Ethereum is the most popular cryptocurrency in the world after Bitcoin. However, it is not only digital money, but the entire computing system that allows you to create and run other programs (smart contracts) in the blockchain system. Thanks to this, we have many tokens and coins on the market that were created to finance projects or activate the community. We can trade them on exchanges just like we do with Bitcoin or Ethereum.
Ethereum, ether and ETH – what is it all about?
As we mentioned earlier, Ethereum is a computing system (network) in which we can create and run many different smart contracts. The billing currency of this network is “Ether”. Ether has its three-letter acronym ETH. Ether can be stored on the wallet, sent and received just like we do with Bitcoin. In addition to the e-money function, Ether has a special role as the settlement currency of all contracts operating in the Ethereum network. To make it even more interesting, in everyday life many users use the name Ethereum, Ether and ETH interchangeably. When they talk about Ethereum, they usually mean token and digital money, not the entire network.
How does ethereum work?
If a bitcoin blockchain can be compared to a large database that stores information about each transaction, the Ethereum blockchain is similar to a database and the computer that manages this database. In addition to storing information about transactions in Ethereum, we can additionally perform various calculations and perform operations when the programmed conditions are met. Thanks to this, programmers can create mini programs in Ethereum, which we call Smart contracts. As in real life, a contract may specify some action (e.g. sending tokens, granting voting rights) after checking the fulfillment of other conditions (e.g. achieving the minimum number of subscriptions for tokens). These contracts are performed automatically and do not require human intervention, so they can be anonymous and unconditionally performed, which guarantees their safety and impartiality. Of course, a Smart contract is written by a human and may contain errors, so, especially in the case of less popular contracts, it is worth checking how they work and what they are for. This can be checked using additional tools or services such as Etherscan.io.
In the Ethereum network, developers create many different tools – from new tokens supporting software development on the crypto market, such as RevCoin.io, to games, decentralized exchanges, loan systems or tokens reflecting the value of the dollar, gold, real estate and even paintings.
Ethereum is a large network of individual computers (nodes) that are connected together via the internet. Ethereum software is installed on each computer that allows to make calculations. The operation of the Ethereum network requires, of course, equipment and energy, and these costs are covered using the cryptocurrency called Ether.
Ethereum was founded in 2015 and, like bitcoin, is an open source project – it is not owned or operated by anyone. Anyone with Internet access can connect to the network and run the Ethereum node.
Despite its enormous innovation, the Ethereum network has its drawbacks, which include slow operation and a high cost of confirming transactions. It is currently being updated to increase speed and performance and improve network security. The new version, called ethereum 2.0 (ETH2), started operating in December 2020 and the connection of the two networks is to take place within the next two years. If you are an ETH holder, you don’t need to do anything – your property will be automatically transferred to the ETH2 chain. Ethereum 2.0 will allow the network to process thousands of transactions per second (now the transaction is confirmed every 30 seconds).
A brief history of Ethereum
In 2013, Vitalik Buterin, a 19-year-old programmer (co-founder of Bitcoin Magazine), publishes a document proposing for the first time a blockchain that can handle virtually any type of transaction. In 2014, a teenager from Toronto and a team of co-founders, including Gavin Wood, raised $ 18 million to finance the development of Ethereum by pre-selling tokens. The first version of Ethereum was launched in July 2015. In 2016, about $ 50 million was stolen from a venture fund called DAO (Decentralized Autonomous Organization) based on smart contracts due to a software bug. Moved by this fact, the Ethereum community decides to change the protocol in a way that allows to restore the lost funds. Not everyone is delighted with this fact, which is why Ethereum is divided into two separate projects: Ethereum (new network) and Ethereum classic (old network). In 2017, the ERC-20 standard is created making it easier for developers to create compatible applications. The first widespread ethereum-based application is a game called CryptoKitties. The game has become a real phenomenon. Users collect and trade digital cats that reach a price of $ 200,000 at their peak. In the same year, the non-profit organization Ethereum Enterprise Alliance is established and its members include JP Morgan, Samsung, Microsoft and Mastercard. In 2018, compound loan mechanisms and the concept of decentralized exchanges (DeFi) are developing, within which Uniswap is established. In 2020, the biggest event was the introduction of the ETH2 update.
How to buy and sell Ethereum?
As you already know, transactions on cryptocurrencies are anonymous and to receive and send ethereum you need your own digital wallet. It consists of a public key used by people sending tokens to your wallet and a secret private key that allows only you to access your tokens.
If you want to learn step by step how to set up your first wallet, we encourage you to read our blog article Revcoin.io – Your First Cryptocurrency Wallet.