Updated: Mar 17, 2022
Ethereum's cryptocurrency has the second largest capital in the world, behind Bitcoin. A rise in which the ingenious cryptocurrency made in a short four years after its official release into the market.
Crypto has since flaunted its strength as a useful instrument for combating inflation when it made astonishing gains during the meltdown of the US dollars in early 2020. The corona pandemic dealt a fatal blow to the usual flow of the economy, and the US government, forced by the state-of-emergency, distributed relief funds to its citizens. However, this was not without repercussions, the outrageous pump of cash in circulation caused mass inflation panic. The rest was a wild bullish run for crypto.
Ethereum had it way easier than Bitcoin in terms of global adoption as a financial instrument. This was partly because Bitcoin, as a forerunner cryptocurrency, took on the difficult task of winning the crowds sentiments and allaying the initial distrust for cryptocurrency.
Secondly, Ethereum had the support of a huge group of well-established financial institutions, blockchain startups, research groups and Fortune 500 companies. This collection makes up the Enterprise Ethereum Alliance (EEA) founded in March 2017. The collective consists of big shot organizations like; ConsenSys, Toyota Research Institute, Samsung SDS, Microsoft, Intel, the National Bank of Canada, MasterCard, and Cisco Systems, to name a few.
The month of March 2021 proved a very favourable month for the Bitcoin, Ethereum crypto pair. The crypto industry took a substantial amount of upward lunges in terms of financial adoption during this month, more than any recorded time in history.
In mid-March, the collective of dApps on Ethereum’s DAO reached an all-time high of $46.1 billion in terms of total locked value (TLV). Total locked value accounts for the total amount of funds deposited on a DeFi protocols blockchain. These deposited assets fuel the operations of a DeFi platform. Interested Investors get the opportunity to hold stakes on the app via money pools.
Money Pools are fundraisers organized by the members of a dApp to generate income for the upkeep of the platform. Inventors stand a chance to earn rewards and interest for depositing funds. These funds support a project by creating supply to meet trading liquidity (to this end, the investor turns a profit from trading commissions), for validating transactions within the app’s blockchain (investors may be rewarded with native tokens) and so on.
The Explosion of NFTs
Non-fungible tokens (NFT) tokens absolutely blew up in the media during this same month. NFT’s became the number one conversation in the crypto community, as news of various famous personalities selling tokenized digital art shut through the internet like wildfire. On the 2nd of December 2021, Grimes sold off an aesthetic video snippet titled Death of the Old for around $390,000. How about the famous first tweet by the Twitter founder that sold for almost $3 million in August 2021.
NFTs lead to a massive troop of new users to Ethereum’s network. And the positive reactions from the world encourage more game/software developers to build dApps on the Ethereum blockchain.
In 2012, Colored Coins were digital tokens minted on Bitcoin’s blockchain to represent the ownership of physical assets such as property, bonds, contracts, company shares and so on. However, the technology didn’t quite catch on as many didn’t find it too useful.
NFTs can be traced back to the digital artist Kevin McCoy. On the 3rd of May 2014, he created and minted the first non-fungible token way before the crypto art movement started. The digital piece of art was called quantum and it featured an undulating display of rapidly changing neon lights and shapes. McCoy is considered a digital art legend till today, as a pioneer of crypto art. Despite the current bid sale method common to NFTs, McCoy prefers to sell his art at a gallery or in person, the conventional way.
Before digital art became non-fungible tokens, there were viral Pepe the Frog memes that existed in communities like 4chan and Tumblr. In 2014, a marketplace for ‘Rare Pepes’ was created. In a short time, Rare Pepes' worth rose to notorious levels.
In 2014, Counterparty, a decentralized application was launched on Bitcoin Blockchain. The app ran on a peer-to-peer network of computers and offered users access to its code. Users were allowed to modify the original app, creating a new standalone app with its own tradable cryptocurrency on the blockchain.
Gaming was implemented on the Counterparty platform for the first time in April 2015 by the Spells of Genesis game creators. Additionally, their application offered game tokens called BitCrystals backed on the Bitcoin blockchain.
Tokenization garnered a lot of attention in August 2016, when Counterparty partnered with Force of Will to create an application for trading cards. Force of Will was a popular game at the time; therefore, this move attracted a lot of eyes to the beneficiary application of the blockchain to other venues besides trading crypto.
Terra Nullius was the first native NFT to Ethereum blockchain and originated on August 7, 2015. Being one of the earliest NFT projects, Terra Nullius didn’t offer much functionality. Users were required to stake some ether before they could own and customize an NFT.
Rare Pepes made an entrance into the tokenized world in October 2016. Although initially launched on Counterparty (the Bitcoin decentralized app environment). Due to Ethereum's growing popularity and support for decentralized applications, Rare Pepes were eventually traded using Ethereum's blockchain. This would mark one of the earliest appearances of NFT’s on Ethereum.
Ethereum Name Service
Ethereum Name Service (ENS) was created on March 10, 2017, as a standardized naming protocol. ENS allows Ethereum wallet owners to buy a unique name that identifies with their wallet address as well as other dApps on the blockchain. Users on the network can buy a domain name that is linked to all their public wallet address keys. This feature increased transaction ease by giving users enter transactions with a simple username instead of copying chunky hexadecimal characters.
For example, if you wanted to transfer 4ETH to your friend on his birthday as a gift. The usual way to do this would be to get his wallet address, then transfer the funds. However, if your friend has purchased a domain name called ‘Sonia.eth’, it would be much easier to use this username instead of typing a long string of numbers.
ENS generated usernames aren’t tied to Ethereum addresses only. This human-readable domain points to all addresses associated with the participant on the network. The entire process of name assignment and address reference is handled by a computer algorithm (decentralized system).
How does ENS work?
ENS is executed through two smart contracts: the registry and the resolver. The registry consists of code that uploads the following data pertaining to the newly created domain on the blockchain: the domain owner, the resolver and the caching time of the domain’s history.
The resolver handles the encryption and decryption of the human-readable domain name and machine-readable domain name. The resolver also connects the domain name to a designated address.
Whoever wishes to create a new domain, must first lookup the database to ensure the name hasn’t been taken. After finding a valid name, the user may resume with registration. Domains longer than five words attract a $5 fee per year. Next, the domain can be matched to multiple wallets or websites. Also, a subdomain may be attached for each respective use case. For example, email.alex.eth or website.alex.eth.
Early birds exploited the money-making opportunity of ENS by buying domain names that may be sought by popular persons or organizations in future. These persons are usually willing to buy the names at a high cost.
Ethereum announced Curio Cards, its very first native NFT art project, on May 9, 2017. The platform has a limited supply of unique art collectable cards designed by seven artists. Over 30,000 cards with varying degrees of rareness are currently on the dApp. Of course, Curio Cards are minted on the Ethereum blockchain.
CryptoPunks, an NFT characterized by a collection of 8-bit generated characters, each one unique. There are mostly two kinds of people on this platform: the investors and the collectors. Collectors buy CryptoPunks tokens for keepsakes, while investors buy in the hopes that its value will increase in future, thereby flipping a profit.
Although CryptoPunks was minted on June 9, 2017, a bug in its smart contract got exploited by malicious users, who carted away with some tokens. An alternative dApp was proposed and initiated on June 23, 2017. Some of the stolen OG Punks are still in circulation, however, trading them on NFT exchanges have been prohibited.
Visa Adopting USDC as a Payment Method over Ethereum
On March 29th, 2021, Visa announced the settlement of transactions with USD Coin (a virtual version of the American US dollars) on its platform. USDC is minted on the Ethereum blockchain.
This would mark a huge step for Ethereum towards adoption into the global finance industry.
Major Countries Using Ethereum
In general, crypto activity in the United States isn’t as high as one would imagine. More than ninety percent of Americans have neither held any digital currencies nor traded them. But when you shift the scope across other countries, that’s where the action is happening.
So now the question is what countries have warmly welcomed Ethereum into its financial system as a trading instrument. However, it is worth noting that some countries, though having ultra-high trading volumes, face bans from their ruling financial body.
Reports show that regions in Africa, South America and Asia have the highest stake and trading volume in crypto compared to Europe, North America, or Australia.
Within Africa, Nigeria has an outstanding engagement of thirty-two percent of its population, despite the ban placed on crypto by its government. A huge number in contrast with America’s six percent. Analysts claim that Nigerians' intense involvement may be driven by poverty. With over 60 percent of Nigerians suffering from poverty (and considering the cheap cost of crypto transactions), many are prone to desperately seeking financial freedom via crypto trading. Additionally, crypto was proposed to solve inflation crises, and the Nigerian currency is knee-deep in it. Therefore, it’s almost as if the pair found each other.
What is the Future for Ethereum?
Ethereum seems to be picking up from where Bitcoin technology peaked and relentlessly lunging forward into a future with many promised innovations.
So far, Ethereum has successfully re-imagined and implemented a new approach to digital finance technology, and enforced a complete reform on the classic structure of single-server applications. It is obvious that Ethereum has made a big technological shift that will see continuous advancements, at least, for the next few decades.
The developers of Ethereum are still hard at work, toiling to take the system to unprecedented levels. A new upgrade that promises to improve its scalability and security is set for release in 2023. The cogs of the machine are already in motion (step one of a three-step plan has been executed). The combined effort of the Ethereum ecosystem plus volunteering developers will see to the upgrade’s actualization.
Development on all three phases of the plan is carried out concurrently. However, each succeeding one depends on the previous for complete deployment.
These three phases are: the Beacon Chain, Merge, and Shard Chains.
The Beacon Chain
The Beacon Chain is a forked blockchain designed to change the consensus protocol of Mainnet. As of now, validation occurs using the proof-of-work system (PoW). Under PoW, there are two separate parties that are responsible for validating transactions.
Using proof of work, Validators perform the computation necessary for adding a new block to the chain. Verifiers perform the last check by seeing if the validator's computer used the amount of computing power required for solving the hash.
Proof-of-Stake is a much safer protocol. Since valid transactions are determined by a consensus between all computers in the system, gaining control would mean possessing the majority of ETH in circulation. Additionally, every time a new participant joins the system, more ETH is created, destroying the possibility of owning majority stakes. Unlike the previous model (PoW), which made it difficult for new miners to join the network due to the challenge of having the required computing power.
Persons interested in becoming a full validator must stake 32ETH. Although, you can also stake less if you wish to be a participant on the network.
Just as rewards are earned by honestly participating on the network, you can lose ETH If you go offline or fail to validate transactions.
Rewards will not be available for withdrawal until the next software upgrade. After the merger of Beacon Chain and Mainnet, then participants may withdraw in a preceding minor upgrade. .
Recall that after the Beacon Chain is deployed, a fork consisting of two simultaneously run blockchains will exist, the original chain (Mainnet) and Beacon Chain. This will persist for a while until both Merge. Then, the Beacon Chain transfers the new consensus protocol (Proof of Stake) to the Mainnet.
When the merge is done, Mainet’s consensus protocol will be converted from Proof of Work to Proof of Stake. Smart contracts will now be handled using the PoS protocol. The objective of attaining a more secure and full-scale Ethereum will be actualized.
Since a PoS system will now be in motion, the merge will render miners from the old system obsolete. Therefore, miners are expected to deposit their funds into stakes if they wish to remain members of the network.
The developers are using all that is in their power to ensure that a simplistic approach is taken during the upgrade development. They are determined to keep tunnel vision as needed for this project, and even relatively important features like withdrawing staked Ether will be pushed till later. The plan is to include this feature on a minor upgrade after the merger is complete.
The Shard Chain
The deployment of the Shard Chain depends on the successful release and merger of the Beacon Chain and Mainnet Chain because it needs the PoS protocol to run.
The Shard Chain will be scaling up the network and increasing transaction speed by creating 64 blockchains, The Bacon Chain will facilitate the transactions on the Shard Chain by randomly selecting validators on any given branch. This irregular assignment of validation will make it impossible for malicious users to control a specific branch through connivance.
The implementation of sharding is going to be a stone that kills two birds. It will increase transaction speed, and at the same time, give the system a complexity that makes it difficult for malicious users to compromise.
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