- What is Ethereum?
- How was Ethereum born?
- Ethereum, a smart contract platform
- The Ethereum Virtual Machine (EVM)
- ERC-20 tokens / tokens
- Non-fungible tokens (NFT)
- The operation of the charges: the gas system
- The evolution of Ethereum
- Ethereum Classic (ETC) : l’Ethereum original
- Advantages of Ethereum
- Ethereum limits
- How to buy Ether?
- How to store ETH tokens?
- Ethereum project ratings and reviews
What is Ethereum (ETH)?
Simply put , Ethereum is a global computer : secure , always on , and anyone can use and program as they please. It is also important to clarify that anything done using this computer is public .
Below is an infographic titled “Ethereum explained to my mother” , which will give you a better understanding of how it works. This infographic was created by Angelo Milan and translated by Simon Polrot.
Ethereum is a platform based on blockchain technology that allows developers to build and deploy decentralized applications or DApps (for decentralized applications ). While Bitcoin ‘s primary role is to transfer virtual currency , Ethereum ‘s is to run the program of any decentralized application . Instead of investing in servers, the developers will put the application on the Ethereum network .
The unit of account, the currency of Ethereum is ether (or ether ), whose acronym is ETH and the symbol Ξ . Ether has two functions:
- It remunerates the validators ( miners ) who guarantee the validity of the blockchain;
- It is used to pay the fees for using DApps.
⚠ Ethereum is the name of the platform and ether is the name of the native unit of account that is traded on this platform. These are therefore two different things, although the use of “Ethereum” to designate cryptocurrency remains quite common.
The Ethereum blockchain is currently secured by Proof-of-Work (miners use computing power to secure the network) but this security should evolve towards Proof-of-Stake with the transition to Ethereum2.0.
Many projects are being built on this decentralized network, including projects related to decentralized finance (DeFi) which allow anyone to lend or borrow crypto-currencies.
How was Ethereum born?
Ethereum was created by Vitalik Buterin , a young Russian-Canadian who wanted to generalize the programmable aspect of Bitcoin . Indeed, although Bitcoin allows a host of more or less complex operations to be carried out ( multisignature , payment channels , atomic exchanges , tokens, etc.), it is nevertheless too limited in terms of flexibility and scalability . Ethereum represents in this an evolution of Bitcoin supposed to improve its contractual functions, sometimes to the detriment of its decentralization and its stability in the short term.
Vitalik Buterin, the founder of Ethereum
The basic idea of Ethereum was dreamed up by Vitalik Buterin at the end of 2013 , and a first version of the white paper was distributed during the month of December to a number of major players in the ecosystem. cryptocurrencies. The project was officially co-founded in January 2014 by 8 people: Vitalik Buterin, Anthony Di Iorio, Charles Hoskinson, Mihai Alisie, Amir Chetrit, Joseph Lubin, Gavin Hood and Jeffrey Wilcke.
In July 2014 , Ethereum’s Initial Coin Offering took place, which took place on the Bitcoin blockchain. More than 60 million ethers were pre-sold in this way, raising 31,529 bitcoins, or more than $15 million at the time of the ICO. 12 million ethers were also created to fund the pre and post development of the project .
After more than a year of development, the launch took place on July 30, 2015 . The rest of the ethers were mined over the years that followed. Today (April 2020), about 5 million ethers are created per year, and the total amount of coins in circulation is 110.5 million.
Ethereum, a smart contract platform
The main role of this platform is to execute so-called smart contracts , also known as “intelligent” contracts or stand- alone contracts .
A smart contract, or intelligent contract in French, is simply a computer program whose execution does not require the intervention of a trusted third party . In the blockchain context, it is a program that can perform operations when certain conditions are met on the ledger.
💡 For example, a lottery could be set up through a smart contract. When the balance of a predefined account would exceed a certain amount, it would be automatically sent to a randomly chosen participant.
Even if this type of contract can be implemented in a rudimentary way on Bitcoin, Ethereum is the first platform focused on this use . The platform thus brings together a multitude of autonomous contracts, which are executed on the blockchain and which are the basis of many decentralized applications (DApps).
The Ethereum Virtual Machine (EVM)
As said, Ethereum aims to be a decentralized world computer. For this, it uses a virtual machine (the Ethereum Virtual Machine or EVM ) which operates simultaneously on each of the nodes of the network. This virtual machine modifies the global state of the system (made up of Ethereum accounts , their balances , data in storage and code) based on user actions and smart contract execution. The modifications are replicated on each of the computers on the network by consensus, hence the fact that we speak of a “virtual” machine: this does not really exist but is a practical abstraction to represent what Ethereum is.
The Ethereum virtual machine has its own language consisting of many instructions, each with a different effect on the system. This language, called bytecode , is usually obtained by compiling another more accessible contract programming language. Thus, on this network, smart contracts are usually written in Solidity .
The main novelty brought by Ethereum is the fact that its virtual machine is almost Turing-complete : it allows autonomous contracts to perform loops and allows recursion (a contract can call itself). On the one hand, it improves things considerably compared to the scripting system used in Bitcoin which does not have the same capabilities. On the other hand, it makes the operation of Ethereum more complex: in fact, to prevent smart contracts from running infinitely, a gas system (described below) must be put in place.
ERC-20 tokens / tokens
It is possible to create your own programmable currency on the Ethereum network without having any particular knowledge of blockchain technology. The currency created is managed by a smart contract which most often follows the ERC-20 standard : this is why we speak of an ERC-20 token or ERC-20 token . Since these tokens live on the same platform, they go through the same addresses as ethers (ETH) and therefore it is possible to keep your tokens on the same address / the same Ethereum wallet (unlike other cryptocurrencies which require each a different portfolio). Also note that you will needa minimum of ETH on the wallet to send ERC-20 tokens to another address: ether is used to pay transaction fees.
⚠ Attention , when we say that it is possible to send ERC-20 tokens on an Ethereum wallet , we are talking about wallets like MyEtherWallet or Ledger. Be careful not to send your tokens to the Ethereum wallet of an exchange platform like Coinbase or Binance , which may not be configured for this.
It is also through these tokens that fundraising by Initial Coin Offering is carried out .
The full list of all such tokens in circulation can be found on sites like Coingecko .
To learn more about ERC-20 tokens, we recommend reading our article: What is an ERC-20 token?
Non-fungible tokens (NFT)
Another type of token is also accessible on the Ethereum blockchain : these are non-fungible tokens or non-fungible tokens , often abbreviated as NFT . Unlike the ERC-20 token, which forms a unit of account (you can own 3.6468 tokens, send 2.1936 tokens, etc.), the non-fungible token is a unique and identifiable object that cannot be divided or mixed with other tokens. Non-fungible tokens most often follow the ERC-721 standard .
The use of non-fungible tokens can range from representing a piece of virtual land ( Decentraland ) to trading card games ( Gods Unchained ) to breeding virtual cats ( CryptoKitties ) to tokenizing goods. real estate ( RealT ).
The operation of the charges: the gas system
As we said, the fees for carrying out operations on Ethereum are always paid in ethers (ETH). However, the complexity of the platform makes it necessary to set up an intermediate calculation system involving what is called gas , or gas in English.
Think of gas as gasoline for your car: each transaction carried out on the network consumes gas to carry out a certain number of operations, just like your car consumes gasoline to move forward. These operations include ether transfers , ERC-20 token transfers , but also simple operations like additions, multiplications, etc. They can be initiated by users or by the smart contracts themselves.
💡 Each operation has a fixed gas cost . The more complex the operation , the higher the gas cost . An addition costs 3 units of gas and a multiplication in demand 5. A transfer of ETH costs 21,000 gas.
Note that gas is a completely virtual unit that serves as an intermediary and that you cannot keep: you pay the fees in ether and the validators also recover ETH. When you make a transaction, you must therefore indicate how you want to convert your ethers to pay the fees. For this, there are two parameters that can be modified: the gas limit (or gas limit ) and the gas price (or gas price ). We will look at these two concepts in more detail in the rest of this sheet 🙂
You can adjust the maximum amount of gas to use during a transaction: this is called the gas limit or gas limit . This limit will tell the system how much gas your transaction can consume . For a transfer of ethers from one account to another (classic transaction), there is no need to modify this parameter since this transfer always consumes 21,000 gas . However, in the case of an interaction with a contract , it is necessary to properly estimate the potential amount of gas consumed.
Three scenarios are possible:
- In the event that you have set a limit that is too low, your transaction will run out of gas to execute all operations. You will then lose the amount of ETH used for the fees , your transaction will be canceled, which means that those sent will not be debited from your account.
- If you put a gas limit corresponding exactly to the actual consumption (as in the case of a classic wallet-to-wallet transaction), your transaction will be validated and added to the blockchain.
- Finally, if you enter a gas limit that is too high , your transaction will also be confirmed and the unused surplus will be refunded to you . It is therefore advisable to overestimate this consumption if you cannot determine it with certainty in advance.
Although this is not necessarily a very serious problem, do not specify an excessively high gas limit . A gas limit that is too overstated could indeed disrupt the economic calculation of miners and slow down the processing time of your transaction.
The price of gas (gas price)
To guarantee the decentralization of the system, each block of Ethereum is limited in gas: the amount of gas consumed by the transactions it contains must be below a certain threshold. This is why gas is not available in abundance and therefore has a price determined by the market.
The price of gas is generally expressed in gigaweis or Gwei . The wei , named to pay homage to the cypherpunk Wei Dai , is the smallest unit on the Ethereum platform and corresponds to one attoether or 10 -18 ETH. One Gwei therefore represents one billionth of an ether:
💡 1 ETH = 1 000 000 000 Gwe ou 1 Gwe = 0,000000001 ETH
Combined with the amount of gas consumed, the price of gas determines the fees paid for the transaction. The formula is:
fee (ETH) = gas consumed × gas price
For a classic transaction (21,000 gas consumed) and a gas price of 3 Gwei , the fee will be 0.000063 ETH , or 1 euro cent at the current price (April 2020).
The price of gas is used to determine the priority of transactions : miners will favor transactions with a high gas price over transactions with a low gas price. If the network is heavily used, the price of gas to be indicated for a transaction to be confirmed quickly will tend to increase.
💡 If you want your transaction to be processed quickly , indicate a high gas price . If you can wait and want to pay as little as possible , quote a low gas price . You can find the estimated confirmation times based on the gas price on the ETH Gas Station website .
The evolution of Ethereum
Unlike Bitcoin, whose community is very conservative, particularly in terms of monetary policy, Ethereum wants to be much more progressive and seek to evolve quickly even if it means sometimes neglecting its own stability . Since its creation, the platform has been upgraded many times! Here is the list of Ethereum protocol modifications, each of which has an original code name:
|Code name||Date of application||block height|
Although Ethereum has been upgraded a lot over the past few years, its evolution is far from over and more changes are already being considered. Many developers and researchers are working hard to make this evolution go smoothly . The next big upgrade planned by the development team, called Serenity or Ethereum 2.0 , includes three major changes :
- The switch to proof of stake with Casper .
- The implementation of sharding to increase the scalability of the platform.
- The improvement of the virtual machine with eWASM.
In addition to sharding , other so-called second-layer projects are also being developed to help Ethereum scale up : we can notably cite Plasma and the Raiden network , which are solutions envisaged in the medium term.
Ethereum Classic (ETC) : l’Ethereum original
You may have noticed the existence of Ethereum Classic (ETC). Do not confuse it with Ethereum (ETH), it is not the same thing. In June 2016, a cryptocurrency investment fund called TheDAO was hacked and nearly million worth of Ethers was misappropriated . It was not the Ethereum blockchain that was hacked, only the investment fund. To return these Ethers to their owners, it was agreed to perform a hard fork. However, part of the community did not agree on the principle and preferred to continue mining the old Ethereum chain (the original chain) which today became Ethereum Classic . Ethereum (ETH) is still supported by its founder (Vitalik Buterin) and the Ethereum Foundation , while Ethereum Classic (ETC) is now owned by another community ( Ethereum Commonwealth ).
Advantages of Ethereum
- A transparent, secure and reliable network.
- Nobody can modify a smart contract once online on the network.
- More secure than a classic smart contract format.
- No downtime since the Ethereum network is active 24 hours a day.
- DApps (decentralized applications) are dependent on the scaling of the Ethereum blockchain, which is not perfect. For example, the network was considerably slowed down during the cryptokitties craze in December 2017.
- You cannot modify a smart contract that contains a bug or a flaw.
- Monetary policy is not as well defined as in Bitcoin.
How to buy Ethereum (ETH) cryptocurrency?
To trade the Ethereum cryptocurrency , you can go to different platforms such as eToro, Binance, Coinbase, Kraken… To find out more, you can read our explanatory article on buying ether . You will see that it is possible to buy ETH directly with fiat currencies (euros, dollars…). Recall that the protocol name is Ethereum and the coin name is Ether (symbol ETH).
Here is an overview of the main exchanges that offer ETH trading as of June 24, 2020.
Screenshot of the Coingecko website
Ether is a cryptocurrency that has already risen in value since its inception. It traded at less than €1 in 2015 and less than €10 in 2016, its price will have literally exploded in 2017, going from €7 to more than €1000 in the space of a year. As you will have understood, the probability of seeing the price of ETH increase by 100 now seems quite low. The fact remains that Ethereum has been second in the ranking of cryptos (behind Bitcoin) for several years now. It is therefore a safe bet for anyone who would like to have a diversified portfolio.
Comment stocker ses tokens Ethereum (ETH) ?
It is advisable to use a hardware wallet to store your crypto-currencies and the same goes for storing your precious ETH 💎
But what is a hardware wallet? It is a highly secure electronic wallet that can be plugged into a computer’s USB port. This allows you to store your cryptos on an external medium. This means that the assets are no longer directly stored either on a computer or on the Internet. There is no longer any risk of being hacked and losing everything. The electronic safe must then be placed in a safe place for maximum security.