Single decentralized system
Like Bitcoin, the Ethereum network exists on thousands of computers worldwide, thanks to users participating as “nodes” rather than a central server. This makes the network decentralized and extremely immune to attacks because of not being able to crash. If one computer is left out of order, it doesn’t matter why thousands of others keep the network running.
Ethereum is a single decentralized system that uses a computer called an Ethereum virtual machine (EVM). Each node uses a copy of that computer, meaning any interactions must be verified so everyone can be updated.
Network interactions are otherwise considered transactions and are stored in blocks on the Ethereum blockchain. Mining to verify transactions is known as proof of work (now after Ethereum 2.0 it is only proof of stake). Each block has a unique 64-digit code that identifies it.
As with Bitcoin, all transactions on Ethereum are public and unmodifiable. Miners transmit completed blocks to the rest of the network, confirming transactions and adding the blocks to the universal ledger.
Each transaction comes at the cost of a commission called “gas”. This commission acted as a payment to the miner who confirmed transactions on the network.
Unfortunately for many, the supply of gas to Ethereum is sometimes quite high based on network mobility, as a result of which miners choose the transactions with the highest commissions. This brings the commissions higher and higher, creating a problem of congestion in the network at times.
To get in touch with the Ethereum ecosystem one needs to own Ether which will be stored in a wallet. This way one connects to Dapps. From there anyone can buy various items, play games, lend money, and do all kinds of activities.
Cryptocurrencies take on the role of information here, so users are free to browse and interact anonymously. Also, a “banking” or “lending” Dapp cannot reject someone based on their race or financial situation. Users have total control over what they do, which is why many consider Ethereum Web 3.0 to be the future of digital interaction.
The ERC-20 token ecosystem
Cryptocurrencies that do not have their own dedicated blockchain, but use the blockchain of another crypto asset, are known as tokens. Those on the Ethereum network are called ERC tokens, and most of them fall into the category of ERC-20 tokens. Operations with ERC tokens will still cost transaction fees in the blockchain’s native currency: Ether.
The first ERC token was launched in 2015. This was the crypto asset known as Augur. Since that day, a plethora of tokens have been created on the Ethereum blockchain. There are currently more than 200,000 ERC tokens, which means that there is a huge cryptocurrency ecosystem operating on a single blockchain. Thanks to smart contracts, you can even trade these tokens with each other using decentralized tools. In the moment on which this article is written, there are several ERC-20 tokens in the top 20 of Coinmarketcap as well as several stablecoins.