Ethereum 101
Ethereum was the first and biggest blockchain platform. It revolutionized what blockchains could be applied to. So, let’s learn about it.
Ethereum vs. Bitcoin
To learn about Ethereum, let’s start by comparing it to something we already know - Bitcoin.
Check out this tweet thread:
Bitcoin = decentralized calculator | purpose is to be a cryptocurrency
Ethereum = decentralized computer | purpose is to be an application platform
dApps = decentralized applications | built on platforms like Ethereum
That’s a simple explanation. Let’s dive a little deeper
What is Ethereum, really??
Ethereum is a decentralized, blockchain-based global supercomputer that launched in 2015 to serve as the foundation for an ecosystem of interoperable, decentralized applications (dApps) powered by token economies and automated smart contracts.
- Assets and applications designed on Ethereum are built with self-executing smart contracts that remove the need for a central authority or intermediary.
- The network is fueled by its native cryptocurrency ether (ETH), which is used to pay transaction fees on the network.
- Programmable, public, and censorship-resistant, Ethereum forms the backbone of a decentralized internet, which has already spawned significant innovation like Initial Coin Offerings (ICOs), stablecoins, and decentralized finance (DeFi) applications.
That was a lot of info. But, it serves as a great primer for this in-depth blog post:
You now have a baseline understanding of what Ethereum is and why it matters. Woooooo!!!!
But that article we wrote was back in 2021. A lot of stuff has happened since then. Especially the most important update so far…
Ethereum Merge
If you’ve been keeping up with news about Ethereum, you’ve probably heard about a term called the Merge. It was a pretty important event that everyone in the crypto community was buzzing about. But why was it so important?
To understand what the merge is, we have to introduce two new terms: proof-of-work and proof-of-stake. These are both two mechanisms for verifying transactions on a blockchain.
Proof-of-work requires mining by nodes/validators to add and verify new blocks on the blockchain. In order to earn rewards on the blockchain, validators compete against each other to solve cryptographic puzzles and verify transactions. However, in a proof-of-stake model, validators are randomly chosen based on how much crypto they “stake”.
Here’s an article explaining proof-of-work vs. proof-of-stake more in-depth:
Essentially, the Ethereum Merge involved switching the Ethereum verifying mechanism from proof-of-work to proof-of-stake, creating Ethereum 2.0. The Merge officially happened on September 15, 2022. But why was this switch so important?
One main reason (probably the most important): Ethereum 2.0 now claims to use 99.5% less energy than its predecessor. The biggest drawback of proof-of-work is that mining consumes too much energy, which contributes to a massive carbon footprint. But now that Ethereum 2.0 uses proof-of-stake, it’s more environmentally friendly and doesn’t have to rely on mining to validate transactions.
The Merge is only the first of five upgrades to happen to Ethereum. Which means that there’s a lot coming in the future to make Ethereum even better.
Since Ethereum is so important, let’s dive even deeper. Understanding Ethereum’s core value and future potential is vital to understanding web3 as a whole.
Read this Packy McCormick post for an all-encompassing dive on Ethereum:
By now, you should have a holistic understanding of why Ethereum matters. If you want learn more on how Ethereum works, check out these resources:
Further Resources
Alternative Blockchain Platforms
Right now, Ethereum is the 800 lb gorilla of blockchain platforms. More decentralized applications are built on Ethereum than anywhere else. It has benefitted a lot from the “first-mover” advantage. BUT, it isn’t invisible. It has huge scalability issues. In addition, chains that are tailored to specific markets could better serve those markets than Ethereum.
Many people believe web3 will have a multi-chain future. There will not be one blockchain that rules the industry. What chains rise into dominance is far from determined. Below, we outline current chains with the potential for future success. We are only talking about public blockchains (there are private ones for enterprise applications). We also could not include every chain (there are A LOT of ‘em).
This is meant to give you an idea of what current platforms are out there. Let’s get into it!
Solana (SOL)
Solana is an incredibly scalable blockchain platform. It is the new kid on the block and has A LOT of financial backing. Solana has a variety of network optimizations (especially “Proof of History”) which help them be incredibly scalable. It can do up to 65,000 transactions per second (Ethereum can only do ~17 TPS right now)!!
But, critics question its integrity and resources. Solana uses the Proof of Stake consensus mechanism. It requires a lot of SOL (it’s native currency) to become a validator. As a result, there are not as many validators running the network (thus it is less decentralized). Also, Solana also raised a lot of money from investors. People question if that money has influence over the platform’s progression. Solana may be questionable, but its growth is undeniable. Learn more here:
What Is Solana? (video) A simple breakdown of Solana’s ecosystem (article) A high-level breakdown of Solana’s core innovations (article) Solana Website
Polygon (MATIC)
Polygon is basically Ethereum with super cheap gas fees. To get technical, it is an Ethereum sidechain scaling solution that allows Ethereum applications to have higher throughput and lower transaction fees. Polygon is able to do this because it made a few pragmatic tradeoffs on security (according to Vitalik). Low gas fees makes it easier for users to try new apps and test things. Learn more here:
What is Polygon? (video) What is Polygon? (article) Vitalik Buterin’s Thoughts on Polygon (video) Polygon Website
Avalanche (AVAX)
Avalanche’s is a more secure, scalable, and customizable blockchain platform. It is especially applicable to DeFi. Due to the network’s design, an attacker would need ~80% control of the network to take it over (Bitcoin and Ethereum is ~51%).
In addition, Avalanche scales well without losing much decentralization.
Finally, Avalanche has customizable subnet blockchains. Each subnet can have multiple blockchains (with customizable consensus mechanisms and virtual machines). Those chains can be public or private and have customizable rules. The customization makes Avalanche applicable to all kinds of organizations. It is also compatible with Ethereum so developers can easily transfer their Ethereum dApps to Avalanche. This is what is known as a EVM compatible chain. Learn more here:
What is the Avalanche Network? (video) What is Avalanche? (article) Avalanche: The New DeFi Blockchain Explained (article) Why does Avalanche stand above the rest? (Tweet thread) Avalanche Website
Polkadot (DOT)
As you’ve seen so far, everywhere you look there’s a new blockchain network that claims they solve the issues of all the others, but in reality they are all very similar in their functions. Unlike all the others mentioned above, Polkadot is referred to as a layer-zero (L0) blockchain. Instead of being its own blockchain platform, its purpose is to bring together all the previous networks like Ethereum, Avalanche, and Solana. By connecting these networks it allows for them to be more interoperable, and achieve more together. It is intending to connect the entire crypto ecosystem together and make building and using blockchains easier. Learn more here:
What is Polkadot? (video) What is Polkadot? (article) Polkadot Website
Recap
On this page, we learned the value of blockchain platforms. We also got a lay of the land for current platform competitors. It is impossible to predict what platforms will come out on top. But, a holistic view of the industry can help you make smarter decisions.
But, what are you making decisions about? Other than buying that platform’s token, how do you interact with it?
99% of people are either making decisions about buying tokens (investing) or interacting with decentralized applications (dApps). If you are planning to buy that platform’s token, you should know how it works.
If you are using a dApp, you are also using the the platform it runs on. So, it is important to understand how that platform works.
To use these applications you need a wallet. Soooo, let’s talk about wallets!