Viewpoints: Ethereum

How Ethereum works

Ethereum’s foundations are its blockchain and the Ethereum Virtual Machine (EVM), which operate atop a proof-of-stake (PoS) consensus mechanism.

The use cases of Ethereum

Internet money − Ethereum’s native currency, ETH, is programmable digital money. It can be used as a medium of exchange, a store of value, and, when staked, as a yield-bearing capital asset. It’s useful for borderless 24/7 payments and paying for interactions with apps built on Ethereum.

Restaking − Restaking on Ethereum allows ETH stakers to support multiple networks, thereby extending Ethereum’s security as a service for additional earning potential.

Open global computer − Ethereum functions as an accessible global computer, enabling developers to build open applications and networks, including Layer 2 solutions, via smart contracts.

Stablecoins − Ethereum has become the leading home of stablecoins, digital currencies anchored to stable assets like the US dollar. These tokens, like USDC and USDT, are designed to offer a shield against crypto market volatility and help facilitate everyday transactions.

DeFi − Ethereum’s decentralised finance (DeFi) ecosystem includes lending, borrowing, and trading platforms. The aim is to revolutionise traditional financial services by removing intermediaries and supporting open composability. Popular projects here include Uniswap, Maker, and Aave.

NFTs − Ethereum has become the leading platform for non-fungible tokens (NFTs) which are used to represent unique digital items and assets on the blockchain. NFT use cases have boomed atop Ethereum around art, digital collectibles, gaming, and beyond.

DAOs − Decentralised autonomous organisations (DAOs) on Ethereum are community-led entities with no central authority, operating through smart contracts. These smart contracts enforce the organisation’s rules and execute decisions based on the inputs of its members.

Digital identity − Services like the Ethereum Name Service offer blockchain-based digital identity solutions for simplifying and securing online identity management in the crypto space. More than 2,1 million ENS names have been created to date. I own the domain monicasinger.eth.

Crypto social − Ethereum is home to a rising wave of crypto social platforms that are blending social media with blockchain tech. A prominent example is Farcaster, which uses Ethereum wallets to underpin user accounts and manage in-app interactions.

Onchain games − Ethereum has become a popular hub for underpinning onchain gaming. These blockchain-based games offer crypto-linked gameplay, transparent rules, and a trustless environment, facilitating new types of gaming economies and player interactions that are not possible in traditional gaming settings

Background

Ethereum distinguishes itself from its forerunner, Bitcoin, in having pioneered smart contracts. Smart contracts are self-executing applications that run perpetually via code. These contracts can automate endless processes, expanding blockchain’s utility beyond simple asset transfers.

Ethereum’s native currency, Ether (ETH), is used as ‘gas’ for paying for operations on the network, like interacting with a crypto app’s smart contracts. It’s also possible to ‘stake’ ETH to help secure Ethereum and earn ETH staking rewards.

Ethereum’s journey, marked by pioneering smart contracts and the world’s most trusted PoS (Proof of Stake) model, has significantly expanded blockchain’s utility. The network’s advances towards a more scalable, secure, and user-friendly future through its upcoming upgrades, alongside its minimal energy footprint, underlines its ecosystem’s commitment to innovation.

As Ethereum continues to evolve, it is positioned steadfastly at the forefront of the crypto-economy and is poised to continue driving forward the decentralisation of art, finance, gaming, and beyond.

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