Ethereum is a decentralized platform designed for building smart contracts and decentralized applications. The platform operates with its own cryptocurrency, Ether, allowing users to transact and communicate without the need for a central authority. Unlike Bitcoin, Ethereum is a general-purpose blockchain that can be customized for a wide variety of tasks, making it suitable for creating apps, organizations, and facilitating financial transactions while emphasizing user privacy and censorship resistance.
The native cryptocurrency of Ethereum, ETH, plays multiple roles within the network, serving as fuel to secure the platform, collateral for creating other tokens, and supporting the overall Ethereum financial system. ETH holds value as a means of paying transaction fees and as a store of value essential for decentralized finance solutions. Ethereum’s cryptocurrency, with an unbounded supply, has an annual inflation rate around 4.5%.
In August 2014, Ethereum launched its native token, ether, through an initial coin offering (ICO), raising over $16 million for the project. The platform’s issuance rate is influenced by the “difficulty bomb,” a mechanism that adjusts the mining difficulty to control the rate of new ETH entering circulation. Ethereum has also seen significant price fluctuations over the years, reaching all-time highs and experiencing market corrections.
Ethereum’s evolution has led to the transition to a proof-of-stake mechanism and ongoing upgrades to enhance scalability and efficiency. The blockchain operates on consensus, ensuring the network’s integrity and preventing double-spending. Through smart contracts, Ethereum enables developers to create decentralized applications for various use cases, including decentralized finance (DeFi) and supply chain management.
As Ethereum continues to develop, its community drives improvements through Ethereum Improvement Proposals (EIPs) and network upgrades to optimize performance and address emerging challenges in the cryptocurrency space.
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