2020, in a clause, would be a bitter-sweet year for most people, me especially. Freshly out of high school with aspirations of the next phase of life in look. I’d say my path was much of a pretty pre-planned one. Get a degree in economics and get a job( Still the same but a lot of things have changed, You’d have to stick around to find out). I wasn’t much of a curious or exploring type to start with so I didn't really put my hands into a lot of things or explored on the internet.
Corona virus came early February I think and this was the first change of course in my life, trust me this was the same case for a whole lot of people as it halted some people’s lives, There were millions of casualties and other stuff. My story is quite different. This epidemic halted schools so I was basically idle for months at home until my friend introduced me to a smart contract program named forsage. At that time I didn't know what a smart contract meant.
This is a guide so I'd be explaining a lot of content in between the lines.
A smart contract is a piece of code, a program that executes business logic when certain conditions are met.Think of it as a thing that performs an action when certain parameters are set and actualized.
Their purpose is to programmatically execute sets of business logic that performs various tasks and processes transactions as a response to a series of conditions. Smart contracts encode this logic that is executed and run on a virtual machine baked into a blockchain”.
Forsage was built on the Ethereum blockchain and in this case when you bring in or register a user( the conditions needed to be met) you get incentivized( the response) from the users you bring in. They are called downsiders and as they bring in more users they earn and you earn. Don’t blame me if the crypto preachers as at then preached forsage like it’s the main function of the blockchain specifically Ethereum. I mean I was pretty naive. Because it was a ponzi scheme it didn’t take too long before it folded up, trust me i didn't make money from it at all but what i saw as the end was the start of a rollercoaster.
The beginning of an exciting path( The quest for knowledge).
After forsage, the search for answers started brewing up in me.What was ethereum? Why could we spend the digital acclaimed “tokens”? How did it come to place? What was the next shiny object to look into? One amazing thing about the world we live in is how we find answers as long as you want through social media and communities. On my quest for knowledge, i stumbled upon some pretty interesting concepts like web3, Blockchains, centralized exchanges and decentralized exchanges and DEFI.
Web3 - to understand the concept of web3, you need to understand the webs before it. Web1 is basically the internet where you can only get input without giving an output. It’s the read only internet. Web2 is the internet where you can read and create information but you have limited control over it. 99% of your data is being censored meaning you have no control over it. Web3 gives you power over it. You are literally the owner of your data with the sole authority to act upon it. Web3 is able to do this with Blockchain technology.
Blockchain Technology - A blockchain is a distributed database or ledger shared among a computer network’s nodes. A blockchain creates a decentralized, tamper proof ( also called immutable) system to record transactions. The blockchain stores data in blocks that are linked together in a chain. These properties of the blockchain technology has led to its use in various sectors including the creation of digital currency like Ethereum.There are different types of blockchain which are private, public, hybrid and consortium. Examples of blockchains are Ethereum, Solana, Bitcoin.
At this point in time, making money was quite limited in the cryptocurrency space as the majority of people were traders buying assets on Binance as at that time. Majority of them were spot and futures traders. Binance was a centralized exchange.At this point in time, making money was quite limited in the cryptocurrency space as the majority of people were traders buying assets on Binance as at that time. Majority of them were spot and futures traders. Binance was a centralized exchange.
Centralized exchanges - A centralized exchange refers to a digital platform that facilitates the trading, buying and selling of various cryptocurrencies. It serves as an intermediary between users providing an online marketplace where you can exchange digital assets for other cryptocurrencies or fiat currency. Other centralized exchanges are Bybit, FTX, Kucoin and Whitebit.
I could remember vividly that at that point,interacting on a particular thing then gave people a lot of money because of their interactions. The thing was called uniswap(still called uniswap) and the “thing” was a decentralized exchange.
This was the birth of a new meta.
Decentralized exchanges - A Decentralized exchange is a peer to peer marketplace that connects cryptocurrency buyers and sellers. Decentralized exchanges are non-custodial meaning a user remains in control of their assets and security. It enables the users to trade cryptocurrencies in a non-custodial manner without the need for an intermediary to facilitate the transfer and custody of funds.
On September 17, who would have imagined waking up to over 4 figures in their wallet.Definitely not me. Questions like How did it happen? Why did it happen and these questions prompted research.In September 2020, Uniswap airdropped over 135 million $UNI tokens to nearly 220,000 wallets for being early users of uniswap with a wallet having a minimum of 400 $UNI worth $2300. That was a lot of money then just by interacting with how a decentralized exchange works. This also made me learn the intricacies of liquidity pools, Contract address, non-custodial wallets, How to buy and sell a token.
Airdrops- Airdrops are simply ways a protocol incentivizes users by interacting with a protocol or performing a particular task.
Non-custodial wallets - Because you no longer interact with a centralized exchange, you need a non-custodial wallet to interact with a decentralized exchange. A non- custodial wallet is a wallet which gives you the sole responsibility for storing and managing your assets with the aid of a private key or a seed phrase. Examples of a non-custodial wallet are Trust wallet and metamask.
Buying and selling a token - You buy or sell your desired token on a decentralized exchange by inputting its contract address and swapping with the required token to use. In this case, buying a token on uniswap requires $ETH as the initiator. You’d also fill other parameters like slippage and the rest.
Contract address - A contract address is a unique identifier for a smart contract deployed on a blockchain. Each token has its unique contract address and this makes it easily searchable and accessible. An example of a contract address is 0x1f9840a85d5aF5bf1D1762F925BDADdC4201F984 which is for $UNI.
Liquidity pools - You can’t buy and sell tokens on a decentralized exchange without a liquidity pool. Liquidity is a fundamental part of both the crypto and financial markets. It’s the manner in which assets can be quickly converted to cash efficiently without price swings. A liquidity pool is a digital pile of cryptocurrency locked in a smart contract that allows ease in making transactions.
It has been an interesting story so far but all these lead to one climax.
The Birth of DEFI( Decentralized finance).
It goes without saying that the Ethereum blockchain is the home for Decentralized finance. Why is this so? This is because it is the home to diverse financial applications and services in the space. It also led to the introduction of the biggest financial applications in the space like Maker Dao, Aave and Cuve Finance. The obvious question here is what is DEFI?
Decentralized finance - Defi refers to a rapidly expanding ecosystem of financial applications and services built on blockchain technology. It aims to enhance traditional financial services by leveraging the transparency, security and efficiency of blockchain networks. Defi platforms operate in a decentralized manner where smart contracts execute predetermined actions without the need for intermediaries. These financial services are provided via a decentralized application(Dapp).
Decentralized application - Dapps are interfaces that interact with the blockchain through the use of smart contracts. They behave like regular web and mobile applications except that they interact with a blockchain in different ways. Some of these ways requires ETH to use the Dapp.
There are over 1155 defi applications on Ethereum as at writing diversing from lending and borrowing protocols, decentralized exchanges, collateralized debt positions, derivatives and launchpad, insurance.
Lending and borrowing protocol - Decentralized lending and borrowing protocol alllows anyone to collateralize their digital assets using it to obtain a loan. You can also earn a yeild on your assets participating in the lending market by contributing to lending pools and earning interest.
Derivatives - A derivative is a contract whose value is derived from another underlying asset such as stocks, commodities, indexes, bonds or interest rates. Traders use derivatives to hedge their positions and decrease their risk in any particular trade.
Launchpad - These are platforms which allows decentralized cryptocurrency projects to raise funds by selling a percentage of the project’s token supply at a discounted price. This is more or less like a fundraising platform that provides investors with the opportunity to invest in early crypto projects.
By nature, Cryptocurrency assets are very volatile so their value is not really stable. How do you know you are in profit or loss, that’s by selling whatever asset you were holding to a particular asset. This is called the stablecoin. I see this as a digital representation of our currencies.
Stablecoins - Stablecoins are cryptocurrencies that attempt to peg their market value to some external reference. They play the role of a store of value and medium of exchange more than other volatile cryptocurrencies. Some stablecoins are backed to the US dollar, crypto assets. Examples are DAI, USDC and USDT.
A couple of other airdrops came after $UNI like $DYDX and $APE in 2021 and I started interacting with DEFI but my knowledge wasn’t sufficient enough. Then another problem arose. There was a point where you would pay over $30 to $50 on interacting with decentralized applications. This was the gas issue associated with Ethereum and it was even worse in times of congestion.There was a need to solve scalability issues for the ecosystem to grow.
Vitalik buterin proposed a set of three main issues a blockchain is likely to encounter. This is decentralization, security and scalability.
This is called the blockchain trilemma. Ethereum is so far leading the race to solve the blockchain trilemma,trying to achieve a balance between security, decentralization and scalability and they have been able to put in structures like Layer 2s, rollups and EIPs.
Layer 2s.- This represents a collection of off-chain solutions or separate blockchains that are constructed atop Layer-1 blockchains. Layer 2 solutions extend the capabilities of layer 1 networks. They act as intermediaries that communicate and alleviate the mainnet's transaction processing load through smart contracts. A number of popular Layer 2s are Arbitrum, optimism and fantom.
Rollups - Rollups are scaling solutions designed to increase the capacity and efficiency of blockchain networks while maintaining their security and decentralization. They achieve this by processing and verifying transactions off-chain in a more efficient manner before committing them to the main blockchain. There are ZK rollups and optimistic rollups.
EIPs - Short form for Ethereum improvement proposals are standards that aim to specify potential upgrades or functionalities to the Ethereum protocol. They allow developers and community members to propose new solutions, protocol specifications and modifications to the network. Examples of Eips are EIP- 4844, EIP- 721, EIP- 1559, EIP-3675.
You would be as surprised as i am when i made a transaction one particular day and i am paying cents in transaction fees. I honestly was prepared to pay a lot on Gas fees. This is to show that the EIPs and the upgrades like the proto-danksharding has contributed immensely to the growth of ethereum as an ecosystem.
Going forward.
I think Ethereum going on from here is strongly on the path to still being the biggest blockchain though i’d acknowledge other blockchains like Solana and Binance smart chain as top competitions. With the goal of making user experience a top priority, Ethereum has being able to implement structures to make life easier like Account abstraction, Intents, Cross chain communication.
I Strongly suggest that they make Marketing that onboard normies a top priority because these makes the onboarding process for those that are just entering the space to fit in so well into the ecosystem as this should be a long term priority and gain.
