Ethereum and NFTs: A Comprehensive Guide for Beginners and Experts
Ethereum is one of the worldâs most popular blockchains, and itâs a great place to start if youâre interested in non-fungible tokens. Currently ranked second in market cap among all the worldâs cryptocurrencies, Ethereum has only grown more popular since its launch in 2013. And despite the recent increase in blockchains supporting NFTs, most NFT trade volume still resides on the Ethereum network.
Apart from NFTs, Ethereum plays host to a variety of other uses. Itâs used as an investment platform, a transaction space for the sale of goods and services, a medium that allows users to decentralize finances and assets, and much more. But, if youâre just getting started with NFTs, itâs important to know that Ethereum is ultimately just one of many options.
So letâs take a closer look at the Ethereum blockchain. Weâll cover its history, how it functions and is upgraded, its pros and cons, and where it stands among its competitors. If you havenât jumped into the NFT space yet and donât want to read a bunch of white papers discussing the technical specifics of one Blockchain over another, donât worry. Weâve done most of the hard work for you.Search
Dennis Diatel Photography/istock
GUIDES
Ethereum and NFTs: A Comprehensive Guide for Beginners and Experts
BY SCOTT SUMMERS
FEBRUARY 08, 2023
Ethereum is one of the worldâs most popular blockchains, and itâs a great place to start if youâre interested in non-fungible tokens. Currently ranked second in market cap among all the worldâs cryptocurrencies, Ethereum has only grown more popular since its launch in 2013. And despite the recent increase in blockchains supporting NFTs, most NFT trade volume still resides on the Ethereum network.
Apart from NFTs, Ethereum plays host to a variety of other uses. Itâs used as an investment platform, a transaction space for the sale of goods and services, a medium that allows users to decentralize finances and assets, and much more. But, if youâre just getting started with NFTs, itâs important to know that Ethereum is ultimately just one of many options.
So letâs take a closer look at the Ethereum blockchain. Weâll cover its history, how it functions and is upgraded, its pros and cons, and where it stands among its competitors. If you havenât jumped into the NFT space yet and donât want to read a bunch of white papers discussing the technical specifics of one Blockchain over another, donât worry. Weâve done most of the hard work for you.
Table of Contents
Ethereum: A brief history and overview
Smart contracts and NFTs
Ethereum and NFTs in 2023
Top NFT projects
Getting started with Ethereum
Ethereum: A brief history and overview
Ethereum is an open-source, public blockchain and cryptocurrency platform proposed in late 2013 by Vitalik Buterin, a Russian-Canadian programmer. Buterin wanted to build a decentralized platform that could facilitate online contracts and track ownership of various assets.
To do that, Ethereum introduced the concept of smart contracts, programs stored on a blockchain that automatically execute once a series of predetermined conditions are met. Often, the execution of a smart contract is transaction-based. A user pays in ether (ETH) or a denomination of the currency, and the smart contract executes automatically. Smart contracts can store a wealth of information, including transaction history and ownership details.
While smart contracts are also created when using Bitcoin, Ethereum added a level of complexity and sophistication to the process that was unrivaled at the time. This added functionality â and the fact that it was one of the first blockchains to offer this advanced level of functionality â has helped propel the Ethereum platform to the unparalleled popularity that it enjoys today.
When it comes to initiating upgrades to the Ethereum network, thereâs a formalized, multi-step process that users follow. The key to this process is the Ethereum Improvement Proposal (EIP). There are three main types of EIPs: Standards track, Meta, and Informational. No matter the kind of proposal, each is considered and debated by the broader Ethereum community, the core developer team, and others who have proven to have a deep knowledge of the Blockchain. This complex system of checks and balances can take months, potentially finally resulting in a testing phase on Ethereumâs âtestnet.â But the proposal isnât officially a part of Ethereum until the dev team implements it into the client node software, where it can be enabled.
Since its inception, the platform has continued to change and evolve. In 2022, Ethereum transitioned to a proof-of-stake consensus system for processing transactions, reducing the power consumption of the network by 99 percent from the previous proof-of-work method.
Unlike Bitcoin (BTC) and other currencies, Ethereum doesnât have a maximum supply to its cryptocurrency and instead seeks to curb inflation through Ethereum transaction fees and similar monetary policies. The summation of these technology tools has made Ethereum a popular blockchain platform for a wide variety of use cases, as users leverage the network to create NFTs, decentralized apps (dApps), decentralized finance (DeFI) networks, and more. For NFT users, Ethereum offers a solid application of blockchain technology with built-in scalability that can meet user demand as interest in NFTs and Web3 continues to grow.
Smart contracts and NFTs
The smart contracting protocols introduced by Ethereum are sophisticated concepts. Contracts are created using Solidity, a unique programming language designed to run on the Ethereum Virtual Machine (EVM), which acts as a kind of operating system and persistent storage for all Ethereum accounts and contracts. Without getting too far into the weeds on technical details, the complexity behind the smart contracting system is one of the main reasons that Ethereum remains one of the worldâs most popular blockchains for NFTs. Why? Because, at its core, every non-fungible token is a smart contract.
Itâs easy to think of NFTs as digital assets â like a painting, video clips, or gifs. However, NFTs are the blockchain token that enables the transaction. The token is associated with the asset you intend to purchase, but itâs not the asset itself. Additionally, physical assets can also be traded via NFTs using QR codes or similar tools (see our guide to NFTs if youâre looking for a deeper explanation of how all of this works).
Suffice it to say smart contracts bridge the gap between digital and physical assets and a blockchain network. The NFTs allow validator nodes (individuals who validate blockchain transactions) to track the transfer of a digital asset as it changes hands across the ecosystem. Using this method, validators can verify ownership and ensure that trades and transactions are authentic. All of this is done using smart contracts, and itâs what has made Ethereum a cornerstone of the digital asset â and NFT â revolution.
Thanks to its advanced functionalities and how early it was to market, most major NFT projects were initially launched on Ethereum. Digital wallets and similar transaction technologies were also created to be â first and foremost â compatible with Ethereum. There were simply no other leading competitors at the time that could offer the same level of functionality.
Ethereum and NFTs in 2023
Since those early days, several successors and competitors to Ethereum (Solana, Tezos, etc.) have joined the crypto universe. Like Ethereum, most of these blockchains also offer smart contracting technology as part of their platforms. While these newer blockchains lack the popularity and momentum that Ethereum has gained within the NFT space, they still have some benefits worth considering. Letâs take a closer look at the pros and cons of using Ethereum compared to other NFT-capable platforms.#Dyor #ETH #Ethereum #cryptopredictor #bitcoin
