Ethereum, the pioneering blockchain platform, is an open-source, decentralized system that enables smart contracts and Distributed Applications (DApps) to be built and run without downtime, fraud, control, or interference from a third party. Launched by Vitalik Buterin in 2015, Ethereum’s core innovation is its Ethereum Virtual Machine (EVM), which executes scripts using a global network of public nodes.

At its core, Ethereum ( erc20 token development ) operates on a blockchain, similar to Bitcoin, but its capabilities extend far beyond just processing transactions. Its platform-specific cryptographic token, Ether (ETH), is used to facilitate operations within the platform, including compensation to participant nodes for computations performed.

Ethereum’s distinctive feature, setting it apart from other blockchain systems, is its smart contract functionality. These are self-executing contracts with the terms of the agreement directly written into code, thereby removing the need for a trusted intermediary and enhancing security and efficiency.

Currently, Ethereum is undergoing significant upgrades as part of Ethereum 2.0 or “Eth2”, which will improve scalability, security, and sustainability. This major transition involves shifting from the energy-intensive Proof of Work (PoW) consensus algorithm to the more efficient Proof of Stake (PoS) algorithm. It’s also introducing Shard Chains to improve the scalability of the network.

Ethereum Network key components

Ethereum Blockchain

The Ethereum blockchain is a transparent ledger that records all transactions executed on the platform. Each node on the network has a copy of this blockchain and participates in validating new transactions and maintaining the ledger’s security.

Ethereum (ETH)
Ether is the native cryptocurrency of the Ethereum platform. It’s used as “fuel” to power transactions and smart contract interactions on the network. Ether serves two main purposes: to compensate miners (or validators in the case of Ethereum 2.0) for securing the network and to pay for the computational resources needed to execute operations on the platform.

Smart Contracts A significant aspect of Ethereum is the concept of smart contracts. These are self-executing contracts with the terms of the agreement directly written into lines of code. They automatically execute transactions when predefined conditions are met, eliminating the need for an intermediary and reducing the risk of fraud.

Ethereum Virtual Machine (EVM) The EVM is the runtime environment in which smart contracts are executed. It’s completely isolated from the main Ethereum network, which makes it a perfect sandbox for testing smart contracts.

Decentralized Applications (DApps) Built on top of Ethereum’s blockchain, DApps are open-source applications that leverage smart contracts to perform their functions. They are decentralized, meaning they are not controlled by a single entity and can provide various services, from games to decentralized exchanges and more.

Gas
To execute transactions or smart contracts on the Ethereum network, users must pay a fee known as “gas”. Gas is priced in Ether and is used to allocate resources of the Ethereum Virtual Machine so that decentralized applications can run and smart contracts can be executed.

Proof of Stake (Ethereum 2.0) Ethereum is currently transitioning from a Proof of Work consensus mechanism (where miners solve complex mathematical problems to validate transactions and add new blocks to the blockchain) to a Proof of Stake mechanism with Ethereum 2.0. With Proof of Stake, validators are chosen to create a new block based on the amount of ether they hold and are willing to “stake” as collateral.

Ethereum Hard Fork Hardfork is a systematic and intentional process by which a blockchain validates or invalidates its previously performed transaction.

This process initiates a permanent modification or upgrade to a blockchain by birthing two results, viz the old version and the new modified version.

When this process occurs, users of the particular blockchain network are expected to download and upgrade to the new features to access the modified features in the new software.

Notwithstanding, the birth of a new version of the blockchain does not eliminate the old versions. As users of the particular blockchain may continue to use and access the old version.

However, after completing the upgrade, blockchain developers introduce a difficulty bomb to make the transition to the new version seamless.

A difficult bomb is a feature that makes using the old version of software uninteresting and frustrating. Thereby backing users into a corner where they are left with no option other than to migrate to the upgrade version.

In essence, the Ethereum hard fork is a permanent upgrade or modification to the Ethereum blockchain. This upgrade is achieved by introducing Ethereum Improvement Proposals or EIPs.

EIPs are standard guidelines that spell out technical specifications that govern the introduction of new features in the development of ethereum. Let’s take a look at the evolution of ethereum, shall we?

The London Hard Fork The London Ethereum hard fork, which went live on August 05th, 2021. At block 12,965,000, is considered the most controversial and defining hard fork in the history of Ethereum.

All thanks to the radical innovations that came with its emergence.

The London Ethereum hard fork, launched on August 5th, 2021, introduced significant changes. Five novel Ethereum Improvement Proposals (EIPs) were included: EIP 1559, EIP 3554, EIP 3198, EIP 3529, and EIP 3541. The changes targeted Ethereum’s transaction fee model, mining rewards, and the transition to Ethereum 2.0.

EIP 1559 aims to make Ethereum’s transaction fees more predictable, addressing the unpredictability and volatility of the existing model. It also introduced a deflationary mechanism by burning part of the transaction fees.

EIP 3554 intended to delay the Ethereum “difficulty bomb,” a mechanism to make mining more challenging, hence pushing the network towards a proof-of-stake consensus mechanism. This EIP gave developers more time for the transition to Ethereum 2.0.

Other EIPs (3198, 3529, and 3541) improved the end-user experience, enhanced security for state fraud-proof solutions, and adjusted the gas refund mechanism.

What’s next?

Following the successful Shapella upgrade last month, Ethereum developers have quickly shifted gears to plan the next substantial update for the blockchain, whimsically named “Dencun.” This title represents a blend of two concurrent upgrades: “Cancun” on the execution layer where protocol rules reside, and “Deneb” on the consensus layer responsible for block validation.

Central to the Dencun upgrade is EIP 4844, also referred to as “proto-danksharding,” which aims to scale the blockchain by providing more space for data “blobs”, thereby reducing fees for layer 2 rollups. Alongside EIP 4844, other technical upgrades such as EIPs 6780, 6475, and 1153 are also expected to be included in Dencun. The developers plan to launch this major upgrade in the second half of 2023, further supporting Ethereum’s growth and impacting Ethereum’s price in South Africa.