What is Ethereum

Ethereum is a decentralized, open-source blockchain platform that enables the creation of smart contracts and decentralized applications (dApps). Launched in 2015 by Vitalik Buterin and a team of developers, Ethereum extends blockchain technology beyond simple currency transactions (like Bitcoin) to support programmable, self-executing agreements and complex applications.

All the information Taken from Deep Seek AI.

1. Key Elements of EthereumSmart Contracts
   1. Self-executing agreements written in code that automatically enforce terms when predefined conditions are met.
   1. Example: A rental agreement could automatically transfer ownership of a digital asset (e.g., a car) once payment is received.
2. Ether (ETH)
   1. Ethereum is a native cryptocurrency, used to pay for transactions and computational services on the network (called “gas fees”).
3. Ethereum Virtual Machine (EVM)
   1. A global, decentralized computer that runs smart contracts. Developers write code in languages like Solidity, which the EVM executes across all nodes in the network.
4. Decentralized Applications (dApps)
   1. The Applications built on Ethereum that are not controlled by any single entity. Examples include:
      1. DeFi platforms (e.g., Uniswap, Aave) for lending, borrowing, and trading.
      1. NFT marketplaces (e.g., OpenSea) for buying/selling digital art and collectibles.
      1. Decentralized Autonomous Organizations (DAOs) for community-governed projects.

How Ethereum Works

• Blockchain: Like Bitcoin, Ethereum uses a blockchain to record transactions. However, Ethereum’s blockchain also stores and executes smart contract code.
• Consensus Mechanism:
  • Originally used Proof of Work (PoW) (like Bitcoin) but transitioned to Proof of Stake (PoS) in 2022 (the “Ethereum 2.0” upgrade).
  • PoS: Validators “stake” ETH to secure the network and validate transactions, reducing energy consumption by ~99%.

Use Cases

1. Decentralized Finance (DeFi)
   • Financial services (loans, insurance, trading) without banks or intermediaries.
2. NFTs (Non-Fungible Tokens)
   • Unique digital assets (art, music, virtual real estate) verified on Ethereum’s blockchain.
3. DAOs (Decentralized Autonomous Organizations)
   • The Organizations governed by a code and community voting instead of centralized leadership.
4. Enterprise Solutions
   • Companies use Ethereum for supply chain tracking, identity verification, and more.

Challenges

• Regulation: Governments are still defining rules for DeFi, NFTs, and crypto.
• Scalability: High demand can lead to slow transaction speeds and expensive gas fees.
• Complexity: Smart contracts are prone to bugs or exploits if not audited carefully (e.g., the 2016 DAO hack).