What is Ethereum?

What is unique about Ethereum?

Ethereum is the second most popular cryptocurrency in the world and one of the most influential players of the crypto market. Founded by Vitalik Buterin and Gavin Wood in 2015, today this cryptocurrency holds the second place in terms of market capitalization.

In this guide we'll give you the most important information about Ethereum and its network.

When and Where Did Ethereum Appear?

The Whitepaper was released in 2013 by programmer Vitalik Buterin. Additional founders of Ethereum included Gavin Wood, Charles Hoskinson, Anthony Di Iorio and Joseph Lubin. In 2014 Gavin Wood released The Yellow Paper (a technical definition of ETH protocol) and development work began. The network went live on 30 July 2015.

On 15 September 2022, the most important event of the year happened: Ethereum transitioned its consensus mechanism from proof-of-work (PoW) to proof-of-stake (PoS). This process is known as "the Merge".

What is Ethereum?

Ethereum is a global, decentralized ecosystem for building apps and organizations, holding assets, transacting and communicating without being controlled by any central authority. The ETH blockchain utilizes the PoS (Proof-of-Stake) consensus algorithm.

Ethereum network has its own native token, Ether, which is used to buy and sell goods or pay for certain activities on their ecosystem. Ether reinforces the Ethereum financial system. You can use ETH as collateral to generate entirely different cryptocurrency tokens on this network. You can also borrow, lend and earn interest on ETH and other ETH-backed tokens.

What's unique about Ether?

Many assets are based on Ethereum, but there is something unique in Ether. What is it?

• When you make any transaction with Ether or use an Ethereum app, you must pay a fee in ETH. This fee is an incentive for a block producer to process and verify what you're trying to do.
• The work validators do, and the capital they stake, keeps Ethereum secure and free of centralized control. Ether powers Ethereum.

How Does Ethereum Blockchain Work?

All cryptocurrencies use blockchain technology and Ethereum is no exception. To better understand how the blockchain works, imagine a very long chain of blocks, each of which stores information and each user sees it. After checking, the block cannot be deleted or changed. This makes the blockchain very secure.

Source: Arctic Wallet

As a consensus mechanism, Ethereum uses the proof-of-stake algorithm: participants, who are called validators, create new blocks and work together to verify the information contained in them, pledging a "stake" of crypto assets. The reward depends on how much of an asset the participant has committed and how long they have been staking for.

Source: Arctic Wallet

You can find the information about the state of the blockchain, a list of attestations (a validator's signature and vote on the validity of the block), transactions in the blocks.

What Can Ethereum do?

Privacy

There is no need to provide personal data. DeFi gives an opportunity to own your funds without third-party organizations.

Source: Arctic Wallet

Bank in your pocket

All you need to control your money - an internet connection.

Source: Arctic Wallet

A peer-to-peer network

You can send or receive money anywhere in the world in a couple of minutes without a third-party.

Source: Arctic Wallet

Independent

The Ethereum Network isn't controlled by the government or company. Such decentralization means that nobody can stop you from receiving payments or using services.

Source: Arctic Wallet

Development

As all apps are built on the same blockchain with a shared global state, they can build off each other. This allows constantly improving products.

Source: Arctic Wallet

What is the difference between Ethereum and Bitcoin?

Source: Arctic Wallet

Of course, Ethereum is based on Bitcoin's innovations, but there is a great difference in their purpose of creation and way of use.

Both allow you to use digital money without the participation of any payment providers or banks. But unlike Bitcoin, Ethereum can also create and deploy decentralized apps on its network.

The programmability of the network gives an opportunity to create applications to store data or control what your app can do. The result is a general-purpose blockchain that can be programmed for anything. Since there is no limit to what ETH can do, it allows for great innovation in its network.

While Bitcoin is just a payment network, Ethereum is more like a market for financial services, games, social networks and other apps that respect your privacy and anonymity.

How to buy Ethereum

- Buy ETH via a Reputable Exchange

Various crypto exchanges such as Coinbase, Kraken, Binance, and OKX are offering to buy it with a bank card.

It should be mentioned that the largest exchanges are often centralized and may restrict trading activities and lock your funds anytime. So exchanges definitely are not a go-to for your long-term holdings.

- Buy ETH right from your Wallet

Many digital wallets today offer great functionality and have an in-built purchase option.

It allows you to avoid fees for transferring funds into your wallet from exchanges and any additional friction in the buy-store journey.

Also in many wallets you can find such features:

• Buy/sell and exchange option
• Asset statistics in Portfolio
• Full transaction history tabs
• Customizable commissions for sending coins

See the example from Arctic Wallet down below.

Source: Arctic Wallet App

How to Store your ETH?

Essentially, you do not own your crypto until you hold it in your crypto wallet. So always store it in a reliable hardware or software wallet. As opposed to exchange wallets, non-custodial ones (like Arctic Wallet) give you full ownership over your funds and private keys. Considering this, buying crypto right from the wallet may be a great option.

Conclusion

Lately, Ethereum has significantly dropped in price. That fact turns it into a good opportunity to invest while it's low. ETH is the one of the most developed and adopted crypto in the world, which makes it a perfect asset to start your investing journey.

Become ETH Investor in three steps:

1. Choose the service and the payment method
2. Place an order
3. Make sure the purchased Ethereum is stored safely

On a final note, Ethereum and crypto in general is a highly volatile asset class. Always research and understand the asset that you're investing in and the risks that you're taking.