Ethereum and Ethereum

Vitalik 2025-10-25 18:31 30708人围观 ETH

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Compared to Ethereum, most people are more familiar with ETH (Ether). The two names are similar, but they represent different meanings.

Etherum is an open source, programmable blockchain. Developers can build many decentralized applications through smart contracts Solidity: such as the ICO in 2017, DeFi that blew the bull market horn in 2020, the non-fungible token NFT that will become mainstream in 2021, the expansion solution EVM compatible chain and Layer2 Rollups due to the surge in user demand... Ethereum has always been the most important innovation layer in the cryptocurrency market

ETH (Ether), like BTC (Bitcoin), is used to reward those who maintain the operation of the network. It is also used as a handling fee token on Ethereum. If you want to build an application or initiate a transaction on Ethereum, you need to pay a corresponding amount of ETH. The transaction fee will change dynamically according to the current usage demand. After the merger of the Ethereum network and the Beacon Chain's proof-of-stake system, ETH will also be used as the pledge currency of the new consensus mechanism PoS.

Ethereum is a new application born based on the innovation of Bitcoin. The biggest difference between the two is that Ethereum is programmable, so Ethereum can be used as a decentralized cryptocurrency and application platform, bringing together financial services, games, artworks and various diverse applications.

What is Ethereum?

The founder of Ethereum is Vitalik Buterin. He was born in Russia in 1994. He later moved to Canada after his parents divorced. He was gifted since he was a child. He has computing abilities that are easy for ordinary people to develop, and he is highly enthusiastic about mathematics, programming and economics. For him, his interest in decentralization originated from when he was playing "World of Warcraft" as a child. Blizzard unilaterally canceled his favorite warlock skill-Siphon of Life. The dissatisfaction with centralized institutions at that time planted a seed for the booming Ethereum in the future.

In 2021, after entering college, Vitalik Buterin found that traditional education could no longer bring him more inspiration. The concept of Bitcoin decentralization and blockchain technology fascinated him even more. The characteristic of decentralization is that it can avoid human intervention from central institutions and cannot be forged. Although the value and function of Bitcoin were still controversial at the time, it deeply attracted Vitalik Buterin. In the same year, he founded Bitcoin Magazine and published thousands of articles.

In 2012, he devoted all his time to delving into the blockchain world, studying the underlying blockchain technology, and designing programs such as Dark Wallet, Marketplace Egora, and Kryptokit.

In 2013, Vitalik Buterin resolutely chose to drop out of school, focus on blockchain development, and travel around the world to make like-minded partners. Vitalik Buterin's move laid the foundation for the future development of Ethereum.

The most important year was 2014, when Vitalik Buterin was only 19 years old. Through crowdfunding through the ICO model, he began to build an open source public blockchain platform and added smart contract functions, making Ethereum the first and most widely used underlying blockchain platform. Ethereum was officially launched in 2015 after completing fundraising.

Vitalik believes that "Ethereum is an innovation that applies some technologies and concepts in Bitcoin to the field of computing." However, judging from the current situation of Ethereum, Ethereum has completely embarked on its own innovation route and has given birth to many decentralized applications. Vitalik Buterin promoted the development of blockchain technology and opened the blockchain 2.0 era. Vitalik has gained many supporters (believers) due to his outstanding contribution to the blockchain industry, recognized technical strength and unique insights into decentralized development. The Chinese community often refers to him as "V God" to show respect for this opinion leader of the decentralized community.

What is Ethereum?

ETH Ethereum

Ether, referred to as ETH, is the native cryptocurrency of Ethereum. It is a pure digital asset and can be used for transfers, transactions, value storage, payment of blockchain usage fees, etc. It is the only approved and approved circulating currency on Ethereum. It can be said that Ethereum is the pass on the Ethereum chain, because as long as the Ethereum blockchain is used for any activity, including transfers, transactions or creating new applications, users must pay the handling fee recognized by Ethereum, that is, Ethereum.

The world calls Bitcoin digital gold 2.0； Ethereum is called Oil 2.0 because it provides the power source for Ethereum. If you imagine Ethereum as a highway system, smart contracts are cars, and Ethereum is like digital oil that provides the energy to drive it, allowing the Ethereum system to operate well. The handling fee of Ethereum is also called Gas fee, also called gas fee.

How Ethereum works

On DeFi Llama, we can see that the total locked-up volume (TVL) of Ethereum on the chain reached its highest point at the end of 2021, exceeding US$120 billion. On Ethereum, in addition to peer-to-peer payments, there are many financial services, artworks, games and various applications. Why are so many people willing to invest their assets in Ethereum? We can learn a thing or two from the operating mechanism of Ethereum:

Ethereum blockchain

Ethereum, similar to Bitcoin, relies on the blockchain to store and secure transactions. In addition to transaction records, smart contracts are also stored on the Ethereum blockchain. We can think of Ethereum as a ledger that records all activities on the network. It is open to the outside world and completely transparent. Anyone can track past content.

Copies of this ledger are distributed across a global network of computers called "nodes." Nodes perform various tasks on the network, including validating and recording transactions and smart contract data. This architecture allows participants to own a copy of the blockchain and jointly verify it, ensuring the validity of content added to the blockchain. The benefits of using decentralized nodes to verify transactions and store data include:

No single point of failure
Data is transparent, reliable and immune to tampering
censorship-resistant

What does the node store?

Account: Everyone can have their own account on Ethereum and display how much ether the account has

Smart contract code: Ethereum stores smart contracts, which write the rules that need to be met if you want to unlock or transfer funds.

Smart contract status: Smart contract status Compared with Bitcoin, Ethereum adds smart contracts to the blockchain technology and allows users to create various DApps (decentralized applications). This biggest difference puts it on a completely different ecological development path from the Bitcoin network. Next, we will take you to understand the technology that drives all innovations. Solidity smart contracts span the first generation of blockchains and create the application methods and infinite possible application scenarios of the second generation blockchain. Solidity The emergence of smart contracts allows the blockchain to perform calculations like a computer instead of only having the payment function in the past, which in turn helps people complete more complex transactions through smart contracts.

In 1994, Nick Szabo, an expert in the blockchain field, explained the concept of smart contracts. He described smart contracts as "vending machines." People can use vending machines to choose the drinks they want to drink and complete transactions without the supervision of third-party regulatory agencies.

It is not subject to third-party supervision. Code deployed to Ethereum will be permanently stored. This is the decentralized feature of smart contracts. After the program data on the smart contract is input, the execution results are uploaded to the chain. Even the development team of Ethereum cannot tamper with the data on the chain. Therefore, it can be said that smart contracts are more trustworthy than traditional finance when their codes are strictly audited. This is also the most valuable feature of smart contracts. However, please note that this does not mean that smart contracts are absolutely safe.

When DApp deploys new code to Ethereum, there may still be a risk of being hacked. Just like undetectable logic loopholes sometimes occur when running a program under normal circumstances, on a blockchain directly related to digital assets, a small line of code errors may lead to irreparable consequences. So it’s a good thing to participate in early innovation, but you also need to measure your own risk tolerance.

Decentralized Application DApp Brief Introduction

The full English name of DApp we mentioned many times before is Decentralized Application, which is decentralized application. Because the code and transaction data run on Ethereum, all data on the chain is open and transparent, and anyone can check how the application is built and whether there are loopholes or incompleteness. This is very different from most mobile APPs and desktop applications.

We can explain it through the operating system of the smartphone APP.

The current mainstream mobile operating systems: Android and iOS. Different blockchains also represent different operating systems. Developers must use a programming language suitable for the operating system for development. Since they are different operating systems, the blockchain user characteristics and ecology of the two will also be different.

Ethereum is currently the most mainstream operating system. It has accumulated quite a strong network effect and has the most resources and applications. It has complete basic development tools, documents, and teachings. It has been tested and verified by large-scale markets, and there are many useful experiences for reference. Therefore, Ethereum has become the first choice for many Web2 developers to enter the blockchain world and start building DApps.

Transaction fee Gas

For all on-chain actions on Ethereum, ETH must be paid as a handling fee to initiate a transaction or call a smart contract. This fee that must be paid is called Gas.

Gas is paid to nodes that assist in verifying and executing transactions, that is, miners. As a role to assist in recording accounts, they provide their own resources and obtain corresponding income.

Gas calculation method

The calculation method of Gas mainly consists of Gas Used and Gas Price. Gas Used is assumed to be the amount of fuel required for driving the car, and Gas Price is the unit price of fuel, and the pricing unit is GWei. The smallest unit of Ethereum is Wei, and one Ether is equivalent to 10 to the 18th power Wei. It should be noted here that Wei is only the smallest unit of Ethereum, not the only unit.

The following is the calculation formula for Ethereum’s transaction fees:

Gas Price * Gas Limit =Tx Fee (transaction fee)

Normally when executing a contract, the Gas Limit is 21,000.

Suppose we execute a transaction today with a Gas Price of 20 and a Gas Limit of 21,000. Therefore, the maximum handling fee we need to prepare is 20 * 21,000 = 420,000 Gwei. Therefore, the maximum handling fee we need to pay is 0.00042ETH. This refers to the maximum transaction fee that needs to be paid. If the transaction can be completed without paying that much, the excess will be returned to the user.

Here is the complete ETH unit conversion:

EIP 1559 fee adjustment mechanism

Compared with the total issuance of Bitcoin, which is 21 million, Ethereum does not have a total limit on the number of issuances. However, Ethereum has a deflation mechanism that burns Gas to suppress the quantity of currency in circulation, thereby maintaining the price from falling due to excessive issuance.

There is another major event related to transaction fees, namely the EIP-1559 London hard fork that will be officially implemented in August 2021. The biggest change is to split 100% of the transaction fee that was packaged in the past into Base Fee and Tips.

Base Fee: The minimum fee to maintain the smooth operation of the block, which will be charged dynamically based on the block capacity. The Base Fee collected will be destroyed directly and will not be obtained by miners.

If users want to speed up their transactions, EIP-1559 allows users to add additional Tips to the Base Fee to tip the miners. All Tips will be given to the miners and will not be destroyed.

EIP-1559 has significantly reduced the income of miners and caused dissatisfaction among miners. However, this proposal introduces a new economic system to Ethereum. Some ETH handling fees will be burned directly. This upgrade allows Gas fees to be better predicted, thereby improving the transaction experience. When network demand is high (the more expensive the handling fees), more ETH will be burned, which will form a certain degree of deflation. However, as market sentiment is sluggish, fee income has decreased, the number of burns has decreased, and the deflationary effect is limited.

EVM Ethereum Virtual Machine

The Ethereum blockchain does not simply store data, but also needs to run various program codes and applications. What is compiled, interpreted and executed by the Ethereum Virtual Machine EVM is the smart contract.

As the name suggests, the Ethereum Virtual Machine is an abstract machine built on the Ethereum blockchain, which allows programs running on it to be isolated from each other and from the main chain.

The EVM is Ethereum's native processing system that allows developers to create smart contracts and have nodes interact with them. Ethereum developers use a programming language called Solidity. Solidity can be read by humans, but cannot be understood by machines, so it needs to be converted into machine instructions so that the EVM can read and execute the instructions.

When one sends a transaction to a smart contract deployed on Ethereum, each node runs the smart contract through its own EVM. In this simulated environment, each node can see what the final result is and whether a valid transaction was generated. If all nodes reach the same valid result, changes are made and the updated Ethereum state is recorded on the blockchain.

Important development trajectory of Ethereum

2013 ~ 2014 White Paper to ICO

At the end of 2013, Vitalik Buterin wrote the Ethereum white paper on his blog, outlining the imagination of various blockchain applications. After nearly a year of preparation, Ethereum conducted its first public crowdfunding, raising more than 31,000 Bitcoins. According to the Bitcoin price conversion at the time, the initial offering price of Ethereum was approximately US$0.3. About 12 million Ethereum coins were allocated to the Ethereum Foundation and early development contributors, and 60 million Ethereum coins were sold to investors.

2015 Ethereum mainnet launched

At the end of July 2015, an update codenamed Frontier launched the Ethereum chain mainnet and was listed on the exchange (Kraken) the next week. Due to the high price of nearly US$3 on the opening day, the high return on investment caused many early investors to cash out. The price fell by nearly 50% within a week, and then dropped all the way to around US$0.5. It did not stabilize until the mainnet update in September.

In October 2015, the Ethereum Foundation held the Devcon-1 developer conference, which attracted more and more people's attention. After several months of price fluctuations, Ethereum was updated with the code name Homestead in March of the following year, and the price climbed from $1 to more than $10, and the total market value also exceeded the $1 billion mark for the first time.

2016 Ethereum Hard Fork

The Homestead update includes several protocol and networking changes and prepares for other future updates. Immediately one month later, the experimental project DAO was established. DAO is a blockchain autonomous organization similar to a venture capital company, operating using self-executing smart contract programs. The establishment of DAO has received more than 150 million US dollars in Ethereum funding, making it a high-profile project on the early Ethereum chain.

However, within three months of DAO's establishment, a vulnerability in the smart contract was discovered and Ethereum worth $60 million was stolen. This incident prompted the DAO hard fork of Ethereum. Soon Ethereum also experienced a DDos attack. Under the attack of a series of negative events, the price of Ethereum has been hovering around $10 for more than a year, and the market value of 1 billion seems to have become the ceiling of Ethereum.

2017 ERC-20 driven ICO

In early 2017, Ethereum was listed on the social investment platform eToro, and Bitcoin had network congestion problems after the halving. The market began to make noise about new blockchain networks that could replace Bitcoin. Since then, the price of Ethereum has been soaring, starting from $10 and climbing all the way to $300, before following Bitcoin's decline and pulling back to $150. However, this is not the end of the rally, it is just a temporary correction. The Byzantium upgrade in October caused a shortage of Ethereum supply. Catalyzed by the repeated highs of Bitcoin prices and a large number of ICO projects, the strong demand for Ethereum drove the FOMO sentiment in the market, starting a second wave of surges that broke through the $1,000 price level and reached a record high of $1,400 in January of the following year. The market value of Ethereum also reached 1,000. billion, becoming the second largest cryptocurrency after Bitcoin.

2018 ~ 2019 Silent Bear Market

2018 was a difficult year for Ethereum. After the market cooled down, there was still a large influx of Bitcoin and Ethereum miners. The constant mining and selling and the sell-off of ICO fundraising projects caused the price of Ethereum to continue to fall. In less than a year, it went from over 1,000 US dollars to below 100 US dollars. Until the next Bitcoin halving, it has been hovering around 100 to 300 US dollars, and the number of Ethereum coins in circulation has also increased to 100 million.

The price performance of Ethereum in 2019 was not impressive. After the upgrade of the code name Constantinople in February, there was a small rise back to $300, but it was soon affected by the decline of Bitcoin. The Istanbul upgrade at the end of the year improved the Layer-2 expansion plan, added interactions with Zcash and improved smart contract functions, and the price of Ethereum gradually stabilized.

2020 DeFi Summer

In October 2020, Ethereum deployed a pledge contract to prepare for future Proof of Stake (PoS) network upgrades. As the cryptocurrency market recovers and the price of Bitcoin reaches a record high, funds gradually flow out to Ethereum, and the substantial growth of DeFi applications on the chain has also increased the market demand for Ethereum. Amid the supply shortage caused by on-chain staking, the price of Ethereum hit new highs one after another. This wave of gains continued until it came to an end at a high of $4,300 the following year, and the market value increased by a full 10 times.

2021 NFT successfully breaks through the circle

In the summer of 2021, due to the Chinese government's mining ban and exchange clearances, the price of Ethereum fluctuated violently. After the price halved to below US$2,000, it rose again following the good news of the listing of the Bitcoin ETF. Due to the popularity of blockchain games and the NFT market, the upgrade of EIP-1559 codenamed London, which was launched in August, once made Ethereum a deflationary currency. The total number of coins in circulation on the market is about 120 million, and it reached a new high in early November, reaching a price of $4,800.

2022 Changes to the Consensus Mechanism

Ethereum's switch from Proof-of-Work to Proof-of-Stake in September marked a significant reduction in its network's energy footprint by ditching the power-hungry crypto-mining system in favor of new methods for issuing and validating transactions on the blockchain.

While the merger does not address Ethereum’s relatively high transaction costs and slow network speeds, it is estimated to have reduced the network’s energy consumption by approximately 99%.

The new proof of equity allows users to become Ethereum nodes as long as they hold 32 ETH to participate in network operation and obtain node rewards.

Shanghai upgrade in 2023 and Layer 2 blooming everywhere

In 2023, Ethereum completed two technical upgrades named "Shanghai Upgrade" and Capella Upgrade. One of the biggest functions of this upgrade is to allow pledgers who previously deposited ETH when the consensus mechanism was changed (users needed to pledge their own ETH to obtain the reward income after the mechanism change) to have the opportunity to withdraw from the chain. It also allowed the previous consensus mechanism to completely change successfully.

On June 12, Ethereum co-founder Vitalik Buterin pointed out in his latest blog post that if Ethereum wants to achieve long-term sustainable development, the expansion of Layer 2 is one of the important technological changes. If Ethereum is a kingdom, then Layer 2 is the city-state under this kingdom. The development of the city-state is related to the rise and fall of the kingdom. Layer 2 is equivalent to building viaducts on highways to solve traffic congestion problems. At this time, the two Layer 2s of Optimism and Arbtrium have accumulated rich ecology and applications, and there are also various applications such as DeFi and NFT on them. As the concept of Layer 2 becomes popular, more and more Layer 2 appear.

ETH ETF attracts much attention in 2024, Cancun upgrade promotes Layer 2 prosperity

BTC spot ETF will be approved in the United States in 2024. Bitcoin spot ETFs can bring cryptocurrencies into the mainstream financial market and will provide individual and institutional investors with the opportunity to easily acquire cryptocurrencies. People are paying more attention to whether the ETH spot ETF can pass.

In 2024, Ethereum will also undergo a technical upgrade called the "Cancun Upgrade". After the upgrade, the rate of Ethereum Layer 2 will be significantly reduced, which is expected to attract more users to Ethereum to enjoy a low-cost and fast transaction experience.

DeFi decentralized financial services

DeFi is a global financial services system that emerged in the Internet era and can be viewed as an alternative to the opaque and highly regulated traditional financial markets. Anyone who can connect to the Ethereum network can use DeFi. No one can refuse others to join or be banned from using certain financial services. Users can borrow, lend and trade cryptocurrencies at any time, and the market is always open to everyone. Some people are able to borrow millions of dollars without even providing proof of identity.

Since there is no need for third-party intervention, service fees can be further reduced, and the DeFi architecture follows all pre-framed smart contracts, reducing manual review time and allowing assets to be traded faster.

Text @gete