What is Ethereum? Beginners guide to Ethereum

What is Ethereum?

Ethernet is not a cryptocurrency, it is a “platform for application development using the blockchain.” The currency is called ETH (Ether), and it is distributed as a cryptocurrency. ETH is the second most popular currency since it has maintained second place after Bitcoin in cryptocurrency market capitalization for a long time.

Why does ETH have value?

As mentioned earlier, Ethereum is a “platform for application development using the blockchain.” When using this platform, ETH is required for its usage fee (called “gas”). Therefore, the more you use Ethereum, the more valuable the currency will be.

How Ethereum works

Similar to Bitcoin, Ethereum is currently being mined as a method called PoW (Proof of Work). The image of ETH is giving rewards to people who help who help out in the ecosystem. However, this process presents various problems as described later. In the future, development will shift to a method called PoS (Proof of Stake). With PoS, ETH will be awarded according to the amount of currency a user holds. However, the timeline to shift to PoS is not clear and is estimated to take 3-5 years.

Pros and Cons of ETH

Pros
There are three major advantages of ETH.
1. 1. Smart contracts
The platform called Ethereum has a function called “smart contracts.” This function is a system that will automatically execute a particular contract. This will reduce the time and cost of contract execution. Also, since these systems can be flexibly changed by users, versatility is high and users will be motivated to select “Ethereum.”
1. 2. The existence of EEA
EEA (Enterprise Ethereum Alliance) is a project to promote the development of ETH for business. As EEA includes world famous enterprises, attention is high. Examples of participating companies are as follows:
* JPMorgan
* Microsoft
* Intel
* TOYOTA
* KDDI
In this way, since famous companies around the world are cooperating in the development of ETH, it is likely that some of their contracts will be carried out on ETH in the future.

Why does ETH have value?
As mentioned earlier, Ethereum is a “platform for application development using the blockchain.” When using this platform, ETH is required for its usage fee (called “gas”). Therefore, the more you use Ethereum, the more valuable the currency will be.

How Ethereum works
Similar to Bitcoin, Ethereum is currently being mined as a method called PoW (Proof of Work). The image of ETH is giving rewards to people who help who help out in the ecosystem. However, this process presents various problems as described later. In the future, development will shift to a method called PoS (Proof of Stake). With PoS, ETH will be awarded according to the amount of currency a user holds. However, the timeline to shift to PoS is not clear and is estimated to take 3-5 years.

Pros and Cons of ETH
Pros
There are three major advantages of ETH.
1. 1. Smart contracts
The platform called Ethereum has a function called “smart contracts.” This function is a system that will automatically execute a particular contract. This will reduce the time and cost of contract execution. Also, since these systems can be flexibly changed by users, versatility is high and users will be motivated to select “Ethereum.”
1. 2. The existence of EEA
EEA (Enterprise Ethereum Alliance) is a project to promote the development of ETH for business. As EEA includes world famous enterprises, attention is high. Examples of participating companies are as follows:
* JPMorgan
* Microsoft
* Intel
* TOYOTA
* KDDI

In this way, since famous companies around the world are cooperating in the development of ETH, it is likely that some of their contracts will be carried out on ETH in the future.

1. 3.The roadmap is clear
There are four major stages of development for Ethereum to look forward to:
(1) Frontier 7/2015 〜 3/2016
(2) Homestead 3/2016 〜 10/2017
(3) Metropolis 10/2017 〜 ??
(4) Serenity 2018 〜 ??
Along with this, development is progressing to overcome ETH. It is a highly transparent project because development is planned in this way and the development situation is made public at meetups and conferences.

Cons

Transaction fees increase with more adoption
It is systemized so that the degree of difficulty of mining will become higher more rapidly in the future. As the degree of difficulty rises, the cost of mining will improve and as a result there may be a temporary delay in transactions with soaring commissions. But this is preliminary preparation for transition to PoS, and since it is temporary, you do not need to be overly pessimistic.

Presence of quantum computers
There is a risk that mining is monopolized by quantum computers in PoW currently adopted by the company. In this case, the value of ETH would greatly drop. However, this concern can be solved by introducing PoS, Mr. Vitalik, the creator of the ETH says.

How to store ETH

In addition to keeping ETH on exchanges, there are various storage methods. Here I would like to introduce two:
1. 1. MyEtherWallet
MyEtherWallet is a method of storing ETH on the Web. Because it is a wallet, you can avoid the hacking risk of exchanges. Also, since it is possible to store many currencies besides ETH, it is better to register those who participate in ICOs and Airdrops.
https://www.myetherwallet.com
1. 2. Cold wallet
Cold wallets can store ETH separately from the Internet. Therefore, this storage method hass rather low risk. Famous cold wallets include the Trezor and LedgerNanoS. There are differences in the currencies that can be stored, so let’s choose according to how you use it.