Ethereum ETH

Launched in 2015, Ethereum is the second largest cryptocurrency by market capitalisation. It is described as the world’s computer, using  blockchain technology to facilitate any programmable action without a third party. 

Like Bitcoin, the Ethereum platform also functions as a cryptocurrency in its own right supporting decentralised peer-to-peer money transfer. The currency that is used within the Ethereum platform is known as Ether, or ETH.

The programmable function of Ethereum, is enabled  by Smart Contracts. Smart Contracts are automated programmable agreements, executed without any human involvement. 

These smart contracts allow for the creation of decentralised applications or dApps. dApps are similar in function to standard computer applications such as Facebook or Robinhood but with the one crucial difference that they don’t need  a controlling third party. 

All  smart contract transactions  - monetary or otherwise - are facilitated by the coded instructions of the dApp. These code instructions are all that “Smart Contracts” are. 

The Smart Contracts use the Ethereum blockchain to run the computation but this requires a transaction fee, which is paid for in something called GAS - but confusingly priced in ETH. This fee ensures the network isn't flooded with spam, but also incentivises miners to verify transactions and maintain integrity. Ethereum is currently in the process of moving from the proof of work model, to proof of stake.

Ethereum was first proposed in a 2013 white paper by young Russian-Canadian programmer Vitalik Buterin. Inspired by Bitcoin, Vitalik wanted to take that decentralised vision and apply it to computer programming in general. The idea was that why stop at money with decentralisation, why not extend it to all types of programs? Ethereum is a platform that aims to provide software developers with the tools to do this. 

Just like Bitcoin, Ethereum was originally designed to use the Proof of Work consensus mechanism to process and validate transactions utilising its network.

As with Bitcoin, this approach produced scaling limitations and, so over the period of two years between 2020 and 2022, the Ethereum development team rolled out a series of upgrades known as Ethereum 2.0.  By September 2022, this upgrade was completed. Known as "the Merge", Ethereum has now fully switched to a Proof of Stake consensus mechanism, ditching Proof of Work.

These upgrades have the specific aim of addressing the scaling limitations of the platform whilst not sacrificing the network's security. The upgrades see Ether move to staking, using a technology known as sharding to increase the scale at which the platform can operate. 

It is hoped that these upgrades can move Ethereum from being able to process around 30 transactions per second to up to 100,000. 

Who is using Ethereum?

As of February 2023, there are over 223 million unique addresses holding Ethereum, with an estimated 130,000 new addresses created daily. Each day, over 1 million transactions are confirmed on the network. To give a perspective of this growth, in March 2021, under 500,000 transactions were confirmed in a single day. This does not even take into account off-chain transactions that are happening on other networks building on top of Ethereum (such as Layer 2 and sidechains).

The statistics indicate that Ethereum is a huge and active platform, growing each day. It has, for many years, been the closest rival to Bitcoin for the title of biggest crypto network. 

Google trends shows that interest in Ethereum is global, with America and Europe being the main continental interests. African nations such as Nigeria and Middle Eastern nations such as Turkey have recently shown growth in interest indicating that Ethereum is increasing it’s reach around the world and is continuing to grow its credibility. 

Unlike Bitcoin, Ethereum had its peak in interest very recently in December 2020. Over the next two years, developments in decentralised finance (DeFi), NFT technology, and decentralised applications or Dapps led to a boom of users and apps building on Ethereum. This particular time also coincided with the crypto peak in prices around November 2021. This suggests that whilst the 2017 crypto frenzy was mainly driven by Bitcoin, since then Ethereum has grown to be considered just as much as the original cryptocurrency. The proven utility of decentralised services and products on the blockchain is seen as an important catalyst for the 2021 crypto market rally. 

Institutional investment for Ethereum may be a little while off when compared to something like Bitcoin due to price volatility. Ethereum futures were launched by CME in February of 2021, while Canada approved the first Ethereum ETF in April 2021.

What is the size of the network?

72 million Ether were generated at launch, and the supply has grown to over 115 million at current levels. Ether supply growth is capped at 18 million per year with no current cap on the total supply that can be mined. The original reward for mining a block on the Ethereum network was 5 Eth, this moved down to 3 Eth in 2017 and down again to its current level of 2 Eth in 2019. 

For the previous Ethereum proof of work network, the hash rate (amount of computing power in the network) reached 572 terahashes per second. There were just under 6,000 active nodes in the network in 2021.  Since transitioning to Proof of Stake, this number has dropped slightly, but there are still over 5,700 nodes on Ethereum (Ethernodes.org, February 2023) making it the second largest crypto network, behind Bitcoin. 

For the ETH 2.0 upgrades there are currently around 120,000 validators active, with over worth $9 billion of ETH staked to process and validate network transactions. As Ethereum moves to a proof-of-stake network the amount of Ether staked will surely grow. 

What separates Ethereum 2.0 from other proof-of-stake competitors such as Cardano and Tezos is that the majority of the Eth supply is still yet to be staked and so there is ample room for this growth to happen. 

What is the size of its community?

Ethereum has a large and growing community. The official Ethereum twitter account has over 1 million followers and just under 1 million members at 845,000. There are also large development teams working directly on Ethereum and on decentralised apps in the ecosystem. There are nearly 3,000 active DApps on the network and Microsoft's blockchain development kit for Ethereum has been downloaded and installed by over 11,000 users.

How much Ethereum is traded?

Ethereum has a current average of over $7.5 billion daily transaction value (February 2023). The current market cap stands at over $200 billion with ETH ranking number 2 on coinmarketcap.com. The largest markets for ETH trading are Binance, Huobi, and Coinbase. The most popular trading pairs are ETH/USDT and ETH/BTC.