Ethereum remains one of the fastest-growing blockchain-based software platforms globally, boasting a market cap of more than $203 billion that's second only to the trail-blazing Bitcoin network.
Like Bitcoin, value exchange remains the primary use of the decentralized Ethereum blockchain, usually via the network's native 'Ether' token. However, this blockchain also boasts considerable potential and functionality outside of value exchange, central to its origins and evolution since its initial proposal in 2013.
In 2011, the 19-year old Russian-Canadian entrepreneur and programmer Vitalik Buterin first envisioned Ethereum after developing an initial interest in the Bitcoin network. This passion inspired the Ethereum platform, as Buterin looked to create a blockchain that could offer functionality beyond the basic financial use case. This was explained in detail in a 2013 white paper, which described an alternative blockchain that would enable third-party developers to create their decentralized apps using a built-in programming language.
Also known as dapps, these entities are central to the long-term appeal of Ethereum, as they'd instantly offer developers access to a global audience while also enabling them to utilize a highly secure and scalable infrastructure. To this end, the Ethereum platform also makes it easier to create smart contracts, which generate automated codes to achieve specific outcomes when predetermined commissions are met.
So promising was Buterin's work that he earned a $100,000 grant to work on Ethereum in 2014 (having also been named a 2014 Thiel fellow), with Ethereum finally going live the following year launch of 72 million Ether coins. Of course, many have questioned the Ethereum protocol's ambition to evolve into a so-called "world computer" that can provide a viable, decentralized alternative to Google and Facebook. The second-generation blockchain has also encountered familiar scalability issues, increasing transaction fees while simultaneously lowering speed.
However, to negate this risk, 'Ethereum 2.0' has been launched as a network upgrade aimed at resolving some of these core issues and enhancing the blockchain's underlying security. Launched on December 1st, 2020, Ethereum 2.0 has also been utilized with similar scaling technologies such as Raiden to achieve its objectives sooner rather than later. In this respect, it's attempting to ward off the competitive threat posed by third-generation blockchains such as Cardano, which are uniquely designed to resolve the common issues that have plagued first and second-generation protocols.
In the case of Cardano, this has also developed an off-chain scalability protocol that can handle approximately 1,000 transactions per second at present while providing scope for considerably more in the future.
#What is an Ethereum (ETH) Wallet?
The Ethereum wallet is where you can manage your Ether and other ERC20 compatible tokens and process transactions, although this isn't used to store tangible or corporeal coins. Instead, it enables transactions and interacts directly with the Ethereum blockchain while allowing the details of payments and exchanges to be stored on the decentralized network.
There are different types of Ethereum wallets available, each of which offers unique value and advantages. Here's a brief breakdown of your options when storing Ether:
Your Own Third-Party Ethereum Wallet
This is the easiest way of storing your Ether, with a viable third-party option typically provided by an exchange such as Atomic Wallet. This provides easy access to your funds and automatically allows for quicker exchanges and transactions through the web without necessarily forcing you to compromise security.
While this can cause you to cede some control of your funds to the third-party in question, however, Atomic Wallet negates this risk by enabling you to retain complete control of your private keys (we'll have a little more on this later). Interestingly, you can also use the Ethereum platform to create a personal wallet for yourself, ensuring that you retain sole access to your private keys and funds.
Hot and Cold Wallets
In general terms, there are also two broad categories of Ethereum wallet, namely hot and cold.
The former (which are also referred to as web wallets) essentially store your private keys online within a decentralized network, making the wallet and your funds accessible so long as you have Internet access.
This does raise some security concerns, of course, particularly as your private keys are potentially more accessible to hackers and cyber-criminals. This type of wallet certainly wouldn't be suitable for individuals who hold large amounts of Ether or EC20 tokens, as the potential risk would outweigh any advantages in terms of flexibility.
Conversely, cold or hardware wallets have no connection to the Internet or the network connecting devices to the World Wide Web. Instead, they typically take the form of paper wallets or dedicated devices with USB ports, which can be stored away safely when not used to provide an additional layer of security.
Do You Need a Full Node Wallet?
You can also choose between a full node or light client Ethereum wallet, the former of which provides you with direct access to the Ethereum blockchain.
This essentially enables you to download the complete Ethereum blockchain to your desktop device, so long as you have the requisite memory. This is only possible on a capacious desktop computer due to the number of gigabytes required to store the network's information.
However, this is only really necessary if you intend to contribute to the network as a full node, rather than simply facilitating and managing personal transactions.
If you do require more basic functionality, you can install a light client Ethereum wallet, which enables you to simply synchronize to the blockchain rather than downloading this in its entirety.
Understanding Public and Private Keys
All Ethereum wallets have public addresses, which are effectively hashed versions of your public key. A public key is a randomly generated, 512-bit sequence of case-sensitive letters and numbers, with the unique wallet address derived from the last 20-bytes of the string.
This address will receive any Ether tokens that you're sent as payment or as part of a cryptocurrency exchange. While this is published and available to other token holders, the public key can only encrypt individual transactions where coins are sent to your wallet (rather than decrypting them), ensuring that you retain total control of your funds at all times.
Public keys are also created by solving a special cryptographic formula or elliptic equation, while a digital signage algorithm (DSA) may also be used. We've already touched on the private key, which can encrypt and decrypt messages included as part of Ether transactions. This is another randomly generated 256-bit number, which also comprises letters and digits. It effectively serves as a personal wallet ID within the Ethereum network while enabling you to sign off individual transactions, send tokens, and unlock coins that are shared with you.
Private keys are generated using the same algorithms that create public keys, enabling you to create strong encryptions bonded mathematically.
Ultimately, installing an Ethereum wallet is critical if you're exchanging Ether tokens or starting earning cryptocurrency. Still, you should also know that those network fees are required to process payments and exchanges.
The reason for this is simple; each Ethereum transaction requires variable computational resources to execute, which in turn means that validators must be compensated with an appropriate fee. On this blockchain, the fee is commonly referred to as 'Ethereum gas,' while this is typically paid in the network's native Ether token.
But how is this fee set?
Ultimately, it's miners who set the price of gas based on core factors such as supply and demand and the computational power required to process individual transactions and smart contracts, causing the typical Ethereum transaction fee to vary considerably over time. This also explains why transaction fees increase during hikes in activity and trading volume, as miners can charge a price premium in exchange for prioritization and quicker transaction speeds.
As of February 21st of this year, the average Ethereum transaction fee is estimated to be $17.37, with this having peaked at $24.05 earlier in 2021.
#Ethereum (ETH) Wallet Features
Now that we have a basic understanding of how Ethereum wallets function, it's time to drill down into the unique features available through the Atomic Wallet. As we've already stated, some web wallets work by storing users' private keys on a decentralized virtual network, potentially making them vulnerable to hacks and malware attacks.
With Atomic Wallet, however, your private keys are fully encrypted on your devices. This means that there's no need to hold them on the network or a centralized exchange, ensuring that you retain full control over your funds and Ether holdings. This ultimately means that no third-party or centralized entity has the power to withhold funds or block individual transactions, which is highly advantageous for users of all descriptions. Despite this, Atomic Wallet users continue to benefit from the platform's immense accessibility as a web app, which supports multiple devices and can be used seamlessly on personal computers and your smartphone.
Atomic Wallet also helps users to maintain their privacy and anonymity at all times, which is why there's no need to provide a linked email account or identity verification when using basic and light client features. This negates the need for Know Your Customer (KYC) protocols for most users, ensuring that you won't have to provide copies of your photo ID before exchanging tokens.
Of course, Ether tokens are just one of more than 300 cryptocurrencies that you can exchange with Atomic Wallet, with the platform's built-in exchange offering access to a diverse range of coins. You can also buy Ether tokens in real-time using Atomic Wallet while using the platform'sAssets' page to view live information about prices, market capitalization, and trading volumes.
This resource also details the change in price during the previous 24 hours, so you can gain an insight into the recent trajectory of Ethereum and its prospects. However, you will have to provide ID verification and proof of your identity before buying Ether tokens through Atomic Wallet while committing to a minimum purchase of $50 or more.
If you have installed Atomic Wallet on your chosen device and hold at least some Ether tokens, you can also develop and manage unique dapps or associated smart contracts. As we've already touched upon, dapps are based on the Ethereum blockchain. They operate in a completely decentralized way, with these applications' data requirements distributed securely amongst the nodes.
This network allows you to develop a wide array of apps and functions, distinguishing Ethereum from its closest rivals (which typically impose stringent limits on its available operations). If you do decide to develop your dapp, you simply need to connect to Ethereum's blockchain, ideally through its native Mist browser.
In simple terms, this provides a digital wallet for users to trade and store Ether securely. Simultaneously, the browser's user-friendly interface also allows for the creation and deployment of smart contracts.
#How to store Ethereum Safely?
To enjoy the full benefits of Atomic Wallet, you need to follow the process of creating a new and unique wallet.
You also need to take additional steps to safeguard your private keys and personal information, particularly as centralized exchanges remain vulnerable to the machinations of hackers and cyber thieves.
Here are some ideas to keep in mind:
- Store your Seed Phrase Safely: When you first create a wallet, you'll be given a unique 12-word seed phrase. This affords you alone access to your Ether tokens, while it must be used to verify blockchain transactions and withdraw funds. This will remain unchanged and must be stored securely, either offline (in a safe or locked drawer) or the type of Cloud backup services that can create an encrypted version of the seed phrase on your Google Drive account.
- Don't Store your Private Key on a Phone or Email: You can use the 'Settings' tab on your Atomic Wallet to manage your password, while this is also home to private keys that are initially secured in encrypted form. If you intend to store your private key on a device you use, we'd recommend that you place this within a secure desktop folder that has been password protected. Where possible, refrain from storing the key on your smartphone or in an email or a Google Drive account that hasn't been encrypted.
- Backup Your Ethereum Wallet and Key: It's also important to frequently back up your Ethereum wallet, as this will enable you to restore your currency from historical data in the event of a network failure. You can back up the requisite wallet.dat files on a hard drive or USB, while we'd also recommend ensuring that your device software is regularly updated and capable of providing a stringent defense against hackers.
#What is Ethereum Gas?
We've already discussed Ethereum Gas, which refers to the network fee charged by nodes to process and record individual transactions.
Remember, the transactions that require more processing power will drive higher transaction fees. At the same time, those requested during busy periods will also be priced higher due to basic supply and demand factors. As a result of this, validators tend to prioritize more lucrative transactions with higher gas requirements, directly impacting individual transaction speeds.
#What is EVM?
The term 'EVM' stands for the 'Ethereum Virtual Machine,' a blockchain-based software platform that allows for the development of dapps.
Programmers tend to value these entities due to the absence of downtimes, while all created objects are decentralized, immutable, and safe from the risk of subsequent modification. This also has considerable advantages from the perspective of smart contracts, as Ethereum can underpin transparent agreements that cannot be changed by a third-party going forward.
EVM is also ideal for beginners on the Ethereum network, eliminating the need for powerful hardware and extensive coding backgrounds.
#What are Smart Contracts?
On the topic of smart contracts, this term refers to a self-executing agreement where the unique terms that bind buyer and seller are directly written into lines of code. In the case of Ethereum, the code and detailed agreement subsequently exist across a distributed and decentralized network, with this controlling the execution and providing a way of tracking individual transactions.
#What are Dapps?
By eliminating the need for centralized and third-party servers, dapps offer significant promise to users across numerous industries and marketplaces.
Their decentralized nature is highly appealing for developers, as dapps must be open-source and capable of operating independently without the control of a third-party entity. To this end, all dapp data is completely transparent and recorded publicly. The use of the cryptographic Ether token simultaneously works to keep the network and individual applications completely secure.
By relying on a peer-to-peer system, developers can also experience reduced downtime, as the network will continue to operate even if individual computers fail.
#What are Tokens?
The Ether token is central to the whole Ethereum network, whether you consider its role in value exchange or how it secures smart contracts and dapp functionality. To this end, the Ether token can be utilized as either a currency, a virtual share, or proof of membership, the latter of which is key when formulating secure and amicable smart contracts.
In this instance, a smart contract will automatically connect with any wallet because tokens utilize a standard coin API. Interestingly, Ether is also an ERC20 token, essentially a blockchain-based asset that can hold value, underpin transactions, and be stored and sent using Ethereum addresses.
In terms of value, the Ether token recently peaked at a new high of $2,030, with this price hike following in the wake of BTC's recent bull run.
In this respect, the token had come a long way since its launch on August 9th, 2015, when it was valued at just $0.909046.
#Top 5 things to know about Ethereum
- While Vitalik Buterin received a $100,000 grant to fund the development of Ethereum back in 2014, the blockchain was partially crowdfunded before being launched and publicly traded in the summer of 2015!
- While Ethereum is now firmly established as the second-largest cryptocurrency in the world (in terms of both token value and market cap), it once trailed Litecoin and similar Bitcoin mining alternatives. It was deemed as a far less viable investment option.
- Ethereum has become a multi-functional blockchain network since its inception, to the point where it now hosts the majority of new token sales and ICOs. More than 75% of all ICOs are hosted on the Ethereum blockchain, with this fact central to the network's immense recent growth.
- Like Bitcoin, Ethereum isn't as decentralized as is often advertised. This is because it continues to be governed by a core group of developers and employees who manage the network, creating an element of central control within a transparent and decentralized network.
- Ethereum is constantly changing, as evidenced by the rise of the platform's hotly-anticipated 2.0 iteration. It may also transition from mining to an algorithm called Casper in the near-term, eliminating proof of work and undermining the profitability of actively mining tokens.
As you can probably tell by now, Ethereum is innovative second-generation blockchain technology. At the same time, its native Ether token can also be purchased, exchanged, and managed in real-time through Atomic Wallet.
The introduction of Ethereum 2.0 is also well-timed, given the recent emergence of third-generation blockchains. This enables the network to tackle its scalability issues and optimize transaction volumes as it continues to scale.
With this in mind, and considering the rate at which the Ether token has appreciated Q1 of 2021, some experts predict that the coin could break out above the $3,000 barrier by the end of the year.
So, now may be the ideal time to invest in Ethereum while using Atomic Wallet to manage your tokens securely alongside a raft of alternative cryptocurrencies.