Ethereum Guide 2022 - Full Explanation and Tokenomics of ETH

What is Ethereum?

The Ethereum token is called Ether, or just ETH. Ethereum is the second most valuable and popular cryptocurrency after Bitcoin. It’s most known for its blockchain platform that supports smart contracts, thousands of decentralized apps (dApps), and their cryptocurrencies.

What makes Ethereum unique?

Four things make ETH unique:

1. Made as a decentralized platform rather than just a digital currency.

2. Provides access to decentralized financial (DeFi) services through protocols.

3. Uses smart contracts to host decentralized apps (dApps).

4. Transacts NFTs.

Who founded Ethereum?

Vitalik Buterin, a programmer, thought up Ethereum in 2013. Other founders are Gavin Wood, Charles Hoskinson, Anthony Di lorio, and Joseph Lubin. The blockchain started being developed in 2014 and went live on July 30, 2015.

What does Ethereum do?

The Ethereum blockchain offers much more than just a crypto coin to buy and store value. The blockchain powers a network of applications and their transactions. Plus, you can buy and sell NFTs with ETH.

 

Smart contracts make Ethereum stand out. They are the backbone of all dApps and NFTs, and many see them as the future of financial contracts.

 

dApps built on the Ethereum blockchain aren’t controlled by a single organization. And because all dApp data is stored publicly on the Ethereum blockchain, the data can’t be altered or tampered with.

What is Ethereum’s objective?

To provide a flexible platform that allows for scalability and full-scale development of dApps, creating an interconnected Web3 for changing everyday operations and transactions.

 

How is Ethereum distributed?

In July and August 2014, 60 million, or 83%, of the initial 72 million ETH was distributed to people who bought it in a crowd sale. The sale’s proceeds paid for development, research, legal expenses, and communications.

 

Half of the remaining 12 million ETH was distributed when the network launched to Ethereum’s early contributors and the other half went towards the Ethereum Foundation.

 

As a result, ETH’s initial distribution was concentrated.

 

Today, that concentration is spread out as early buyers have sold some of their holdings and Proof of Work mints new supply, increasing distribution.

 

How does Ethereum get minted?

Ether is minted each time a new block is made on the Ethereum blockchain. To make sure more blocks are built, the protocol grants a reward for each new block. Today, that reward is 2 ETH per block.

 

How does Ethereum get burned?

Every time there’s a transaction on the blockchain, a portion of ETH is burned. That is, tokens are taken out of circulation.

 

Is Ethereum inflationary or deflationary?

Ether was inflationary. But after it started being burned in August 2021, it became deflationary.

That’s when it started using a mechanic called EIP-1559 that burns tokens instead of giving them to miners. So, when there’s a lot of network activity, the burn rates temporarily make the coin deflationary - more tokens are destroyed than created.

When you own Ethereum what exactly do you own?

You own the freedom to transact across distributed applications which are part of a growing network. You can transact on the Ethereum blockchain as well as all the blockchains connected through dApps, trade with other cryptocurrencies on exchanges, and buy NFTs.

 

What is on Ethereum’s roadmap?

The Merge is fast approaching and the biggest thing in Ethereum’s current sights. Ethereum 2.0 will upgrade the network and in doing so, improve speed[WS1] , scalability, and efficiency. The blockchain will be able to process more transactions. Also, Ethereum will switch from a Proof of Work (PoW) (and mining) to a Proof of Stake (PoS) consensus mechanism, reducing the blockchain’s use of energy by up to 99.9% and making it sustainable.

 

Buterin is focusing on scalability, estimating that Ethereum is currently about 40% finished. After The Merge, it’ll be at 55%.

 

To make Ethereum 100% complete with the roadmap, there’ll be 4 more stages: the surge, the verge, the purge, and the splurge.

 

Let's break down each stage:

 

The Surge - increasing scalability through "sharding" - where the network gets split into pieces called shards to create smaller, faster, more manageable parts.

 

The Verge - optimize storage through Verkle Trees. This will reduce node sizes and help Ethereum become more scalable.

 

The Purge - reducing excess historical data. The goal is to decrease the hard drive space needed for validators and reduce network congestion.

 

The Splurge - making smaller updates to ensure everything runs smoothly from previous updates. Vitalik calls this "the fun stuff" since all the hard work is done by this stage. He claims: “By the end of its roadmap, Ethereum will be able to process 100,000 transactions per second”.

 

What risks does Ethereum have?

The Merge will affect the crypto world given the blockchain’s interactivity with other tokens through DeFi protocols and dApps, which depend on smart contracts. Specific to ETH, there will be forks, meaning tokens and dApps will choose to stick with PoW. Some think the shift to PoS will make ETH more centralized and less secure, meaning more open to bad actors. All those factors could affect ETH’s price.

 

Ethereum Tokenomics

ETH ticker: $ETH
Whitepaper

Roadmap

Max Supply: ∞
Total Supply: 122,158,688
Circulating Supply: 122,158,688
Market Cap: CA$240,137,354,025
Fully Diluted Market Cap: CA$240,137,354,025
Price: CA$1,974.77
ATH: CA$6,355.30
TPS (Transactions per second): 15 (average)
Developer Activity: High
TVL (Total Value Locked): US$33.56b
Total Staked: CA$8.6b

Crypto Asset Statement - Ethereum (ETH)

*as of August 29th, 2022 at 11:00AM ET

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