How Does Ethereum Work?
Ethereum is a revolutionary technology that has transformed the world of decentralized finance and smart contracts. As a distributed ledger technology, Ethereum enables the execution of smart contracts, which are self-executing agreements with the terms of the agreement directly written into code. This eliminates the need for intermediaries, such as banks or lawyers, to enforce and oversee transactions.
One of the key features of Ethereum is its shift from proof of work to proof of stake consensus mechanism, known as the Ethereum Merge. In the traditional proof of work system, miners use computational power to solve complex mathematical problems and validate transactions. However, in proof of stake, validators are chosen to verify transactions based on the number of stakes or coins they hold. This transition reduces energy consumption and makes the network more sustainable.
Ethereum's programmability is what sets it apart from other blockchain platforms. Developers can create and run decentralized apps on the Ethereum network. These dApps are powered by smart contracts, which are self-executing agreements that automatically execute once predefined conditions are met. Smart contracts remove the need for intermediaries, making transactions faster, cheaper, and more secure.
The versatility of the Ethereum platform expands beyond financial applications. With its programmable nature, it has opened doors for various use cases such as supply chain management, voting systems, decentralized social networks, and much more. Ethereum's flexibility and potential for innovation have led to the rise of decentralized finance (DeFi), which aims to recreate traditional financial systems using blockchain and smart contract technology.
Ethereum’s Upgrades
Ethereum is a community-driven project, constantly evolving and improving. Ethereum’s protocol has undergone several major advancements over the years, including the Berlin upgrade, London hard fork, and upgrades like the Merge (Eth2) and Shard chains.
The Berlin upgrade was a significant advancement in Ethereum's protocol that occurred in April 2021. It introduced several improvements, including reductions of gas fees for certain operations, enhanced security measures, and updates to the Ethereum Virtual Machine (EVM) to make the network more efficient.
London is another major upgrade in Ethereum. It implemented the Ethereum Improvement Proposals (EIP) 1559, which changed the transaction fee structure by introducing a base fee and a burn mechanism, making transaction fees more predictable and reducing network congestion. By the way, an Ethereum Improvement Proposal (EIP) is a formal document submitted by developers or community members to propose changes, enhancements, or additions to the Ethereum network's protocol, functions, or standards. EIPs serve as a way to discuss and gain consensus on proposed improvements before implementation, ensuring open collaboration and transparency within the Ethereum community.
Shard chains are part of the Ethereum 2.0 upgrade, which aims to improve the network's scalability. Shard chains will allow the Ethereum network to process transactions and smart contracts in parallel across multiple chains, instead of relying on a single chain. This will increase the network's capacity and throughput, enabling it to handle a larger number of transactions and applications.
The Merge (Eth2) involves transitioning Ethereum's consensus mechanism from Proof of Work (PoW) to Proof of Stake (PoS), making the network more energy-efficient and scalable. It will also enable Ethereum 1.0 and Ethereum 2.0 to merge into a single, unified network.
Ethereum Merge
In September 2022, Ethereum transitioned from a Proof of Work (PoW) to a Proof of Stake (PoS) consensus mechanism. The merge successfully combined the PoW Ethereum mainnet with the PoS Beacon Chain to create a new proof-of-stake Ethereum with a consensus layer and an execution layer. This major update also revolutionized the way transactions are validated on the platform. Unlike the traditional method of solving computational puzzles through mining equipment, users can now stake 32 ETH to validate transactions, resulting in a more energy-efficient process.
One significant change brought about by the Merge is a drastic reduction in ETH issuance, with a 90% decrease. As a result, ETH could potentially become deflationary after the transition, and stakers may earn between 8% and 12% APR. However, the staked ETH Token will only be withdrawable after the Shanghai upgrade, expected within 6 to 12 months.
The Merge does not affect transaction throughput or gas fees, as the block production rate remains similar. On-chain governance is not enabled, and protocol changes continue to be discussed and decided off-chain by stakeholders.
A key benefit of the transition to PoS is a massive reduction in Ethereum's annual energy consumption by 99.9%. This "greener" Ethereum is anticipated to attract institutional investors. However, Ethereum miners, valued at $19 billion, are advocating for ETHPoW, a potential proof-of-work hard fork.
It’s worth noting that the Ethereum blockchain has experienced multiple hard forks since its launch. The biggest one is, perhaps, the DAO Fork. This fork occurred in July 2016 as a response to the DAO (Decentralized Autonomous Organization) attack, where around one-third of the total supply of Ether tokens was stolen. The hard fork was intended to undo the theft and return the stolen funds to their original owners. This resulted in the creation of two separate blockchains: Ethereum (ETH) and Ethereum Classic (ETC).
Shanghai Upgrade
The most important scheduled modification on Ethereum’s road map since the Merge is the Shanghai Upgrade that will offer the ability for users to withdraw staked ETH and access their ETH rewards from Beacon Chain.
In the early days of the Merge stage (when Ethereum’s proof-of-work chain amalgamated with the proof-of-stake Beacon Chain), validators had to secure the network by staking 32 ETH, which replaced the need for mining. However, stakers could not withdraw their locked crypto assets until the Merge stage was fully executed. The Shanghai upgrade has made staked ETH withdrawals possible, without waiting for the completion of the Merge update.
Ether (ETH)
Ether (ETH) is the native cryptocurrency of the Ethereum Blockchain. Similar to Bitcoin, ETH is a crypto asset that can be used as electronic money on the internet. It allows individuals to be their own bank and control their funds through a wallet as proof of ownership.
ETH is secured by cryptography, ensuring the protection of wallets, transactions, and the digital asset itself. One unique aspect of ETH is that it enables peer-to-peer payments without intermediary services like a bank. It is also decentralized and globally accessible, with no centralized control over its issuance or terms of use. ETH is divisible up to 18 decimal places, allowing for flexible amounts to be transacted.
ETH fuels and secures the Ethereum network, serving as the primary asset of the Ethereum financial system. It is used to pay for transaction fees, participate in decentralized finance (DeFi) activities, and provide collateral for various financial activities.
Ethereum's programmability allows developers to shape ETH for different purposes, such as streaming, token swapping, earning interest, and obtaining stablecoins.
ETH holds value as a means of payment on the Ethereum chain and as a digital store of value due to its limited supply. It is an essential component of the Ethereum ecosystem, facilitating a wide range of interactions and the creation of various tokens on the platform.
Changes in Ethereum's Consensus Mechanism and Block Rewards
The first Ethereum block, also known as the genesis block, was mined on July 30, 2015. This marked the official launch of the Ethereum network and the beginning of the Ethereum blockchain.
Initially, the block reward for mining an Ethereum block was set at 5 ETH. However, Ethereum has undergone several changes to its consensus mechanism and block reward structure over the years. In December 2019, Ethereum transitioned from a Proof of Work (PoW) to a Proof of Stake (PoS) consensus algorithm, which is known as Ethereum 2.0. As part of this transition, the block reward is expected to change.
Currently, Ethereum operates on a PoW model, where miners are rewarded with a certain amount of Ether for successfully mining and adding blocks to the blockchain. However, with the fully successful transition to Ethereum 2.0, the inflation model will shift from PoW to PoS, which is expected to reduce or eliminate the block reward altogether. Instead, validators in the PoS system will earn rewards by becoming ETH holders or staking their ETH.
Who Invented Ethereum Blockchain?
Ethereum, the innovative blockchain platform, was co-invented by Vitalik Buterin, a prominent figure in the cryptocurrency space. Vitalik, a Russian-Canadian programmer, conceived the idea of Ethereum in 2013 and later co-founded the project alongside several other influential individuals. Among these co-founders is Gavin Wood, who assumed the role of Chief Technology Officer.
Gavin played a pivotal role in developing the technical specifications and designing the Ethereum Virtual Machine (EVM), which powers smart contracts on the platform. Together with other dedicated contributors, Vitalik Buterin and his co-founders revolutionized the blockchain landscape, providing a decentralized platform that enables the creation of a wide range of decentralized applications (dApps) and programmable smart contracts.
Ethereum Foundation
The Ethereum Foundation is a Swiss nonprofit organization established on July 30, 2014. It is responsible for the development and promotion of the Ethereum blockchain platform. The foundation is run by a team of individuals, including developers and researchers, with Vitalik Buterin being one of the co-founders. Its purposes include fostering the growth of the Ethereum ecosystem, supporting Ethereum-related research and education, and coordinating community efforts to enhance the platform's scalability, security, and usability.
Who Operates Ethereum?
Ethereum operates without being controlled by any specific entity. It relies on a network of interconnected computers running software that adheres to the Ethereum protocol and contributes to the Ethereum blockchain. Each of these computers is called an Ethereum node. Nodes can be operated by anyone, although staking ETH (Ethereum's native token) is required to participate in securing the network. Permissionless participation is possible for anyone holding 32 ETH.
The Ethereum source code is not developed by a single entity, either. Suggestions for protocol changes and upgrades can be proposed and discussed by anyone. Multiple independent organizations create different implementations of the Ethereum protocol using various programming languages. These implementations are typically developed openly, encouraging community involvement and contributions.
How Ethereum Differs From Bitcoin
Ethereum and Bitcoin are the two largest digital currencies and blockchains, but they differ in several key ways:
Purpose. Bitcoin was created as a digital currency to facilitate peer-to-peer transactions and store value, while Ethereum's primary goal is to enable smart contracts and decentralized applications to be built on its platform.
Blockchain functionality. Bitcoin's blockchain focuses on recording and verifying transactions, making it primarily a digital ledger. In contrast, Ethereum's blockchain is more versatile, allowing developers to create and execute smart contracts.
Smart contract capabilities. Ethereum's programmable smart contracts enable developers to build decentralized applications with self-executing code, automating processes and removing intermediaries. Bitcoin's scripting language is more limited, primarily supporting basic transaction functions.
Consensus mechanism. Bitcoin uses Proof of Work (PoW) as its consensus mechanism, relying on miners to solve complex mathematical puzzles to validate transactions. Ethereum, on the other hand, is in the process of transitioning from PoW to Proof of Stake (PoS), which uses validators who hold and stake their cryptocurrency to secure the network.
Supply. Bitcoin has a limited supply of 21 million coins, with new coins created through the mining process. Ethereum currently has no supply limit, but it is transitioning to Ethereum 2.0, which will introduce a new supply model.
Community and development. While both cryptocurrencies have active communities and development teams, Ethereum has a more extensive ecosystem supporting DApps, decentralized finance projects, and non fungible tokens (NFTs). This diversity has contributed to Ethereum's popularity for innovation and experimentation.
Ether vs. BTC: Ethereum's native cryptocurrency is called Ether (ETH), which is used to pay for transaction fees and computational services on the Ethereum network. Bitcoin (BTC) is solely a digital currency used for transactions and storing value.
Live Ethereum Price
What is the Ethereum price today? What are the coin’s current market cap, the ETH/USD exchange rate, circulating supply, the lowest and highest price? Get these and other related questions answered, thanks to Changelly’s interactive Ether live price charts.
Changelly is a reliable cryptocurrency exchange platform that offers seamless buying, selling, and exchanging of various cryptocurrencies, including Ethereum. It provides real-time ETH price updates and Ethereum price analysis, empowering users to stay informed and make data-driven trading and investment choices.
Ethereum, the second largest cryptocurrency by market value after Bitcoin, has experienced severe price fluctuations since its inception. The highest price paid for Ether (ETH) was approximately $4,382, reached on May 12, 2021. The lowest price point occurred on October 21, 2015, shortly after its launch, when it was valued around $0.42.
Like any other cryptocurrency price, Ethereum's current price is primarily determined by supply and demand dynamics on major crypto exchanges. Factors influencing demand (and thus an average price) include investor sentiment, adoption by individuals and businesses, technological developments, and macroeconomic conditions. Additionally, factors such as trading volume, liquidity, and overall market conditions can impact Ethereum's price.
Ethereum (ETH) currently ranks #2 cryptocurrency by trading volume on most cryptocurrency exchanges, including Changelly. Popularity is based on the relative market cap. The market cap of Ether is calculated by multiplying the price of one ETH by the total supply of ETH coins in circulation. This is similar to how market capitalization is determined in the stock market, where the current share price is multiplied by the total number of shares available.
Ethereum (ETH) is among the largest digital assets by market capitalization, but Ethereum price is highly volatile. To navigate the market, users and investors should exercise caution, conduct thorough research, and make informed decisions when they trade Ethereum. The 24/7 trading of cryptocurrencies contributes to the constant changes in the Ethereum price and its high volatility in USD.
Ethereum Live Price at Your Fingertips
Changelly's interactive real-time charts for ETH price allo you to track the performance of Ethereum. Our price chart will provide a wealth of information at a glance, so users can explore the lowest and highest price points, live market price, market cap, 24-hour trading volume, price change in the last 24 hours, price change over the last 7 days, ETH/USD price, and a plethora of other valuable data.
With these comprehensive charts and technical indicators, Ethereum traders and enthusiasts can stay informed about the ever-changing market conditions, enhance their ability to make a more accurate Ethereum price prediction, and make weighted decisions regarding their ETH investments.
How to Get Ethereum?
To get Ethereum (ETH), you can:
Become a validator on the Ethereum network: By staking a minimum amount of ETH and participating in the network's proof-of-stake consensus, you can earn rewards for validating transactions. Staking on the Ethereum blockchain is a process where participants lock up a certain amount of Ether (ETH) as collateral to become validators. Validators propose and validate new blocks, and are rewarded with additional ETH for their participation. Validators risk losing their staked ETH if they act maliciously. Staking pools and services enable users to pool their ETH together to meet the staking requirements and share rewards.
Buy ETH with fiat through an ATM. Some cryptocurrency ATMs allow you to purchase Ethereum directly using cash or a debit card.
Buy Ethereum from cryptocurrency exchanges. Platforms like Changelly enable you to buy ETH using fiat currencies or other cryptocurrencies. You can employ your credit card, debit card, bank account, and other conventional payment methods to invest in Ether or other crypto assets on Changelly.
Other methods of getting Ethereum include:
Peer-to-peer (P2P) trading. You can buy ETH directly from individuals through P2P trading platforms like Paxful that are replete with willing Ethereum traders.
Participate in Initial Coin Offerings (ICOs). Some projects offer their native tokens through ICOs, and you can acquire ETH to take part in these token sales.
