Ethereum 2.0, Smart Contracts & NFTs: The Most Important Ethereum Buzzwords Simply Explained!

(Photo: BS/Choong Deng Xiang)

In recent years, the term Ethereum has appeared more and more in the media. It seems that interest in this blockchain platform is growing every day. But what is Ethereum and what is the role of Smart Contracts & NFTs?

These are certainly important questions that investors want answered before they dare to enter the market. There are numerous trading options and popular payment methods such as the market leader PayPal can also be used without problems. The company’s services are trusted by millions of users, and buying Ethereum with PayPal is one of the preferred methods. The quick availability of cryptos, precisely because deposits can be made flexibly on the marketplaces, is one of the most important criteria for investors.

Reason enough to shed some light and explain the most important terms related to the second largest cryptocurrency. In this way, even beginners in the world of cryptocurrencies can understand the basics and speak up.

Ethereum 2.0

Ethereum 2.0 is the next generation of the Ethereum blockchain under development. It will be a completely new blockchain based on a proof-of-stake consensus model as opposed to the current proof-of-work model. This means that Ethereum 2.0 will be significantly more energy efficient than the current Ethereum blockchain.

It will also feature a number of scalability and speed improvements. For example, it will be possible to perform several transactions at the same time (multithreading), which will significantly increase the speed.

Furthermore, the update will implement a so-called sharding. Sharding means that the blockchain is divided into several smaller blocks (“shards”), so that each block only contains a fraction of the entire blockchain. This allows nodes to focus on a smaller portion of the blockchain, greatly improving scalability. The update will be developed and implemented in three phases. These include:

  • Phase 0 – Beacon chain
  • Phase 1 – Shard Chains
  • Phase 2 – State execution

So far, the new update for ETH 2.0 has not been fully rolled out, but it is said to be on its way. According to some experts, full implementation will take place during 2022, but reports have also appeared on the Internet that publication is not expected until 2023.

Smart contracts

Many people have heard of “smart contracts”, but few know what they are and how they work. Smart contracts are computerized contracts that are automatically executed when certain conditions are met. These contracts are stored on the blockchain and can be accessed by anyone who has access to it.

They also allow transactions to take place between two or more parties without the use of an intermediary. By using it, financial transactions can be processed faster and more cost-effectively.

What makes smart contracts special is that they are decentralized and tamper-proof. Decentralized means that they are not controlled by a central body – unlike normal contracts, which are controlled by governments or companies.

Tamper-proof means that they cannot be tampered with, unlike normal contracts, which are written by humans and therefore prone to error or tampering. They can be used for a variety of applications, e.g. B. for processing securities transactions or automating supply chains.

NFTs

NFTs are digital assets stored on the Ethereum blockchain. These objects can be anything from digital art to game objects. One of the most interesting aspects of NFTs is that they are not interchangeable – each one is unique.

Also, the special thing about NFTs is that they are stored on the Ethereum blockchain. Blockchain is a decentralized database hosted by many different computers around the world. These computers are referred to as “nodes”. Each node has a copy of the entire blockchain. Once someone creates a smart contract on the Ethereum blockchain, it is saved across all nodes.

So if you decide to create an NFT, it will be backed up on all nodes. Conversely, this means that NFTs are extremely secure – there is nowhere for them to be stolen or lost.

As previously mentioned, as the name suggests, NFTs are not interchangeable, making each piece of digital art unique. This means they are excellent for managing digital collections and inventories. For example, one could store a collection of digital artwork as NFT for safekeeping or for sale.

German rapper Kool Savas also took advantage of this advantage in 2021. He burned the lyrics to his first song “King of Rap” and has kept it as a digital artwork ever since. A short time later he sold it on October 14 for €30,000.

Furthermore, they can also be used to represent digital property. For example, one could store a house as an NFT and track ownership of the house. If the house has been sold, you could easily find the new owner by searching the relevant NFT. It would thus be impossible for thieves to steal the property and remain undetected, as the new owner would be immediately visible.

Conclusion: The Internet has an interesting future ahead of it

Ethereum 2.0, smart contracts and NFTs are the components that make Ethereum a powerful and versatile blockchain platform. The update allows developers to create decentralized applications that can run smart contracts. Thanks to NFTs, users have the ability to share, manage and market digital objects. All these features make Ethereum ideal for creating and managing digital content. These factors are also likely to have a significant impact on price. Although the Ethereum price has experienced a rapid downward trend in recent months from over €4,144.35 on November 11, 2021 to €1,041.91 on July 12, 2022, it is now steadily rising. If the update hits as desired, Ether could see a huge jump higher. Some analysts see the price above $5,000 in 2023.

Author: Jennifer Waltz

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