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.
Last September 15, 20022, developers transitioned Ethereum to run on a proof-of-stake (PoS) consensus mechanism. PoS allows token owners to lock up, or stake, their ether tokens to help validate new transactions and secure the network. Moving to proof-of-stake was seven years in the making, so its long-awaited completion demonstrates exactly how complex and groundbreaking the move was.
According to its official website, Ethereum's energy use has now been cut by 99.95%, a statistic that is sure to please environmentalists in both the government and the crypto community. Additionally, moving to PoS paves the way for Ethereum's network to implement sharding in 2023, an update that will split and distribute the network load across side blockchains. Think of it like adding more lanes to a highway. The result is a huge potential increase in throughput to the tune of 100,000 TPS.
Ethereum is now in a position to scale better thanks to its switch to PoS. And this could lead to even greater adoption with the continued popularity of decentralized applications such as decentralized finance (DeFi) protocols and non-fungible tokens.
The new age of the internet
Our reliance on the internet seemingly increases every year. Some companies capitalized on this and now have an omnipresent role in our daily lives. These companies provide technology, track your every move on the internet, and generate an absurd profit from their centralized business models. But it looks like that might be coming to an end thanks to new technology with the potential to upend the current status quo of the internet.
Known as Web3, this new age of the internet aims to be everything that our current internet, referred to as Web2, isn't. In Web3, things such as social media, finance, gaming, and the metaverse have the potential to mark a break from today's centralization. With Web3, decentralized blockchains would be the backbone for an internet that's open source, offers secure interoperability between apps, and is entirely trustless -- meaning no third party, like Google, is needed for the system to function.
So how can investors capitalize on this opportunity?
Blockchains are the foundation of Web3, owning the cryptocurrencies native to those blockchains is one simple way to gain exposure to the new age of the internet. Based on current developments, Ethereum is at the top of supporting Web3's future growth. Ethereum is slowly becoming the foundation of Web3. To be straightforward, there is no possibility of Web3 without Ethereum. With its smart contracts, developers can program decentralized apps (dApps) to replace third-party entities, allow user data to flow seamlessly between applications without any collection, and (the best part) be highly secure and execute automatically when conditions are met. There are other smart-contract-based blockchains like Solana and Cardano, but Ethereum has risen to the top as one of the most used blockchains. Its popularity has caused it to become the home of the most development for Web3 use cases. It could help to think of Ethereum as the base layer or code that allows Web3 to function, as JavaScript or HTML is for Web2. Any investor interested in Web3 should make sure they have a substantial amount of Ether in their portfolio.