Ethereum is a decentralized blockchain platform that establishes a peer-to-peer network that securely executes and verifies application code, called smart contracts. Smart contracts allow participants to transact with each other without a trusted central authority. Transaction records are immutable, verifiable, and securely distributed across the network, giving participants full ownership and visibility into transaction data.
Transactions are sent from and received by user-created Ethereum accounts. A sender must sign transactions and spend Ether, Ethereum's native cryptocurrency, as a cost of processing transactions on the network.
Benefits of building on Ethereum
Ethereum offers an extremely flexible platform on which to build decentralized applications using the native Solidity scripting language and Ethereum Virtual Machine. Decentralized application developers who deploy smart contracts on Ethereum benefit from the rich ecosystem of developer tooling and established best practices that have come with the maturity of the protocol. This maturity also extends into the quality of user-experience for the average user of Ethereum applications, with wallets like MetaMask, Argent, Rainbow and more offering simple interfaces through which to interact with the Ethereum blockchain and smart contracts deployed there.
Ethereum’s large user base encourages developers to deploy their applications on the network, which further reinforces Ethereum as the primary home for decentralized applications like DeFi and NFTs. In the future, the backwards-compatible Ethereum 2.0 protocol, currently under development, will provide a more scalable network on which to build decentralized applications that require higher transaction throughput.
Decentralized Finance (DeFi)
DeFi is a network of financial applications built on top of blockchain networks. It is different from existing financial networks because it is open and programmable, operates without a central authority, and enables developers to offer new models for payments, investing, lending, and trading.
By using smart contracts and distributed systems, customers can easily build secure decentralized financial applications. For example, DeFi companies are already offering products that enable peer-to-peer lending and borrowing, earning interest on cryptocurrency holdings, trading via decentralized exchanges, and much more. Some popular DeFi platforms include Compound, Aave, UniSwap, and MakerDAO.
Non-Fungible Tokens (NFTs)
NFTs are unique and indivisible digital tokens that are useful for proving the provenance of rare assets, both digital and tangible. For example, NFTs can be used by an artist to tokenize their work and ensure that their work is unique and belongs to them.
The ownership information is recorded and maintained on the blockchain network. NFTs are also gaining popularity in the gaming industry because they allow interoperability between gaming platforms. For instance, the first NFT project on Ethereum was CryptoKitties, which enabled customers to collect digital cat collectibles backed using NFTs. Gods Unchained is a card game that gives players full ownership of their in-game items using NFTs. NFTs are gaining popularity as more companies look to tokenize assets and provide users with tamper-proof lineage information about their assets.
