Ethereum – An introduction to the second generation blockchain

In 2013, a young 19-year-old Canadian-Russian Developer named Vitalik Buterin wrote a white paper describing ethereum. In 2015, Buerin along with British computer scientist Gavin Wood developed Ethereum with crowdfunding by Initial Coin Offering (ICO). Ethereum is a decentralized blockchain that enabled writing codes onto the blockchain that can execute by itself. It is the first second-generation blockchain technology. Ethereum quickly gained its popularity and “ether”, the cryptocurrency on the ethereum blockchain is the second-largest cryptocurrency based on its market capitalization. At the time of writing this article, the market capitalization of ether is $392 Billion.

What is Ethereum?

In 2008, Satoshi Nakomoto introduced bitcoin to the world and along with the bitcoin, Satoshi gave blockchain. Bitcoin is the first digital asset that is built over the blockchain. It revolutionize how we used currency by removing government, banks, or any other intermediaries that existed between buyer and seller. Bitcoin became the first decentralized cryptocurrency and on May 22, 2010, a programmer named Laszlo Hanyecz brought two pizzas for 10,000 bitcoins. This was a landmark day, as it was the first time when bitcoin was traded in exchange for a real commodity. Since then bitcoin started gaining popularity and the era of cryptocurrency started.

Bitcoin is a digital asset but the application of blockchain is beyond converting or replacing real-world assets with digital assets. Blockchain along with other cryptographic technologies helps in solving many real-life problems that exist due to trust issues. Vitalik Buterin along with Gavin Wood created a scripting language over the blockchain technology and thus created smart contracts. Smart contracts are pieces of code that can execute by themselves on the blockchain. Writing business logic on blockchain was possible through Ethereum.

Difference between Bitcoin and Ethereum?

Implementation

In the initial period, Bitcoin protocol was defined by reference C++ implementation. As the development progress, Java and Go implementations were also made that moved bitcoin from a single system language. On contrary. Ethereum had 6 implementations languages for the protocol (C++, Go, Python, Java, JavaScript, and Haskell). Because of this, when a disparity occurs due to human error or coding, developers can look at results and examine the implications of a specific translation to decide a particular strategy. This specification-driven implementation helped in reducing human error while coding.

Assets

Bitcoin is just a cryptocurrency whereas ethereum allows the exchange of other assets like stocks, digital art, currencies, and much more because of smart contracts. Users can write codes on the ethereum blockchain and create logics that can solve problems beyond financial sectors. Insurance, voting system, supply chain, IoT are some of the areas where ethereum applications are built. Immutability, transparency, traceability, and distributed nature of blockchain along with smart contracts replaced trust. This enables writing crypto laws which once got executed cannot be stopped by any organization or third party.

Nature of blockchain

Blockchain only allowed permissionless (public) transactions whereas ethereum allows both permissioned and permissionless transactions. On the ethereum blockchain, a company or an individual could create a branch from the main network and create a separate chain that could be visible to the participants of that chain. Most businesses like to enter into agreements with other businesses or individuals but would like to keep them private to themselves rather than publicly doing it. The permissioned nature of these side chains attracted businesses to Ethereum network where they can do contracts with other parties but keeping it a secret. For example, a person could share his medical records with the hospital and his/her insurance company without sharing them with an untrusted third party.

Mining

Mining is the process of adding blocks to the blockchain. Bitcoin takes approximately 10 minutes to mine a block and add to the blockchain. Ethereum takes 12 seconds to mine a block and add to the blockchain. This is because Bitcoin uses proof of work (PoW) and Ethereum uses a mixture of Proof of Work and Proof of Stake (PoS), which enables the ethereum network to mine blocks faster and consume less computing power and electricity than the bitcoin network.

Future

Since its inception, ethereum had several hard forks that kept the protocol running more efficiently and securely. Ethereum 2.0 is a major upgrade to the existing protocol and is in development which would allow faster processing time, less processing fees, and greater interoperability. Phase 0 was launched in December 2020 where consensus protocol was completely changed to Proof of Stake. This will also introduce sharding into the network which would reduce the size of blockchain a node has to store. Splitting up the chain to reduce workload by running them parallelly.

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