The world's second-largest blockchain after Bitcoin, Ethereum officially came into being in 2015. This project, which goes far beyond the cryptocurrency known as Ether, has immense potential despite often complex developments.
How does Ethereum work?
Ethereum is a platform based on blockchain technology that can be used in a number of ways, the main one being the creation of decentralized applications, or "DApps". The project is the brainchild of Vitalik Buterin, whose real name is Buterin Vitaliy Dmitrievich, a young computer scientist born in Russia in 1994.
Fascinated by Bitcoin, Vitalik Buterin imagined the Ethereum project in 2013, the year he distributed the first white paper to several major players in the cryptocurrency sector. Ethereum was officially launched at the end of July 2015; today, it is the 2nd most widely used blockchain in the world after Bitcoin.
Ethereum is a platform whose main role is not, as with Bitcoin, to transfer cryptocurrencies, but to enable its users to develop decentralized applications. These "DApps" ("Decentralized Applications") are open-source software programs that use blockchain technology rather than a server, as is the case with conventional applications.
As such, they are not dependent on a third party, such as a private company or a government, and therefore escape any form of control. Their decentralization also makes them highly secure and particularly difficult to hack.
Ethereum, immense potential not limited to cryptocurrency
A truly decentralized global computer, Ethereum does not pursue the same goals as Bitcoin. While there are similarities between the two cryptocurrencies, Ether is not intended to replace traditional currencies. Its main purpose is to serve as a currency of exchange on Ethereum networks.
Ethereum enables users to send and receive Ether , develop DApps and create their own cryptocurrency. With Ether, users can raise funds to develop their own decentralized applications.
In addition, Ethereum is used to program "Smart Contracts": these allow the rules of an agreement between two parties to be set within the blockchain itself, using computer code. In this way, digital assets can only be automatically transferred once all performance conditions have been met, thereby securing the process.
The computer program replaces the trusted third party in contractual relations, and while smart contracts currently have no legal force, some companies are already seeing numerous advantages in using these Smart Contracts: reduced litigation and associated costs, automated payments once contractual obligations are met, simplified transactions, and so on.
The limits of Ethereum
However, Ethereum also has its weaknesses. Its decentralized operation, which contributes fully to its potential, also creates limits to the platform's development.
Developments are sometimes made very laborious by the very absence of centralization, as shown by the update of the transaction validation protocol, scheduled for September, but awaited since 2016.
In addition, transaction fees are extremely high, making exchanges complicated. Although Ethereum co-founder Joe Lubin sees this as a sign of the platform's success, users are still eagerly awaiting a modernization of the blockchain to remedy these drawbacks.