Get to Know the Chain — Ethereum
It goes without saying that the Web3 stack evolves each year, leaving developers lots to catch up on. Still, with a host of blockchain platforms at the Network Layer alone, one has much more choice at their disposal for said use case, compared to just a few years ago.
Speaking of which, Ethereum, being the very first of these chains, took blockchain technology beyond its first use case: the Bitcoin cryptocurrency. As a result, Ethereum has begun to dominate the Web3 space, despite its apparent shortcomings in terms of scalability.
That said, even if this pioneering blockchain platform is poised to reinvent itself once more, getting to know the chain might be well worth your time.
Your First Look at the Ethereum Platform
Even if Bitcoin is widely regarded to be a paradigm shift in money and currencies, Ethereum always planned to be so much more.
From its white paper, the intent is very clear: Ethereum was meant to serve as a platform for a whole new range of use cases implementing blockchain technology. NFTs, DeFi, smart contracts and even DAOs were supposed to lead the charge and extend this innovative technology, increasing Web3 adoption as a result.
In a nutshell, with numerous capabilities offered to build a host of decentralized applications that aren’t limited to just cryptocurrency, Ethereum opened up a world of possibilities when it comes to blockchain technology innovation. Right from the time the platform went live up until now, both the world of NFTs and DeFi have flourished while the proliferation of Dapps (decentralized applications) and smart contracts have become the norm.
Speaking of which, Ether, which is the platform’s native cryptocurrency, can be both purchased and earned as a block reward. As for programming languages, Solidity and Vyper are used to write smart contracts for the Ethereum platforms among other blockchains that are EVM-compatible.
Finally, Ethereum has adopted Nakamoto Consensus, which consists of two parts: considering the longest chain of blocks to be the most legitimate while using the Proof-of-Work (PoW) consensus mechanism.
Now, apart from this basic overview of the Ethereum platform, its dominance has been common knowledge, thanks to an early head start. However, while being able to handle the growth of DeFi in 2020, its hold on the market share has been dwindling with the emergence of several new platforms namely Binance, Polygon, Terra, Avalanche and Solana.
Among a host of issues, the one that has led to the rise of “Ethereum killers” is the inability to meet user demands, in regard to speed and scalability.
Current Challenges
Blame it on the rapid expansion of DeFi in 2020, where the Ethereum platform supported this ecosystem of enterprises that offered financial services, in a manner that banks usually do.
While being the pioneer of such an industry is a matter of pride, there are downsides that have hindered the platform’s ability to cope with such aggressive expansion. When it comes to transaction processing, the Ethereum platform manages a paltry 20 transactions per second as opposed to 24000 transactions per second by a legacy system such as Visa.
In addition, due to network congestion caused by so many transactions that are waiting to be processed, Ethereum gas fees which pay validators for creating new blocks have gone up as far as $50 and even more for certain transactions.
Of course, the Ethereum platform isn’t sitting on its hands, and waiting for its rivals to usurp its position as a market leader in decentralized technology. Platform upgrades, in the form of Layer 1 and Layer 2 scaling solutions are underway.
As one will discover, sharding and consensus protocol improvements are Layer 1 solutions along with the Polygon and Raiden network implementations serving as a Layer 2 solution.
3 Ways You Can Contribute to the Ethereum Platform
If this is your first look at the Ethereum platform and Web3 as a whole, it might interest you to note that there’s a role for everyone in decentralized technology.
Whether you’d like to serve as a validator, enjoy returns as an investor or pursue a career in Web3 as a developer, opportunities to engage with the Ethereum platform have only increased ever since its inception and role as a major player in Web3 today.
For this, you’ll have to open an Ethereum account consisting of a 20-digit address and which contains a nonce, ether balance, smart contract code and the account’s storage. On the whole, there are two types of accounts namely externally owned and contract accounts, which can only be used if you have purchased or earned Ether.
Speaking of which, if you are an investor, you will need to purchase Ether in order to conduct transactions for any DeFi-based transactions. As a validator, you will create blocks that will be added to the Ethereum blockchain based on the PoW consensus mechanism and earn rewards as a result. Lastly, as a developer, you can build Dapps and write smart contracts and deploy them after paying a suitable amount of gas fees.
Now, even if these roles seem new to you, there are a number of upgrades that the Ethereum platform will go through, and which are worth noting since they can alter certain requirements that these roles demand.
What’s Next: Ethereum 2.0
Also known as the Merge, a number of updates and upgrades have been performed so as to move from the PoW to the Proof of Stake (PoS) consensus mechanism.
This will be complete by Q3/Q4 in 2022 and which will have a significant impact on how blocks are being created, since validators will have to adjust to the staking model but in a way that will benefit them greatly. Developers will have to alter certain practices according to upcoming changes. However, this will not impact non-node operating stakers.
If this has piqued your interest, then look for our next blog post that will address the Merge with the Beacon Chain in all respects.
Also, if you are interested in a career in Web3 development, please join our Discord server below to understand what the Lumos Metaverse has to offer.
