Merge happened. Everything else is history…
Source: Digil Kolma
Recently, we told you with great excitement all about Ethere’s merger that took place in September, but today we go back to basics and tell you all about Ethereum as a network, a coin, but also a way of functioning. As a cryptocurrency, Ethereum appeared in 2014. One of the co-founders- Vitalik Buterin, invested all his efforts in the development of blockchain technology. His goal was to dedicate himself to the development of a new currency that will also be more than that, and that is – the world computer.
Compared to the development of Bitcoin, which began in 2006. under the pseudonym Satoshi Nakamoto, and culminated in the publication of technical books and the launch of the Bitcoin network three years later. Chronologically, this means that Ethereum is lagging behind, although – in terms of innovation – it is not lagging behind at all! Moreover, last month he proved it with the long-awaited “Merger”, as well as the announcement of all future upgrades.
Ethereum, like Bitcoin, bases its distributed database on blockchain technology and the principle of decentralization, but also allows the execution of other types of transactions, and the storage of different types of data.
In addition to transactions that occur directly between two users (excluding a third party), Ethereum also functions as an “open source” blockchain platform or decentralized chain of records that allows anyone to build and use decentralized applications on it. On top of that, Ethereum supports the world’s second largest cryptocurrency by market capitalization – ether.
Just like with the Bitcoin system, the Ethereum system is not controlled or owned by anyone, but the main difference is that the protocol in the latter is designed to be as adaptable and flexible as possible. Moreover, the customization and flexibility of smart contracts are precisely the core values on which the idea of the Ethereum blockchain rests.
It’s smart (not) enough. Let’s meet smart contracts aka “Smart Contracts”
Source: PYMNTS
Smart contracts are programs that automatically execute transactions after certain conditions have been met, without the need for an intermediary such as a bank, company or other entity. Let’s become aware of the need for an intermediary in everyday life. Whether obvious or not – intermediaries like Facebook, Twitter, Instagram, etc. they permeate our digital lives. Well, even simply sharing a food photo or family moment with loved ones requires a central authority that not only manages the network but also sets privacy policies, collects data and serves personalized content based on it.
Conversely – although rarely perceived as such, smart contracts allow for the automation of simpler and complex digital tasks without the need for a centralized entity that manages and approves transactions. This automatically eliminated the ability to serve personalized information based on previous behaviors, and if this system became “mainstream” – our searches on numerous search engines, would be less bombarded during the digital user experience, and we as users would be less influenced by advertisers.
What makes smart contracts possible? Smart Contracts?)
Smart contracts are enabled by blockchains, i.e. a decentralized network of computers that together enforce rules on a network without a central entity. In conventional contracts, the document outlines the terms of the relationship between the two parties, which are enforceable under the law. In the event that side A violates the terms, party B may bring charges against side A for non-compliance with the contract. In order for side B to be able to press charges, it also needs a third party, i.e. a court.
With smart contracts, the novelty is that contracts work automatically and are “fixed” without third-party interference. Contracts like this are not heavily used outside the Ethereum system and it is doubtful whether they will ever become the main way of managing transactions. However, Ethereum “supporters” believe that Ethereum will eventually become the standard for executing online transactions, as well as the standard for their security. Hundreds of decentralized applications …. “Dapps”) on the basis of smart contracts have already been launched, and some of the examples are MakerDAO and Compound. Such apps use smart contracts to allow users to borrow and earn interest.
Why smart contracts?
The idea of smart contracts is signed by computer scientist and cryptographer Nick Szabo. He described them as a kind of digital vending machine. His famous example describes how users, by entering a value of $1 into a slot machine, can get an item in the equivalent of the invested amount through the vending machine. In this basic example, it was about snacks or a soft drink. To draw a parallel – smart contracts in the crypto world are the same in so much that with a certain entry of for example $ 1, the user expects a certain equivalent. If we apply this logic further to Ethereum – a smart contract will allow one user to send 10 ether tokens to another user, in such a way that this amount is not “dispersed” by a certain date.
Basic smart contracts
Although Bitcoin was the first to support basic smart contracts, they were quite limited compared to Ethereum’s. With Bitcoin, each transaction is also a smart contract because the network will approve transactions only if a certain condition is met – which is that the user provides a digital signature proving that he actually owns the cryptocurrency he claims to own. Only a Bitcoin owner who owns a private key, which we wrote to you about in our last blog – can produce such a digital signature.
With Ethereum – the basic language of a smart contract, has been replaced by a more advanced language that allows developers to use blockchain to process more than just cryptocurrency transactions. The Ethereum smart contract language is complete. “Turing-complete”), and supports a wider set of computer instructions without restrictions. This allows developers to write any smart contract that comes to mind.
Although the Ethereum smart contract has obvious advantages, it also means that it is less tested, and in so many vulnerable. Ethereum has already suffered millions of dollars in losses due to shortcomings in smart contracts, but it has also greatly contributed to the further progress of the Ethereum platform, as evidenced by numerous recently announced upgrades. A major advance on the Ethereum network has been the recent Merger of aka Merge. As we discovered in a previous blog – The merger represents just one of the planned upgrades that leads to greater scalability of the Ethereum network, and the current upgrade potential is only at 40%. It is believed that the Ethereum network will reach its full potential in the next two years, and according to the founder of Ethereum – Vitalik Buterin – after Merge will arrive Surge, Verge, Purge and Splurge!
Source: Cake DeFi Blog
Ethereum completes 40% … but, psst – much more to come after “Merger”!
Let’s remember – the merger is based on the combination of the Ethereum main network with the “Proof-of-Stake” beacon chain, and marked only the first in a series of upgrades.
The reason they cite within the Ethereum Foundation for all the “profound changes” is the desire to make the network more powerful and robust. What has been achieved so far is higher transaction speed and reduced energy consumption.
According to Vitalik – although Ethereum today can process about 15-20 transactions per second, in the near future it announces an increased speed of 100,000 transactions per second. Interestingly, he speaks of all development promises with so much enthusiasm, that he gave all upgrades names that rhyme!
Well, let’s say something about each one.
- The surge upgrade refers to the further scaling of the Ethereum network (Eng. Ethereum Sharding, to reduce the cost of bulk transactions (Eng. “rollups” and “bundled transactions”), but also on easier node management (eng. “nodes”) that secure the Ethereum network. According to Vitalik, Ethereum today can process about 15-20 transactions per second, but an increased speed of 100,000 transactions per second is planned in the near future.
- Verge upgrade refers to the technical aspect, and the introduction of new mathematical proofs into the network. For users, this means that they will become online validators without the need to store large amounts of data on their machines. Also, using a network based on the principle of “Proof-of-Stake” – validators with locked or “invested” ether will be able to confirm and verify transactions. This upgrade will greatly contribute to decentralization, which became questionable when the “Merger” began to be announced.
- Purge ortiga cleaning – is an upgrade related to cleaning up old history on the Ethereum network, as well as trying to actually reduce the amount of space required by the hard drive. This upgrade aims to simplify the Ethereum protocol over time, and discard nodes as a location for breaded past transactions.
- The Splurge upgrade is the least defined for now, and the founder reveals to us about it that it applies to all the fun things that are yet to come.
Be that as it may, in addition to these upgrades representing great technological advances, we must admit that they also entertain us. We are sure that they will be one of the topics of our future crypto topics!
What about the value of Ethereum after merger and where can you track changes?
After the “Merger” happened, Ethereum set out to sink. In the first hours after the merger, ETH fell to $1,485, and in September, that drop was as high as 18.5%, then an additional 5.6%, bringing ETH to a low of $1,416.57.
Despite the innovation that has taken place on the Ethereum network – we are witnessing that this event did not contribute to the rise in the price of this second largest cryptocurrency. These days , Ethereum broke $1,400 – the lowest value, which has not been seen since late July.
In order to stay up to date and regularly monitor Ethereum’s decline and growth in real time – we share with you one of the sources where you can easily perform verification – Ethereumprice.org. After all, if you use one of the “Hot Wallets“, you can easily peek into the app and check the stock market balance on this day, and if you want to know more about the topic of “Crypto Wallet” – hop over to our last week’s blog about Wallets.
On ethereum, we remain optimistic about further growth in value. We follow all the news and announcements, critically analyze them, and share with you the most relevant. All this is happening now is a possible consequence of typical tricks in the currency markets – both crypto and traditional ones. It is possible that the initial “Hype” around the announcement of the “Merger” pumped demand, and thus the price of ether – and after the “Merger” happened, traders mostly set out to sell the purchase of ether – which very quickly affected the decline in value. It is possible that this was only a short-term decline in ETH, and that this cryptocurrency will further only grow – particularly, if we consider that ethereum’s transition to a more energy-efficient “consensus mechanism” attracted additional interest from traditional financial institutions and investors.
How do I set up a smart contract?
A developer can create a smart contract by writing a board of code, after which he pushes a smart contract into the Ethereum network. This step is what enforces the contract – without allowing anyone to take the money unless they follow the exact rules in the code. Thousands of computers from all over the world then have a copy of this smart contract.
Use of smart contracts
In this part of the article, we share with you a few hints about the application of smart contracts:
- Multiple-signature accountswhich ensure that funds in accounts can only be spent if the required percentage of beneficiaries agrees.
- Coding of financial agreements relating to the management of contracts between beneficiaries. For example, if one beneficiary buys insurance from an insurance company, the rules on when and how insurance can be redeemed – are programmed precisely into a smart contract.
- Agreements based on the outside world allow data to be withdrawn from the outside world (financial, political, or any other) with the help of prophecy …. “oracles“). The prophecy sends data from the outside world (like daytime temperature/number of political votes) to the blockchain system. Then, a smart contract on the blockchain begins to use data to comply with the rules, and to make a decision about whether the money will be paid and to whom.
- Similar to a software database, smart contracts can work or collaborate with other smart contracts in the chain. “Third party collaboration“).
- Storage refers to domain registration or membership record information. Storing data in a blockchain like Ethereum is unique in that the data is immutable and cannot be deleted.
The cost associated with smart contracts
For thousands of computers around the world to validate smart contracts, energy is needed, which is often not cheap, especially at a time of great energy crisis as evidenced by recent large increases in Ethereum fees. In doing so, the user is the one who has to pay the fee, usually in ether (Ethereum’s original token). In principle, transaction fees grow as the network becomes more congested.
Are smart contracts legally enforced?
If many Ethereum proponents are asked – smart contracts should live outside the legal system because they are implemented automatically, and do not require a central entity like the central bank. If they work as they should, users will not have to go to court to resolve conflicts. Still, there remains an open question about how smart contracts will work within the current legal system.
According to a 2018 research paper by partners Stuart D. Levi and Alex B. Lipton- it was found that U.S. law should recognize many smart contracts. However, as each state has a different legal approach to cryptocurrencies and blockchains – there is a mismatch given that some countries are more accepting of the new technology than others.
Smart contracts – the future or the farce?
Many developers, researchers and even legal experts, doctors – share the excitement and optimism regarding the announced promises of smart contracts.
Despite the optimism, which has been amplified by recent advances online with the shift to Proof-of-Stake mode, the application of smart contracts in the mainstream world is likely to wait. While smart contract users don’t have to trust intermediaries, users need to believe that the code is spelled correctly. That’s a big requirement given that there are still major security issues. Over the years, a lot of hacker malfeasance has been discovered that has used network flaws to steal users’ funds. We hope that the problems will be less and less, the Ethereum network will become more advanced, and planned upgrades that contribute to the development of decentralized applications and the Internet will be successfully realized.
Ethereum cryptocurrency – available on Kriptomat.hr!
Source: Red Bubble
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