Ethereum and ETH: From Theory to Practice

Frequently asked: what is the essence of Ethereum and why isn’t it just the “second Bitcoin”? The answer is simple — these are two completely different systems with different goals.

Bitcoin vs Ethereum: Head to Head

Bitcoin was created as a currency — a means of exchange and store of value. Ethereum, on the other hand, was conceived as a platform. If Bitcoin is a calculator, Ethereum is a whole computer on the blockchain.

What’s the big deal? Smart contracts. These are self-executing programs that do exactly what they’re programmed to do, without intermediaries. Imagine a vending machine: you insert money, push a button — the product drops automatically. No cashier, no operator. That’s a smart contract.

The result? Thousands of projects have grown on Ethereum — from DeFi protocols to NFTs and video games.

ETH: The Main Fuel of the Network

Ether (ETH) is not just a coin, it’s the engine of Ethereum. Every operation in the network requires payment in ETH, called “gas.” Validators receive these payments for confirming transactions.

Since 2015, ETH has become the second-largest cryptocurrency by market cap. Why do traders hold it? Some believe in growth, others actively use it in DeFi protocols as collateral.

“The Merge”: A Revolution in Energy Consumption

In 2022, a landmark event occurred — Ethereum transitioned from Proof of Work to Proof of Stake. What did this bring?

• Issuance dropped from 13,000 ETH/day to 1,700 — an 88% reduction
• Inflation: from 4.61% to 0.52%
• Energy consumption dropped dramatically
• With high network activity, ETH can even become deflationary (when burned fees exceed issuance)

Validators now need to lock up a minimum of 32 ETH and receive rewards. The system is more eco-friendly and fair.

Where Ethereum Is Already in Use

Theory gives way to facts. Let’s see who’s actually using it:

• Take-Two launched the Web3 game Sugartown on Ethereum
• ING uses blockchain to simplify document management (the Komgo project)
• TD Ameritrade allows clients to trade Ethereum futures via the ErisX platform

Banks, publishers, exchanges — these are real use cases.

On the Horizon: New Standards

In 2023, major innovations took place:

• ERC-6551: NFTs can now function as full-fledged wallets with their own smart contracts. This is a huge expansion of possibilities
• Ethscriptions: images are transmitted directly on the blockchain, without creating an NFT. Cheaper and simpler
• EFP (Ethereum Follow Protocol): a decentralized subscription system based on Ethereum, which can be integrated with existing platforms

Danksharding on the horizon promises even greater scalability.

Where Problems May Arise

Not everything is rosy. Ethereum faces challenges:

• Competition: Solana and Cardano offer cheap and fast transactions
• Scalability: as the network grows, more memory and computing power are required
• Fees: at peak times, gas can be really expensive
• Regulation: if lawmakers crack down on DeFi and NFTs, blockchain demand will drop
• Security: smart contracts can contain bugs, hackers look for vulnerabilities

Outlook for the Future

Technical analysis indicates an upward trend. Analysts expect that by November 2023, the price could rise 4.3% to $2,038.

But the main thing isn’t the price, it’s the development of the technology. Ethereum is constantly updating, the developer community is active, and new innovations are emerging. This is not a “dead” project frozen in place.

Bottom Line

Ethereum is not just a cryptocurrency. It’s a platform that allows people to build applications without central control. Smart contracts, DApps, DeFi — all of this works thanks to engineering genius and community persistence.

Yes, there are problems. Yes, competition will intensify. But as long as Ethereum continues to develop and adapt, its influence in the crypto world will only grow.

The question isn’t “Will Ethereum exist?” but “How far will it go?”