What Are Use Cases in Ethereum?
When Bitcoin was launched in 2009, it caught the interest of many people. One of which was Vitalik Buterin, a programmer who later co-founded Ethereum, with its crowdfunding in 2014. This article takes a detailed look at Ethereum, its use cases, how to buy, and why you should opt for OriginStamp.
What is Ethereum?
Ethereum is a blockchain-based computing platform that enables developers to build and deploy decentralized applications—meaning not run by a centralized authority. You can create a decentralized application for which the participants of that particular application are the decision-making authority.
- Ether: This is Ethereum’s cryptocurrency.
- Smart contracts: Ethereum allows the development and deployment of these types of contracts.
- Ethereum Virtual Machine: Ethereum provides the underlying technology—the architecture and the software—that understands smart contracts and allows you to interact with them.
- Decentralized applications (Dapps): A decentralized application is called a Dapp (also spelled DAPP, App, or DApp) for short. Ethereum allows you to create consolidated applications, called decentralized applications.
- Decentralized autonomous organizations (DAOs): Ethereum allows you to create these for democratic decision-making.
These are Ethereum’s essential features. Before going deep into the Ethereum tutorial, let’s discuss each of these features in more detail.
How Does Ethereum Work?
Ethereum implements an execution environment called Ethereum Virtual Machine (EVM).
- When a transaction triggers a smart contract all the nodes of the network will execute every instruction.
- All the nodes will run The EVM as part of the block verification, where the nodes will go through the transactions listed in the block and runs the code as triggered by the transaction in the EVM.
- All the nodes on the network must perform the same calculations for keeping their ledgers in sync.
- Every transaction must include:
- Gas limit.
- Transaction Fee that the sender is willing to pay for the transaction.
- If the total amount of gas needed to process the transaction is less than or equal to the gas limit then the transaction will be processed and if the total amount of gas needed is more than the gas limit then the transaction will not be processed the fees are still lost.
- Thus it is safe to send transactions with a gas limit above the estimate to increase the chances of getting it processed.
How to make use of Ethereum
Blockchain is decentralized because its public ledger is not stored in a single place. The public ledger is stored on thousands of volunteers’ computers around the globe, each of which is called a node. The verification of the data stored on the blockchain involves more than half of the nodes before being certified as correct. Cryptography is used to keep transactions on the blockchain network secure and to verify them also.
Computers are used to solve complex mathematical equations that help to confirm transactions on the network and input new blocks to the chain.
Ethereum aims to provide a system that gives users more control over their data, and it also allows for applications to be built and run on the blockchain. To run these applications and have this level of control on the Ethereum platform, requires Ether. The more the number of people making use of the platform, the higher the fees.
What Are Use Cases in Ethereum?
Here is a short video covering Decentralized Finance:
Decentralized autonomous organizations
In an early use case unearthed by Ethereum developers, decentralized autonomous organizations (DAOs) is blockchain-based organizations that operate without central authorities. They are governed by rules coded in software and administrative decisions are voted upon by a community of stakeholders. DAOs were one of the first innovations tested on Ethereum and remain influential today. While the hack of the pioneering Ethereum-based DAO in 2016 was a watershed moment in blockchain history, DAOs remain open-source and community-governed.
2. Non-Fungible Tokens
NFTs are tokens that can be attached to unique items, and they are not interchangeable with any other item. They allow value to be given to art, music, etc., in terms of digital currency. They are secured on the Ethereum blockchain and can have only one owner at a time. A new NFT cannot be copied and pasted into existence, and no two can be the same. They are compatible with anything that is built on the Ethereum platform. NFTs can be sold anywhere, and the owners have access to the global market.
Stablecoins are cryptocurrency tokens pegged to another asset, typically a fiat currency. For example, there are stablecoins backed by fiat currencies like the U.S. dollar and commodities like gold, while other stablecoins maintain their value algorithmically. Additionally, some stablecoins are backed by a balanced basket of major cryptocurrencies. Stablecoins are used as a reliable store of value in the cryptocurrency ecosystem, a hedge against price volatility for crypto traders, and as a stable, global currency for people whose local fiat currency is devalued due to economic or political instability.
4. Decentralized Finance
Decentralized finance is a term used to refer to financial services and products that are available and accessible to anyone that can make use of Ethereum. No authority can deny access to anything for a user or block payments, and markets are always open with Defi. Anyone can inspect the codes, and there are no longer risks of human errors as the services are now automatic and governed by code.
5. Ethereum Token Launches
Initial Coin Offerings (ICOs) are token sales that function similarly to the traditional Initial Public Offering (IPO). Ethereum-enabled startup fundraising played a huge role in the growth of blockchain and crypto throughout 2017 and 2018. While Ethereum’s use of crowdfunding to bolster its protocol’s development in 2014 was novel, token launches exploded during what is known as the ICO boom. This increase in funding for crypto startups presented a paradigm shift in the way innovative startups raise funds.
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