Ethereum is the leading blockchain network that defines the main concept of smart contracts and hosts thousands of decentralized programs. Ethereum, with the symbol ETH, is the domestic coin of this network and the second-best cryptocurrency in the market after Bitcoin. If Bitcoin wants to be a decentralized payment system, Ethereum wants to decentralize everything.
What is Ethereum?
Ethereum is one of the digital currency’s largest and most important blockchain networks. This blockchain is an important platform for building decentralized applications. Simply put, Ethereum is an operating system in the cryptocurrency world.
Ethereum is a decentralized network; no government body supervises it, and any person or intermediary does not control it. The decentralization of the Ethereum blockchain has made it resistant to events such as hacking, network failure due to equipment failure, etc. The prominent feature of smart contracts is the lack of possibility of fraud, censorship, loss and third-party interference.
Ethereum is a semi-anonymous blockchain; you have your address, which you get by creating an Ethereum wallet. This address is public, but no one can identify you from it. The Ethereum blockchain is run by thousands of computer systems worldwide, each of which has volunteered to run the network and receives rewards from the network for doing so.
Another feature of Ethereum is its distributed nature; It means that network information is available to all network members, and this problem eliminates the possibility of changing and manipulating data.
What is Decentralize Application (DApp)?
Decentralize Applications (DApp) are programs that operate in a completely decentralized manner without the existence of an intermediary or supervisory body. These programs work only on the blockchain platform.
How does the Ethereum blockchain work?
Ethereum runs on a decentralized computer network called a distributed ledger or DLT. DLT itself has many sub-branches, blockchain being one of them. Nodes are computers responsible for processing transactions and creating new blocks in blockchain networks. The more nodes there are, the more decentralized the network will be. The operation of the Ethereum block-chain has several components, which we will explain below.
The main thing that separates Ethereum from other networks is smart contracts. Today, many layer-one networks can define a smart contract, but this concept was first introduced to the world in cryptocurrencies by the Ethereum network. The most prominent feature that distinguishes Ethereum from Bitcoin is these smart contracts.
With the help of a smart contract, you can determine a mechanism for the transaction you want and be sure that it cannot be changed or tampered with. The positive point of smart contracts is that you and your other party in the transaction do not need the intervention of third parties.
Ethereum blockchain enables the creation of smart contracts; it means you can write a smart contract on the Ethereum blockchain platform with the help of the Solidity programming language. This Smart Contract can be designed to create the types of operations you want. These contracts allow Dapps and tokens to be created on the Ethereum network.
2. Ethereum Consensus Algorithm
As long as Ethereum nodes operated with the proof-of-work algorithm, they provided processing power to the network, confirmed transactions, and created blocks. After Ethereum moved to the proof-of-stake algorithm, this task was assigned to validators.
The main difference between proof-of-stake and PoW algorithms is the initial cost and energy consumption. Proof of work requires the purchase of relatively expensive equipment and additional expenses such as the cost of cooling facilities, cabling, etc. While in PoS, the only thing required is to buy a certain number of network coins and deposit or stake them. The power consumption in the proof-of-work algorithm is very high, but the proof-of-stake reduces the power consumption by more than 90%.
3. Ethereum Virtual Machine (EVM)
Ethereum Virtual Machine (EVM) is Ethereum’s native processor system that allows developers to build smart contracts and allows nodes to interact with them. Ethereum developers write smart contracts using the Solidity programming language. The Ethereum virtual machine makes these codes readable by computers. Each Ethereum node has its own EVM.
Users communicate with the Ethereum network through nodes and can create this interaction by building a wallet. When you transfer Ethereum (or any other ERC20 token), the blockchain updates your balance to reflect changes in ownership of your coins.
4. Ethereum Token Standards
Ethereum has several standards for creating different tokens, most of which are compatible with each other and Ethereum decentralized applications. For example, a token of a project is exchangeable on all Ethereum-based decentralized exchanges. We introduce some of the most popular and widely used Ethereum token standards in the following.
The ERC-20 standard
ERC-20 standard is a technical specification defining rules and functions for creating and implementing tokens on the Ethereum blockchain. It ensures that tokens created using this standard can be easily exchanged, transferred, and interacted with other smart contracts and decentralized applications (dApps) within the Ethereum ecosystem.
ERC-20 tokens adhere to specific functions and events that enable them to be compatible with various wallets, exchanges, and dApps built on the Ethereum platform. These functions include checking an account’s token balance, transferring tokens between accounts, approving another account to spend tokens on behalf of the token holder, and retrieving the total supply of tokens.
By following the ERC-20 standard, developers can ensure the interoperability and compatibility of their tokens, allowing them to be easily integrated into the Ethereum ecosystem. This has led to the widespread adoption of ERC-20 tokens, making them the most common type on the Ethereum network.
The ERC-1155 standard
The ERC-1155 standard is another technical specification for creating and implementing tokens on the Ethereum blockchain. It was introduced as an extension to the ERC-20 and ERC-721 standards to provide a more efficient and flexible solution for managing multiple types of tokens within a single contract.
ERC-1155 tokens are known as “multi-token contracts” because they can represent multiple fungibles (identical and interchangeable) or non-fungible (unique and distinct) assets within a single contract. This allows developers to create and manage tokens, such as in-game items, collectibles, or even currencies, all within one smart contract.
One of the critical advantages of ERC-1155 is its ability to reduce the gas costs associated with deploying and interacting with multiple tokens. By using a single contract, developers can save on transaction fees and optimize the efficiency of their applications.
Furthermore, ERC-1155 provides a more granular approach to token ownership and management. It allows for batch transfers, where multiple tokens can be transferred in a single transaction, reducing the number of on-chain operations required. It also supports the concept of “atomic swaps,” enabling simultaneous exchanges of multiple tokens between different parties.
Overall, the ERC-1155 standard offers improved scalability, cost-effectiveness, and flexibility compared to previous token standards. It has gained popularity in the gaming and digital asset industries, where managing multiple types of tokens is crucial.
The ERC-777 standard
The ERC-777 standard is another technical specification for creating and implementing tokens on the Ethereum blockchain. It was introduced as an extension to the ERC-20 standard to provide additional functionality and features.
ERC-777 tokens are “advanced tokens” because they offer more capabilities than traditional ERC-20 tokens. One of the critical features of ERC-777 is its ability to implement a “token operator” concept. This allows for more flexible token transfers, as the token holder can authorize other addresses to perform them on their behalf.
Another important feature of ERC-777 is its support for “callbacks.” Callbacks can be triggered during token transfers, allowing additional logic to be executed. This enables more complex interactions between tokens and smart contracts.
ERC-777 also provides improved security measures by introducing a “token contract” concept. This ensures that token transfers can only be executed by the actual token contract, preventing unauthorized transfers from external contracts. Furthermore, ERC-777 offers compatibility with existing ERC-20 infrastructure, meaning ERC-777 tokens can be used in wallets and exchanges supporting ERC-20 tokens without any modifications.
Overall, the ERC-777 standard provides enhanced functionality, flexibility, and security compared to the ERC-20 standard. It has gained attention in the blockchain community as a potential replacement for ERC-20 tokens in various use cases.
The ERC-725 standard
The ERC-725 standard proposes a digital identity standard on the Ethereum blockchain. It defines a set of functions and data structures that can be used to create and manage identities on the blockchain. The standard provides a secure and decentralized way to verify and authenticate individuals, organizations, or things on the Ethereum network. By using ERC-725, users can control their identity and manage their personal data without relying on centralized authorities.
The ERC-621 standard
The ERC-621 standard is a proposal for a token standard on the Ethereum blockchain. It extends the functionality of the ERC-20 standard by adding the ability to increase or decrease the total supply of a token. This allows token issuers to mint new tokens or burn existing tokens as needed, providing more flexibility in managing token supplies. The ERC-621 standard also includes additional functions for tracking and querying tokens’ total supply and balance.
Ethereum is a decentralized, open-source blockchain platform created by Vitalik Buterin in 2015. It was developed as an upgrade to the Bitcoin blockchain to enable the creation and execution of smart contracts. These smart contracts are self-executing agreements with predefined rules and conditions, which eliminate the need for intermediaries in various industries and applications.
The history of Ethereum begins with the release of its whitepaper in late 2013 by Vitalik Buterin. The whitepaper outlined the vision and technical details of Ethereum as a platform for building decentralized applications (DApps) and smart contracts. It gained significant attention and support from the blockchain community, leading to the formation of the Ethereum Foundation in Switzerland to oversee the development and promotion of the platform.
In July 2014, an initial crowdfunding campaign was conducted to fund the development of Ethereum. The campaign raised over 31,000 Bitcoin, equivalent to around $18 million. This funding allowed the Ethereum team to continue their work on building the platform.
After a year of development and testing, the Ethereum network went live on July 30, 2015. This event marked the official launch of Ethereum and its native cryptocurrency, Ether (ETH). The initial version of Ethereum was called Frontier, and it allowed users to mine Ether and participate in the network as developers or users.
Following the launch of Frontier, several updates and improvements were made to the Ethereum network. In March 2016, the Homestead update was released, introducing various security enhancements and stability improvements to the platform. This update marked a significant milestone in Ethereum’s development, signalling that the network was ready for broader adoption.
The DAO Hack
In June 2016, an incident led to a controversial decision known as “The DAO Hack.” The DAO (Decentralized Autonomous Organization) was an intelligent contract-based investment fund built on top of Ethereum. It raised a record-breaking amount of Ether through its crowdfunding campaign. However, a vulnerability in the DAO’s code was exploited, resulting in the theft of a significant portion of the funds.
A hard fork was proposed to address this issue and protect the Ethereum network’s integrity. The hard fork, known as Ethereum Classic (ETC), split the Ethereum community into two factions:
- Those who supported the hard fork to recover the stolen funds (resulting in the continuation of Ethereum as we know it today)
- Those who believed in the original blockchain without any alterations (resulting in Ethereum Classic).
After the DAO incident, Ethereum continued to evolve and improve. In October 2017, the Byzantium hard fork was implemented, introducing several new features and enhancements to the platform. This was followed by the Constantinople and Istanbul hard forks in 2019, further improving scalability, security, and functionality.
Introduction of Ethereum 2.0
Ethereum’s most significant development to date is the introduction of Ethereum 2.0, also known as Eth2 or Serenity. Eth2 aims to address some of the scalability and performance limitations of the current Ethereum network by transitioning from a proof-of-work (PoW) consensus mechanism to a proof-of-stake (PoS) mechanism. This transition will allow for faster transaction processing and reduced energy consumption.
The first phase of Eth2, known as Phase 0, was launched in December 2020, marking the beginning of the transition process. It introduced the Beacon Chain, which serves as the backbone of the new Ethereum network. The subsequent phases, including shard chains and execution environments, will be rolled out gradually over the coming years.
As of now, Ethereum remains one of the world’s most prominent and widely used blockchain platforms. Its versatility, programmability, and active developer community have created numerous DApps, decentralized finance (DeFi) protocols, and other innovative applications. The future of Ethereum looks promising, with ongoing efforts to improve scalability, security, and usability, making it a vital player in the blockchain industry.
How is the transaction fee calculated in Ethereum?
In Ethereum, transaction fees are calculated based on the concept of “Gas.” Gas is a unit of measurement that represents the computational effort required to execute a transaction or contract on the Ethereum network. Every operation in a transaction consumes a specific amount of Gas, and the total Gas consumed determines the transaction fee.
The transaction fee is calculated by multiplying the Gas consumed by the Gas price. The transaction’s sender sets the Gas price and represents the Ether (ETH) they are willing to pay per Gas unit. The higher the Gas price, the more incentive miners have to include the transaction in a block.
To calculate the transaction fee, you need to know the Gas consumed and the Gas price. Gas consumed can vary depending on the complexity of the transaction or contract being executed. Gas prices are usually denoted in Gwei (Gigawei), where 1 Gwei is equal to 0.000000001 ETH.
Once you have the Gas consumed and the Gas price, you can calculate the transaction fee by multiplying them together. For example, if a transaction consumes 100,000 Gas and the Gas price is 10 Gwei, the transaction fee would be 100,000 * 10 Gwei = 1,000,000 Gwei = 0.001 ETH.
It’s worth noting that Gas prices can fluctuate depending on network congestion and demand. Users can choose to set a higher Gas price to prioritize their transactions or lower to save on fees, but this may affect the transaction’s speed of confirmation. It’s always recommended to check current Gas prices and estimate the Gas consumption of your transactions using tools like Ethereum Gas Station or Etherscan before sending any transactions on the Ethereum network.
What is Ethereum’s Roadmap?
Ethereum’s Roadmap is a strategic plan outlining the evolution and development of the Ethereum network. It highlights the milestones and essential upgrades that the Ethereum developers aim to achieve in the future. One major milestone in Ethereum’s Roadmap is the upcoming Merge, Ethereum 2.0 or ETH2.
The Merge involves transitioning from proof-of-work (PoW) to a proof-of-stake (PoS) consensus algorithm, effectively making the Ethereum network more energy-efficient and scalable. This transition will enable Ethereum to handle significantly more transactions per second, improving the user experience and expanding its potential use cases.
The Merge is closely tied to the Ethereum 2.0 upgrade, which will likely be rolled out in multiple phases. These phases include the Beacon Chain, Shard Chains, and Docking. Each phase plays a critical role in achieving Ethereum’s scalability goals and improving its overall performance. As the Ethereum 2.0 upgrade progresses, users can participate in staking (locking up their Ether to support the network), and developers will have more tools and capabilities to build decentralized applications (dApps) on the Ethereum blockchain. Next, we want to have an overview of the Ethereum phases. The terms “surge,” “scourge,” “verge,” “purge,” “splurge,” and “beyond” are not directly related to Ethereum’s official roadmap. However, let’s briefly touch on how they might be interpreted:
- Merge: Merge was the first of the five steps of Ethereum’s proof of stake process. The most important thing about Merge is the significant reduction of energy consumption by 99%. Another critical point is the reduction of Ethereum supply; Before Merge, miners were rewarded with 12,500 Ether daily. After the Merge happened, this number dropped to 2,000 coins per day. These results make the Ethereum network an anti-inflation network.
- Surge: This phase is planned for 2023 and includes the implementation of Sharding, which will increase the scalability of the Ethereum network. Also, after the full implementation of Surge, the cost of using layer 2 blockchains will be significantly reduced.
- Scourge: This phase, which was recently added (after the Ethereum crash) to Roadmap, aims to include reliable, fair, and neutral transactions and also solves the Maximum Minable Value (MEV) issues; These measures include preventing front running.
- Verge: The last phases of Ethereum, namely Verge, Purge, and Splurge, will be done in the years after 2023. The Verge phase is the third part of the Ethereum Roadmap. Verkle Tree will be introduced and implemented in this phase, improving data storage and node size. In this phase, something called “stateless clients” is also presented. The Verkle tree works just like the Merkle tree; That is, it sums up all the transactions of a block and makes proof for this data set for the user to confirm its validity. The encryption of these trees is more complicated than Merkel’s and reduces the size of the proof data so that it can create stateless and more stable clients. In this phase, the network will become more decentralized.
- Purge: Purge removes redundant historical data to reduce network congestion. Purge means cleaning and perfectly conveys the concept of what this phase does. In this phase, the data the validators must store is basically reduced. According to Vitalik Buterin, the network can process about 100,000 transactions per second in this phase.
- Splurge: Splurge includes several more minor upgrades to ensure seamless network performance. Several proposals (EIP) incompatible with the previous steps are combined and implemented at this stage. After the Splurge phase is fully implemented, the version of the Ethereum network will be very different from what we see today, and new rules will govern the network.
What is Sharding in Blockchain?
In blockchain technology, Sharding refers to breaking down a database or network into smaller, more manageable parts known as “shards” or “sub-networks.” Each shard contains its subset of data, transactions, and smart contracts.
The primary purpose of Sharding is to improve scalability and increase the transaction processing capacity of a blockchain network. By dividing the workload among multiple shards, each shard can process transactions in parallel, thus significantly boosting the overall transaction throughput of the blockchain system.
Sharding also helps reduce the storage and computational requirements for each participant in the network, as only some need to store and process the entire blockchain history. Participants only need to maintain and validate the shard(s) they are responsible for, improving efficiency and reducing the resources required to participate in the blockchain network.
However, Sharding introduces certain complexities, such as maintaining data consistency across shards and managing inter-shard communication. Various consensus mechanisms and protocols have been developed to address these challenges and ensure the integrity and security of the overall blockchain network.
Ethereum has managed to acquire the most prominent market volume after Bitcoin. Due to its high popularity, many people believe that Ethereum can revolutionize the global financial industry; For this reason, these people have launched their programs on the Ethereum blockchain network and joined its mining. Ethereum is not affiliated with any organization or institution, and many people and users entirely and independently control it worldwide. Besides supporting the Ethereum network, these people also get a good reward through mining.
Considering the halving of Bitcoin, the reduction of its miner’s rewards, and the development of the second version of Ethereum, which alone will be a revolution in digital currencies, you may also be considering mining Ethereum.
The difference between Ethereum mining and Bitcoin mining
Although the Ethereum blockchain was launched based on Bitcoin’s innovations and ideas, it should be noted that its developers did not copy everything from Bitcoin’s technology. They have made several fundamental changes in the Ethereum blockchain network to adapt to the purpose of this currency, and this issue also affects its mining process.
Ethereum is designed to allow efficient mining with GPUs, which is in deep contrast to Bitcoin. Today, Bitcoin mining is done approximately and exclusively with specialized hardware and the so-called ASIC.
By optimizing mining for GPUs, Ethereum developers wanted to make sure that even after the network grew strongly and the difficulty level increased, mining was still possible for people with home computers and devices. These measures help keep the network as decentralized as possible when it comes to distribution among miners. Comparing Ethereum with Bitcoin, Ethereum is an inflationary currency whose supply is not fixed at the maximum amount, and as a result, its supply growth never stops.
Of course, introducing more money into circulation causes a value decrease of Ethereum; Therefore, if the amount of Ether increases too much, its price may fall. Unlike Bitcoin, these reductions are not embedded in the Ethereum code, and the Ethereum core development team decides about it. For miners, it is more difficult to calculate the future return on their hardware investments (ROI).
Ethereum best wallets
You face several options when choosing a wallet for popular digital currencies such as Ethereum. In the following, we will introduce the best Ethereum wallets. Everyone can store ETH and all tokens based on the Ethereum blockchain in these wallets.
Types of Ethereum wallets
From a general point of view, the wallets of all cryptocurrencies, including Ethereum, can be divided into two categories. Each of them has its advantages and disadvantages.
- Hot Wallets: A hot wallet always connects to the Internet and is more vulnerable to cyber-attacks and hacking. Their main advantage is the ease of use, and they include digital currency exchanges and have both Mobile and desktop-based types.
- Cold wallets: These wallets are hardware and keep your digital assets aside from the Internet. For this reason, in terms of security, they are much more appreciated than their virtual competitors. Using these wallets is more complicated and requires carrying a gadget similar to a flash memory all the time. On the other hand, they are more likely to be lost or stolen.
…Which wallet should I choose?
Every user has different expectations from a wallet. The following will elaborate on the most important factors when choosing the best Ethereum wallets or any other digital currency.
- Managing private keys: Private keys allow access to your coins and only belong to you. If any other user gets hold of them, they will take control of your property. How does your Ethereum wallet manage private keys?
- The size of the developer community: the future development of the features will fix newly discovered bugs, and the possibility of quickly finding answers to your questions is part of the advantages of using Ethereum wallets with a significant development and support community.
- Simple user interface: The complexity of using a wallet does not mean it is professional. A good developer provides professional and unique features in a simple and understandable framework for all users. One of the crucial points in this regard is the ability to use the software on different platforms. In other words, you should be able to access your wallet on your smartphone and your computer. So, the best wallets have a mobile version (Android and iOS), Windows, and especially a web version.
- Cross-platform: Users prefer to use the same wallet on different platforms (mobile and desktop).
- Having a web browser 3: Ethereum is a large ecosystem of (decentralized) applications in various fields, including DeFi, games, non-equivalent tokens, and others. Among the best Ethereum wallets, some are equipped with Web Browser 3 and can connect to decentralized applications (D-Apps).
Best Ethereum hardware wallets
In the following, we introduce 10 Ethereum wallets. They are the best options for storing Ethereum. This list considers security, the number of installations, various features, and user feedback.
MyEtherWallet is one of the best Ethereum wallets, or rather than that, one of the best platforms for the Ethereum blockchain. This wallet is open source and only supports Ethereum and tokens built on this network.
- It is open source.
- It provides a very optimal Interaction with the Ethereum blockchain.
- Allows connection to hardware wallets.
- It is not easy for beginners to work with it.
- It only supports Ethereum and its tokens.
MyEtherWallet is not a web application wallet and never stores your private key on internet servers. This site allows you to create and use your wallet on it or in any other software. This platform have attracted many Ethereum developers and programmers
Metamask is one of the official and valid wallets of Ethereum, which installs as an extension on Internet browsers (Google Chrome and Firefox). In Metamask, it is also possible to interact with decentralized applications (Dapps) and smart contracts; therefore, this software can be considered more than a wallet. Previously, you could only install Metamask on PCs, but now it is also available for smartphones.
- It is open source.
- It is simple to use.
- It allows interaction with Ethereum-based applications.
- The wallet connects to the Internet, so you should be more careful about security.
- It only supports Ethereum and its tokens.
- If you want to work with Ethereum-based projects (such as decentralized exchanges or blockchain games), you will need Metamask.
“Trust” is a popular multi-currency wallet that belongs to the Binance exchange and is considered one of the best Ethereum wallets for Android and iOS. The most crucial advantage of Trust is its simplicity and user-friendliness. Except for Ethereum, TrustWallet covers almost all the valid digital currencies in the market. Also, it supports Ethereum Non-fungible Tokens (NFT).
- It supports thousands of different digital currencies.
- It has an easy user interface.
- It supports all types of tokens on the Ethereum network.
- It is not entirely open source.
- It is only available for mobile and has no desktop or web version.
The main downside of this wallet is you can only use it on mobile phones rather than PCs or the web. Trust Wallet is a non-custodial wallet that doesn’t store private keys on any server; instead, it keeps them on the user’s mobile device, which no one else can access.
Ledger hardware wallet
Ledger, headquartered in France, is the largest manufacturer of hardware wallets. A hardware wallet is simply a tool that stores the private key of the user’s digital assets in a physical space with unique security features, which means the probability of hacking and stealing the wallet is almost impossible.
- It has very high security.
- It supports thousands of different digital currencies.
- It has a robust development and support team.
- Not suitable for daily use (payment or transactions).
Ledger stands head and shoulders above the rest among hardware wallet manufacturers. The two Ledger Nano S and Ledger Nano X models are the best models of this company, which support almost all valid digital currencies in addition to thousands of tokens (Tokens based on Ethereum, IAS, etc.). Hence, one wallet is sufficient to hold Ethereum, Ethereum tokens, and almost all other valid cryptocurrencies.