which the DAO is based are set so that Ether can be withdrawn from the contract only after a period of 28 days, therefore, the hacker could not redeem Ether which he stole for that period. Following this, discussions in the Ethereum community began, with one side arguing that hard-forks should be removed by removing the blockchain created since the hacker attack, and returning the money stolen to DAO tokens holders. On the other hand, some were opposed to fragmentation for fear of harming one of the key ideas underlying the blockchain - its immutability. Following the split, a vote was taken among the Ether holders, and the vast majority voted in favor of the hard fork. Therefore, on July 20, the split took place with Ethereum Classic continuing with the original non-forked chain, and Ethrium with the post-hard fork blockchain. Expandable on the subject .
The effects of the Byzantium update
On October 16, 2017, a hard-fork update was performed on the Byzantium Ethernet Network . The update is part of a two-step process called Metropolis , with no date for the second update, the Constantinople. Main effects of the update: The average block creation time was cut from an average of about 29 seconds (as of 15.10), to about 14 seconds on average; The remuneration for creating a new block was cut from 5 ether to 3 ether; And the blocks themselves became smaller: from about 19,950 bytes, to about 15,000 (click on the graph to see the average size of the blocks).
Ethereum Future: Updates in the near term
- The scalability problem : At the 3rd DevConv conference held earlier this month (November), Vitalick announced that one of the main issues that Ethereum intends to tackle in the near term is the scalability problem. Ethereum intends to solve this problem through technical changes to the network including " sharding ". This idea is not new and has already been proposed in the past To solve the same problem for Bitcoin. In the current state, all users (nodes) of the Ethrium must verify each transaction, and transaction history is saved on each computer. That is, the number of transactions that the entire blockchain can verify is the same as the number of transactions that a single user can verify. Due to the current nature of the blockchain, Bitcoin is currently capable of verifying 3-7 transactions per second, and Ethrium 8-15. Using the sharding technique, it is possible to "break" the Ethrium data base into parts (shards), so that each part is managed concurrently by different nodes. In this way, each node only approves the transactions that are performed in the part where it is located, saving only the the history of those transactions. and Itlik announced at the conference that the sharding concept is not devoid of drawbacks and the main difficulty is building trust among users (nodes) different (to prevent a situation in which nodes send wrong information to other nodes). ( for further details on ).
- Constantinople update : During 2018, the second part of the two-phase update, Metropolis, is expected to take place. This update may include, among other things, the move to use the proof-of-stake casper protocol. The update date is unknown at this time, you can follow the EIP .
Ethereum: Pros and Cons of the Dapps
Etherium's platform simplifies the Dapps build process while making smart contracts accessible. The unique nature of the platform evokes a sense of ambivalence towards its use. On the one hand, Platforma is making access to the use of blockchain technologies and smart contracts for a wide range of industries (the growth of the EEA). But on the other hand, the nature of the platform has two major disadvantages. First, the autonomy of those apps is limited. They do not have their own blockchain, so they have no ability to make specific blockchain enhancements to suit their needs. In addition, the same apps are exposed to the risks of the potential consequences that may arise from the platform's updates (hard-forks). Second, as the number of apps built on the platform grows, the more the platform gains power, as the apps built on it develop a dependency relationship in some sense. It can be debated whether the power accumulation of Ethereum and its dependency on apps is a disadvantage,
Wallets are recommended for storing Ethereum
I should note that people who trade in low frequency are definitely advised to use a cold wallet.
MyEtherWallet MEW - To understand the function of this software, it is important to first understand what private key and public key are. Ether is stored on the Ethereum blockchain and the private key is a kind of proof that the user is the owner Ether's proof This allows the user to access Ether coins and tokens on the ERC20 etherum.The public key is used as the address of your wallet, which means that when you want to receive it from another Ether person, you send it to that address.
The MEW is open source software that enables public key and private key generation and provides a number of options for private key storage, including storage in cold wallets such as Ledger and Terzor. In other words, it's not exactly a wallet, since the private key is not stored on MEW's servers, but on the user's personal computer (or cold wallet). The software offers a combination of intuitive and easy to use product, along with a relatively high level of security and integration with cold wallets. ( Link to tutorial video ).
