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Introduction: Ethereum

Ethereum is by far the most revolutionary platform in the cryptocurrency and blockchain industry, enabling more than a digital currency. The blockchain was launched in 2015 by Vitalik Buterin and was the first to present the concept of smart contracts, revolutionizing crypto and blockchain technologies significantly. The Ethereum blockchain allowed developers to create decentralized applications on it, introducing a wide range of possibilities beyond peer-to-peer transactions. At the heart of it, Ethereum is a decentralized platform that runs smart contracts, contracts whose terms are directly written into code.

Self-executing when predetermined conditions are met, smart contracts eliminate the need for intermediaries and legal formalities, enabling a trustless environment for secure transactions. Additionally, Ethereum has its native cryptocurrency called Ether. While Bitcoin acts mainly as digital gold and store of value, Ethereum’s Ether is the network’s digital currency and is used as gas to run the smart contracts on the Ethereum network . This is because the network costs to hold a piece of the network. Moreover, the network needs to incentivize miners via gas to keep running.

. Known as Ethereum’s gas, Ether is used to pay for transaction fees and computational services. As a result, the developers pay network miners to run their smart contracts, boosting the network’s performance. The high programmability of Ethereum has seen decentralized applications endorsement in various industries. The lending, borrowing, and trading services industry have seen the rise of Decentralized Finance platforms on Ethereum. Similarly, the industry has also seen the establishment of decentralized exchanges .

However, the platform has a scaling problem following its PoW consensus mechanism. According to Skunda , the platform cannot effectively scale due to the high computational fees required in its PoW consensus mechanism. The Ethereum network runs on a PoW consensus mechanism, similar to Bitcoin that requires miners to solve complex mathematical puzzles to add new blocks. These miners require large computational power to add new blocks, which makes the cost of running the network very high. Hence the reason why the cost is streamed on to the developers to pay miners to run the smart contracts.

PoS is a form of miner’s taxation that will address this issue in Eth2. For this reason, the network cannot scale beyond its current level since it will be taxing the miners to continue working. . Initially , the Ethereum blockchain scale was powered by other blockchains. However, the platform is adopting the Ethereum 2.0 scaling dubbed Eth2.

The idea features PoS and complex event processing, also known as sharding . Towards the end of the year, the Ethereum Foundation is planning to introduce Ethereum 2.0, a sharded PoS blockchain. Presently, Ethereum is processed under the consensus POS that makes an attack unpractical. Indeed, Eth2 will overall improve the throughput capacity of Ethereum blockchain. Still, with these scaling challenges, Ethereum is the primary platform of de centralized applications with several projects and protocols.

The platform has triggered significant finance innovation and will likely dominate the decentralized application space in the near future. Smolat . Moreover, the Ethereum blockchain has encouraged other innovative projects. Surely, Ethereum’s instability has sparked scaling drawbacks. However, Eth2 could potentially enhance the blockchain’s capacity that could easily destroy vital applications. Since the Ethereum blockchain is the backbone of an entire economy. The prospects are unimaginable.

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