Ethereum is the community-run technology powering the cryptocurrency ether (ETH) and thousands of decentralized applications.
Ethereum is a platform powered by blockchain technology that is best known for its native cryptocurrency, called ether, or ETH, or simply ethereum. It stands out from Bitcoin because it allows smart contracts and Dapps to be built on the network.
Ethereum is all about re-imagining how the internet works. Buying things, building apps, storing records: The project wants to change all of that..
Bitcoin proved that cryptocurrencies could be used as a store of value, but Ethereum builds on this innovation and proved that blockchain technology can deliver so much more. It can be used to organise people, ideas, companies, money, services, and many other things. If anything can be written into code and used by a smart contact it can be built on Ethereum.
Ethereum is the 2nd largest cryptocurrency as of writing, with only Bitcoin having a larger market capitalisation
Conceived by Vitalik Buterin in 2013 and launched in 2015. This network is unique because it proposed to utilize blockchain technology not only for maintaining a decentralized payment network but also for storing computer code for decentralized financial contracts and applications.
- 2013 - Vitalik Buterin produces a white paper explaining the concept of Ethereum
- January 2014 - Ethereum is publicly announced
- July 2014 - Ethereum launches an ICO using Bitcoin to buy Ether
- June 2016 - $50 million of Ether was stolen from a crowdsale and Ethereum developers agree to reverse the decision by creating a ‘hard fork’
- March 2017 - a group of companies including Toyota, Samsung, Microsoft, Intel, and J.P. Morgan establishes the Enterprise Ethereum Alliance, a non-profit designed to make Ethereum suitable for big business.
The reason Ethereum gained such massive popularity and almost flipped places with Bitcoin in June 2017 is due to its ability to run smart contracts.
The native currency for Ethereum is ether or $ETH. Ether is used mainly for two purposes: It is traded as a digital currency on exchanges in the same fashion as other cryptocurrencies, and it is used on the Ethereum network to run applications.
You can buy Ether or ETH as it is commonly referred too, from all the major cryptocurrency exchanges. For a guide on how to get started on an exchange, click here.
Just like Bitcoin, miners create Ether by creating blocks and solving puzzles. This is known as mining. Roughly every 15 seconds, a new block is added to the Ethereum blockchain, with the computer or miner that solves the puzzle being rewarded with Ether.
Ethereum currently uses the same mining technique as Bitcoin, however, it has plans to move to a different technique - it plans to move from 'proof-of-work' to 'proof-of-stake'. This change rewards those that stake the currency, as opposed to miners solving puzzles. This is significant because it means that the everyday investor can earn interest on their holdings by joining a staking pool.
Ethereum is transitioning to ETH 2.0, a protocol that moves from Proof-of-Work to Proof-of-Stake, which reduces the environmental overhead of mining to zero.
Ethereum has faced many criticisms: slow network, power hungry mining, scalability. All these negatives are true. But Ethereum 2.0 tackles these issues directly.
“1,000x more scalable” and “cut energy costs by 99%”.
Viltalik Buterin on the future of ETH 2.0
Ethereum allows computer programs to run “smart contracts.”
With a smart contract, you don’t need a third party to perform credible transactions. And because these smart contracts live on blockchain technology, they are trackable and irreversible.
A new era of computer programming, digital ownership, and other innovations are being introduced thanks to the smart contract capabilities of Ethereum.
As an investment it also offers some diversification from Bitcoin whilst providing the relative security of a project that has weathered many of the storms of the cryptocurrency world and come out on top.