Understanding Ethereum: Its Features and Applications

May 14, 2021
Indira Srinivasan
Trends

Ethereum is the second most popular cryptocurrency available, but it’s so much more than a virtual currency. Rather, it’s a fully decentralized, open-source computing network that’s blockchain-based. It is also a programming language, handy for the developers to build, publish and distribute applications.

Facts About Ethereum

Ether is a cryptocurrency, instrumental in fueling the Ethereum network. Ether is used for all computational, transactional, and processing charges performed on this network.

The Ethereum network facilitates Smart Contracts, a type of ethereum account.

Anybody can create smart contracts on the Ethereum network, a simple computer program that facilitates the exchange of valuable physical and digital assets, including money, property, royalties, and shares to the parties that have mutually agreed upon.

Unlike conventional contracts, which sign an agreement and get verified by an authority, smart contracts are transactions that are immutable and authentic as independent evaluators assess them and need no third-party verification.

Ethereum Virtual Machine (EVM) that operates in a sandbox environment is an engine that understands Solidity language, which is used to write smart contracts. Once a smart contract is made, it gets converted into bytecode, and EVM is used to decode and interpret smart contracts.

An unlimited number of Ethereum miners operate constantly across the globe to verify, validate, and confirm the transactions made via smart contracts. This is called Proof of Work (PoW).

Ethereum transactions require computational resources to execute each transaction. Gas refers to the fee required for the successful completion of a transaction on Ethereum.

The gas fee is also paid for the validation, verification, and confirmation of contracts made on the Ethereum Network.

Proof of Stake (PoS) is introduced as an alternative mechanism to overcome the painful PoW process.

PoS is a consensus mechanism, where validators are chosen based on the number of Ethers they own and they come to a consensus on the transaction made and testify it.

How Does Ethereum work?

Ethereum is a cryptocurrency that works on a blockchain-based computing platform.

It is a shared database that stores information, known as nodes, in multiple copies on computers around the world. Any Ethereum miner that participated in this process can verify all past transactions, recorded in digital ledgers.

No centralized entity governs and monitors these ledger holders. The Ethereum network, consisting of tens and thousands of miners who are scattered around the globe, participate in this process collectively.

Unlike its predecessor, Bitcoin, which is also a digital currency and other popular currencies that are strictly used to facilitate financial transactions, Ethereum is a cryptocurrency with multiple applications and use cases beyond monetization. Ethereum can be used to promote decentralized finance (DeFi), Identity Management, and healthcare. It can also be used to purchase non-fungible tokens.

Unlike traditional financial systems and institutional structures that are highly centralized and hierarchical in operations and decision making, Ethereum applies cryptography, where there is no need for a federal bank or government to monitor it. Unlike conventional institutes that rely on the Internet, websites, and servers to store and process information, the Ethereum network uses Smart Contracts and Distributed Applications (ĐApps) to facilitate a highly decentralized system that functions without intermediaries and third-party validators so that it eliminates frauds and scams.

What Is Ethereum Mining?

Ethereum relies on mining, a process that unearths a new transaction or block and adds it to the Ethereum blockchain. Proof-of-Work (PoW), a consensus mechanism, confirms the transaction. Miners that unlock a puzzle by identifying a block get incentives in Ether.

This is a process similar to banks that charge its users for maintaining records and facilitating transactions. Ethereum mining is a record-keeping process, in which a network of global users or Ethereum miners rather than an intermediary, verifies transactions and adds them to the public ledger. Ethereum miners constantly work on computers to solve the puzzle posed to them to produce random values, until the time one of them is successful in getting the correct one. The correct answer unlocks the Ether. This consensus mechanism is called Proof of Work.

“Node” is yet another important feature of the Ethereum network; each node contains a copy of the ledger that records all ether transactions. Companies and enthusiasts that are keen in validating transactions maintain thousands of Ethereum nodes all over the world and each of them verifies every block that a miner creates.

Ethereum nodes are expected to function as a “world computer” on which, using specialized programming languages, people can build applications that remain open source. If a miner unlocks the Ether and broadcasts the block across the network, other miners stop working on the current block and move on to the next block.

Ethereum is gradually moving towards Proof of Stake (PoS), an alternative consensus mechanism that allows Ether owners as stakeholders in the validation process. This is meant to scale Ethereum via the Eth2 upgrades. Considered an energy-efficient and time-saving process, PoS is yet to overcome technical and functional challenges.

Ethereum Use Cases

Ethereum is used for a myriad of innovative applications in finance, gaming, advertising, web browsing, supply chain management, and identity management

Decentralized Autonomous Organizations (DAO)

DAOs were one of the earliest innovative use cases of Ethereum. Decentralized autonomous organizations or DAOs are 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.

Decentralized finance (DeFi)

Ethereum promotes a decentralized financial system, known as “DeFi,” through a global computer network that links users to the marketplace through decentralized applications (dApps), which is efficient, secured, and remains user-controlled. Through smart contracts, it executes physical and digital exchange of properties and transactions, loans, minting of stable coins, and decentralized exchanges. “MakerDAO” is a project that applied Ethereum smart contracts to create stable coin (DAI) backed by Ether, which resists market fluctuations and remains stable at $1.

Digital identity

For the past several decades, the world has been relying on physical presence and documents like identity proofs. The onset of Ethereum facilitates digital proofs for identity management, where an individual can present their passport in a digitally verified form that is free from tampering.

Tokenizing real-world assets

Ethereum promotes tokenization of physical and digital arts and properties as Non-Fungible Tokens (NFT). NFTs are offering multi-trillion-dollar markets with the blockchain-based representation of real-world assets including, real estate, music, images, and artwork, offering direct and unlimited monetization opportunities to its creators. Blockchain start-up PolyMath raised $59 Million in an ICO to build one of the first compliant platforms to tokenize the real-world assets on the Ethereum blockchain.

Legal and Financial Services

A UAE-based crypto startup launched the First Islamic Crypto Exchange (FICE), the only crypto exchange in the world meant for the compliance of Sharia laws. Crypto-wallets are used for instant money transfers as remittances, royalties, and financial services in Venezuela and the Philippines.

Health Applications

The healthcare industry can make the best use of Ethereum to store and share patients’ records that can be accessed from across the globe. This is useful for early diagnosis of and decision making around patients’ healthcare, especially when time is of the essence. Sensitive data on clinical trials, patient records, vaccine formulas, etc., can be shared instantly, which is secure and immutable.

Security Infrastructure

Data on Ethereum transactions are not stored in any servers for hackers to attack it. Since it relies on independent DAOs for its operations, it offers a secured network.

Data Privacy

Since it would not rely on search engines and login mechanisms to enter user data, there’s no need to track user activity or information, ensuring complete confidentiality of the sensitive data shared across the platform.

Direct Interaction with no Intermediaries

A customer can directly contact an artist for a painting or image to eliminate add-on, intermediary, or brokerage costs. An artist can sell his works in a virtual gallery without paying for auction houses so that the creator will ripe all the benefits.

Contracts and transactions

Smart contracts on the Ethereum platform facilitate all agreements related to property, business deals, project agreements, etc., where independent miners verify and validate them through proof of work. It remains safe, and secured, without any need for third-party verification.

Enterprise Ethereum Alliance (EEA)

EEA is an important development for promoting Ethereum use cases in industries. As many as 86 companies and multinationals, including JPMorgan Chase, Microsoft, CME Group, BNY Mellon, State Street, Toyota, Merck, ING, Broadridge, and Rabobank have joined the collective intending to use blockchain technology to run smart contracts at Fortune 500 companies.

John Hancock, a financial company, for example, aims to keep track of compliance with know your customer (KYC) and anti-money laundering (AML) regulations, using Ethereum in its wealth management unit. European aircraft maker Airbus is planning to shift its supply chain management to a blockchain that relies on Ethereum. Companies that are part of EEA may also store their data in decentralized locations on Ethereum platforms to ensure data safety.

Empowering Democracy

An incumbent, loyal to a particular political party can cast his vote and select the representative of his choice using blockchain technology that cannot be tampered with.

Gambling

The nearly $240 billion US gambling industry is known for all kinds of malpractices and scams. The onset of the internet promoted online casinos in the late 90s, which are lacking in transparency. Adaption to Ethereum can disrupt the malpractices in the online casino industry to avoid scams.

Data storing

Currently, the world is generating 2.5 quintillion bytes of data daily and it is growing exponentially year after year. Data storage options remained in stark contrast in the future. Ethereum offers safe alternatives for data storage.

The Issues Ethereum Encounters

Ethereum is away from the mainstream users and utilities and therefore faces several scalability issues.
It is not inclusive of the marginalized and does not represent the geographic, ethnic, and racial diversity.
It is governed by a secluded network of experts that verify and validate its authentication; though PoW appears to have been purely based on the consensus of majority experts, PoS is a biased mechanism, which is based on the number of Ethers at the disposal of each validator.
Plutocracy, the ability of a secluded group to manage the entire wealth, is one of the major concerns of the Ethereum ecosystem.
It is not financially accessible because it is very expensive to purchase and to be able to pay for various transaction and processing charges.
Access to the Internet and smartphone ownership among the population across geographies is not even to facilitate decentralized and democratic wealth transfer and management.

The Future of Ethereum

Ethereum is the second most popular digital currency today and is expected to continue to grow in use and popularity, surpassing Bitcoin in every aspect.

With enterprise alliance and acceptance of major institutions and companies across the globe, Ethereum is expected to capture a $270 trillion market with the digitization of the contract in the global economy, where major NDAs, agreements, and transactions will happen digitally more and more.

By launching phase 0 of Ethereum 2.0 in December 2020 and phase 1 of Ethereum 2.0 in 2021, the Ethereum network aims to upgrade from Proof-of-Work to Proof-of-Stake to make it more scalable, efficient, and run faster with less computing power. This is expected to reduce the transaction fees and gas fees, making Ethereum more accessible.

With several use cases beyond financial transactions, Ethereum is expected to emerge as the market leader. As of April 2021, the Ethereum market cap reached over $250 billion US and it is expected to go further surpassing other cryptocurrencies in the market.

Tags: cryptocurrency digitalization

Indira Srinivasan

I started my career as a program producer for women and children in AIR FM Radio as a freelancer and progressed for the past 27 years serving academia, industry, and research as faculty, communicator, author, and writer for digital media platforms. I have spent my past 8 years as Science Communicator, writing articles and blogs on social media platforms. I am an ardent book and music lover and fond of singing Indian classical music. My research interests are on ethnography and I love to write on topics including but not limited to climate change, environment, culture, and at present digital monetization.

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Digital Monetization Update – February 17, 2022

1. Google Has New Publisher Program For Post-Cookie Era (AdAge) In the post-cookie era, Google is launching Encrypted Signals for Publishers that allows websites to interact with online advertising identifiers in Google’s ad platform. Encrypted IDs, according to ad tech experts, might be a lifeline for publishers in programmatic advertising, which is how sites serve ads to users who do identify themselves. 2. Google Plans Privacy Changes, Promises Not To Be Disruptive (TheHill) To protect user privacy, Google has announced that it would begin deleting ad trackers from its Android operating system. The suggested changes include ultimately eliminating advertising ID, a unique identifier provided to each Android device that allows marketers to create customized profiles and offer targeted adverts. 3. Spotify Acquires Two Podcast Tech Firms Chartable And Podsights (TheVerge) Spotify has announced the acquisition of Chartable and Podsights, two of the most well-known podcast marketing and ad attribution firms. Podcasters and networks may utilize Podsights and Chartable to insert tags in their broadcasts that monitor who listened, if they heard an ad, and whether they took action after hearing it. 4. Twitter Lets Developers Add Labels To Bot Accounts (TechCrunch) Twitter announced a new label that would allow the service’s “good bots” to identify themselves. While the term “bot” has a bad connotation, Twitter observed that there were good bots that automatically sent out vital information. These “good bot” labels are now available to all automated account owners. 5. Discovery+ Ad-Lite Option To Launch In The UK And Ireland (CampaignUK) Following the introduction of the service in the United States, Discovery UK has announced an “Ad-lite” option for users in the United Kingdom and Ireland on its Discovery+ platform. The company claims to be the first subscription video-on-demand service in the UK, offering a lower membership rate in exchange for “limited” ad exposure. 6. India’s Biggest Short Video Platform: MX TakaTak Merge With Moj (Variety) MX TakaTak of Times Internet and Moj of ShareChat are merging to create India’s largest short-form video platform, in a country where TikTok remains banned. MX TakaTak-united Moj’s platform will have 100 million creators, over 300 million monthly active users, and nearly 250 billion monthly video views. The deal is worth $900 million in cash and stock. 7. Russia To Impose Advertising Ban On Foreign Tech Firms (Reuters) Russia warned it would begin enforcing advertising bans on huge international tech firms that do not have formal representation in the country by March, as Moscow seeks tighter control over the internet. Since July 2021, international social media firms with more than 500,000 daily users have been required by Russian law to open offices in Russia. 8. Canada Uses Emergency Act To Rein In ‘Freedom Convoy’ Crowdfunds (Engadget) After weeks of occupation paralyzing the nation’s capital, Prime Minister Justin Trudeau invoked Canada’s Emergencies Act in response to the “Freedom Convoy” rallies. Trudeau said he will utilize the Act to quell the protests in many ways, including expanding Canada’s money-laundering rules to cover crowdfunding sites and bitcoin transactions.
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Digital Monetization Update – February 10, 2022

1. Tumblr Launches New Monetization Feature To Help Bloggers (TechCrunch) Tumblr Tips is Tumblr’s second effort at monetization, allowing bloggers to accept one-time payments from their fans. Tipping is available on the web, iOS, and Android; but Tumblr will not use Apple or Google’s own billing systems to allow mobile tips, and creators will not be charged additional fees of 30%. 2. Youth Spend More Time With Online Video, Gaming, Social Media (MediaPost) According to a new Hub Entertainment Research, young media consumers continue to spend more time with online video, gaming, and social media and less time with traditional screen-based TV shows and movies. Gaming (25%), online videos (19%), and social media (13%) account for nearly 60% of “screen-based leisure time” for 13- to 24-year-old viewers. 3. Peach Acquires Advalidation To Empower Online Publishers (AdTechDaily) Advalidation, a SaaS platform focused on enhancing ad experience and compliance, has been acquired by Peach, a global leader in video advertising workflow and delivery. It is a strategic effort to give online publishers and media owners more control over their ad workflows. 4. Yahoo’s Future As Private Company Backed By 900M Users (MediaPost) Yahoo’s content is available to more than 900 million global users monthly throughout Yahoo’s network of companies, providing it with a unique perspective on first-party data through products like search, connected television (CTV), and email. Last year, Yahoo’s demand-side platform (DSP) grew by 64% and supply-side platform grew by 40%. 5. Twitter Advancing The Conversation On Social Media (AdAge) Twitter is reimagining public conversation to be more healthy, useful, and accessible to all. It is adding the feature of proactive prompts, which will make users think twice about the language they use or read the articles they are posting carefully before sharing them. It is also removing misinformation from Twitter using labeled tweets. 6. WarnerMedia, Discovery Get US Nod To Create New Media Giant (TheVerge) According to a filing with the Securities and Exchange Commission, the merger of Discovery and WarnerMedia has cleared an antitrust assessment by US government agencies. Once finalized, the merged company will be one of the largest media conglomerates in the US, combining Warner Bros.’ TV and film holdings with Discovery’s vast library of TV programs. 7. Gaming Is Antitrust Regulator’s Blind Spot (Axios) Gaming has become one of the world’s major media industries, but it has yet to endure the scrutiny that other tech sectors do over how its business methods harm competition, customers, or workers. The biggest video game firms are devouring the competition quicker than ever before, despite substantial opposition from antitrust regulators. 8. Meta’s Stock Slide Highlights Tech Antitrust Bill Criteria (Bloomberg) Meta’s sliding stock price looked to provide it a silver lining, exempting it from the harsh antitrust sanctions under consideration in the US House of Representatives. On Tuesday, Meta was valued at $599 billion, following a stock price drop that began when the firm announced that its flagship app’s daily active users had dropped for the first time.
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Digital Monetization Update – February 3, 2022

1. Google Ad Revenue Surges 33% In 2021 Q4 (MediaPost) In the fourth quarter of 2021, Google’s overall ad revenue increased by 33% to $61.2 billion, above analysts’ expectations by 4%. Search advertising increased by 35% to $43 billion, and Google’s YouTube increased by 25% to $8.6 billion. YouTube’s ad dollar increases in the quarter eclipsed Netflix’s $7.7 billion in subscription revenue. 2. Meta Shares Plunge 20% As It Feels Heat From Apple And TikTok (AdAge) Apple’s recent privacy reforms and competition from firms like TikTok, might start to wear on Meta’s ad platform. Meta’s ad revenue in the first quarter of this year will be between $27 billion and $29 billion, representing a 3% to 11% growth year over year. In after-hours trading, Meta shares fell more than 20% due to the bleak forecast. 3. Gaming Companies Are Merging With Ad Tech For Real Reasons (AdExchanger) In the year 2021, there was tremendous consolidation in the ad tech industry. The combination of gaming companies with ad tech platforms is one especially noticeable little trend that is gaining traction. The objective behind the change is to replace old cookie-based technology with first-party data, which is the future of advertising. 4. Spotify Declares Itself To Be A Creator Company Now (TheVerge) Spotify announced its quarterly numbers at a particularly difficult period for the firm. Its monthly active users increased by 18% year on year to 406 million, while paid customers increased to 180 million. Spotify CEO Daniel Ek aspires to achieve 50 million creators who will profit from the platform. 5. Regulators Find Europe’s Ad Tech Industry Acted Unlawfully (Engadget) Data protection experts from throughout the European Union have determined that Europe’s ad tech business has been functioning unlawfully for years. The judgment, issued by Belgium’s APD (.PDF) and backed by authorities throughout the EU, determined that the industry’s underpinning system breached a number of GDPR standards. 6. NortonLifeLock Launches Feature To Protect Social Media Accounts (MediaPost) Norton LifeLock, a software and cybersecurity firm, announced a new feature to help users better safeguard their social media accounts against harmful attacks. In 2021, the number of people on social media has risen to 4.48 billion, accounting for more than half of the world’s population (56.8%). As the user increases, so will the number of threats. 7. Big Tech Boycotts Tend To Be Short-Lived (Axios) Boycotts of tech services have become increasingly common as political division and dissatisfaction with misinformation have grown. However, evidence shows that boycotts and the media attention they generate are usually short-lived. Even the most virulent boycotts have little influence beyond a single news cycle on Big Tech giants.
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