Abstract
In the internet's evolution, cryptocurrencies and decentralized platforms represent a significant shift. This chapter explores this shift, emphasizing Ethereum's role in Web 3. As we move from centralized to decentralized systems, Ethereum emerges as a “world computer.” This chapter explores Ethereum's blockchain and smart contract technology. It clarifies Ethereum and Ether (ETH), highlighting their impact on DeFi and NFTs. Ethereum offers opportunities but also faces scalability and fee challenges. The chapter provides a balanced view, exploring these issues and Ethereum's potential to alter the internet and finance. Readers will understand Ethereum's Web 3 role, its industry implications, and developments enhancing its ecosystem.
Top2. Literature Review
The transformative potential of cryptocurrencies and blockchain technology has garnered significant attention in both academic and industry circles. As the digital landscape evolves, understanding the nuances, challenges, and opportunities presented by these technologies becomes paramount. This literature review delves deep into the myriad facets of the cryptocurrency world, with a particular emphasis on Ethereum, its innovations, and its implications for the future of decentralized systems.
Key Terms in this Chapter
Cryptocurrency: A digital or virtual currency secured by cryptography, operating independently of a central bank.
Non-Fungible Tokens (NFTs): Unique digital assets that represent ownership of specific items or content, verified using blockchain technology.
Gas (Ethereum): A unit that measures the amount of computational effort required to execute operations on the Ethereum network.
Blockchain: A decentralized digital ledger that records transactions across multiple computers in a way that prevents alteration.
Liquidity Mining: A process in DeFi where users provide liquidity to a pool and receive rewards in return, often in the form of tokens.
Ledger: The record-keeping system of a blockchain, where all transactions are recorded.
Consensus Mechanism: A system used in blockchain networks to achieve agreement on a single data value or a single state of the network among distributed processes or multi-agent systems.
Proof of Stake (PoS): A type of consensus mechanism used by blockchains that allows participants to validate transactions and create new blocks based on the number of coins they hold and are willing to “stake” for network security.
Proof of Work (PoW): A consensus mechanism in a blockchain that requires participants to perform a computationally difficult task to validate transactions and create new blocks.
Fork: A change in protocol causing the blockchain to diverge into two separate paths, either temporarily or permanently.
Ethereum: A decentralized platform that enables smart contracts and decentralized applications (dApps) to be built and operated without downtime, fraud, control, or interference.
Decentralized Finance (DeFi): Financial services, including lending, borrowing, and trading, provided on a decentralized network, typically on blockchain technology.
Smart Contract: A self-executing contract with the terms of the agreement directly written into lines of code.
Sharding: A method used in blockchain technology to increase the number of transactions a network can process by splitting the network into smaller, more manageable parts.
Yield Farming: A strategy used in DeFi to maximize returns by moving assets across different lending markets to take advantage of varying interest rates.
Wallet (Cryptocurrency): A digital tool that allows users to store, send, and receive cryptocurrencies.
Interoperability: The ability of different blockchain systems to work together and share information.
Decentralized Applications (DApps): Digital applications or programs that exist and run on a blockchain or P2P network of computers instead of a single computer.