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Ethereum (ETH) 101 For Everyone

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Ethereum (ETH)
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What is Ethereum?

From Wikipedia:

Ethereum is a decentralized blockchain with smart contract functionality. Ether (Abbreviation: ETH;[a] sign: Ξ) is the native cryptocurrency of the platform. Among cryptocurrencies, ether is second only to bitcoin in market capitalization. It is open-source software.

Ethereum is a global computer network that uses the Ethereum protocol to support communities, apps, organizations, and digital assets. You can set up an Ethereum account from anywhere, anytime, to access these applications or create your own. What makes Ethereum unique is its decentralization, allowing you to perform these activities without relying on a central authority that might restrict your access or change the rules.

At its heart, Ethereum is a decentralized, global software platform driven by blockchain technology, most recognized for its native cryptocurrency, Ether (ETH).

Accessible to anyone, Ethereum can be used to develop secure digital technologies. Its token is primarily designed for compensating blockchain support activities, but it can also be used for tangible goods and services.

Ethereum is a blockchain that is ideal for developers and businesses, with a focus on scalability, programmability, security, and decentralization. It offers support for smart contracts, which are essential for decentralized applications (DApps) such as many decentralized finance (DeFi) apps.

Why Would I Need/Use Ethereum?

If you're drawn to more resilient, transparent, and trustworthy strategies for global collaboration, establishment of organizations, application creation, and value distribution, Ethereum is your solution. Ethereum is a collective narrative, inviting you to discover the remarkable potential we can co-create.

Who Invented Ethereum?

Vitalik Buterin, the mastermind behind Ethereum, unveiled it through a white paper in 2014. He, along with Joe Lubin, founder of blockchain software firm ConsenSys, launched the Ethereum platform in 2015.

Ethereum's founders were pioneers in recognizing blockchain technology's potential beyond simply secure virtual payments. Since Ethereum's inception, Ether has ascended to become the second-largest cryptocurrency by market cap, surpassed only by Bitcoin.

Can You Explain The Technology Behind It?

Ethereum, like other cryptocurrencies, utilizes blockchain technology. Picture a lengthy chain of blocks, each with information from all prior blocks and new data. This blockchain is distributed identically across the network.

A network of automated programs validates this blockchain by reaching a consensus on transaction information's validity. Changes to the blockchain can only be made upon network consensus, bolstering its security.

Consensus is achieved via an algorithm known as a consensus mechanism. Ethereum employs the proof-of-stake algorithm where validators, a network of participants, create new blocks and collaborate to authenticate their content. The blocks contain information about the blockchain state, a list of attestations (validator's signature and vote on block's validity), transactions, and more.

In mid-September 2022, Ethereum transitioned to a proof-of-stake algorithm, a more cost-effective and environmentally friendly approach than the proof-of-work model.

What Is Proof-of-Stake?

Proof-of-stake, unlike proof-of-work, doesn't need energy-consuming mining to validate blocks. It employs a finalization protocol called Casper-FFG and the LMD Ghost algorithm, amalgamated into a consensus mechanism known as Gasper, which supervises consensus and determines validator rewards or penalties.

To activate validation, solo validators must stake 32 ETH. Individuals can stake less ETH but must join a pool and share rewards. A validator creates a new block, attests to its validity (called attestation), and broadcasts it to a committee of validators who verify and vote for its validity.

Proof-of-stake penalizes dishonest validators. Gasper identifies attacking validators, deciding on block acceptance based on votes from validators. Dishonest validators are penalized by having their staked ETH burned (sent to a wallet without keys) and are expelled from the network.

Historic Split

A significant event in Ethereum's history is the hard fork, resulting in Ethereum and Ethereum Classic (ETC). In 2016, a majority group of network participants exploited the Ethereum blockchain to steal over $50 million in ether, funds raised for a project known as The DAO.

The theft's success was linked to a third-party developer associated with the new project. The majority of the Ethereum community decided to nullify the theft by invalidating the existing Ethereum blockchain and endorsing a revised version.

However, a small faction chose to stick with the original Ethereum blockchain. This unmodified version eventually branched off to become the cryptocurrency Ethereum Classic.

Ethereum vs. Bitcoin

Ethereum is frequently contrasted with Bitcoin. Although the two cryptocurrencies share similarities, crucial differences exist.

Ethereum is characterized by its founders and developers as "the world's programmable blockchain," presenting itself as an electronic, programmable network with diverse applications. In contrast, the Bitcoin blockchain was specifically designed to support the Bitcoin cryptocurrency.

Ethereum & Non-Fungible Tokens (NFT)

Non-fungible tokens (NFTs) rose to prominence in 2021. Crafted using Ethereum, NFTs are tokenized digital items. Tokenization assigns a specific digital token to a digital asset, recording it on the blockchain.

This process establishes ownership as the encrypted data holds the owner's wallet address. The NFT can be traded or sold, and this action is recorded as a transaction on the blockchain. The transaction is authenticated by the network and ownership is transferred. Ethereum is ideally placed to facilitate such actions.

How Can I Buy Ethereum?

You can buy and sell ether using a variety of centralized cryptocurrency exchange platforms. Or, you can simply tap the ‘Buy’ button from within your Savl wallet and use a credit/debit card to safely and securely purchase and store Ethereum in your non-custodial wallet.

DISCLAIMER: All cryptocurrencies are high-risk investments and you should not expect to be protected if something goes wrong. Don't invest unless you're prepared to lose all the money you invest. The contents of this blog post do not constitute financial, legal or investment advice of any nature and are simply a reporting of publicly available facts and data. Savl does not and will not make financial or investment recommendations EVER. Your capital is always at risk.

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