Ethereum is one of the most popular cryptocurrencies in the world and a viable contender for the Bitcoin throne. Ethereum takes much of what Bitcoin offers and improves upon it with faster transactions, smart contracts and native apps.
By: Keegan Francis | Dec 16, 2019 | Modified Apr 10, 2020
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Ethereum might sound like just another cryptocurrency but it’s actually a globally operated super computer. It might sound like science fiction but it’s true. Much like Bitcoin’s network, Ethereum is run on millions of computers around the world. The main innovation of this decentralized cryptocurrency network was the unique capacity to run smart contracts on its blockchain. Most people, however, still use Ethereum primarily as cryptocurrency. It remains one of the most popular altcoins in the world and a darling amongst developers and investors alike.
You can buy Ethereum at many cryptocurrency exchanges, including:
All-Time Low : $ 0.420897 USD (Oct 21, 2015)
All-Time High : $ 1,432.88 USD (Jan 13, 2018)
Current : $15+ billion
Current : 108,725,102 ETH
Average transactions per second: 25-30
Reason: Ethereum pre-mined 72 million before the blockchain began running. The pre-mined tokens were distributed to the three founders, and participants of a crowd-sale.
Reason: Ethereum has the largest developer community on the planet, only being rivaled by the grassroots developer community of Bitcoin.
Reason: Ethereum is the second-largest cryptocurrency by market capitalization, making it one of the most widely accepted and accessible cryptocurrencies on the market.
Ethereum was proposed in late 2013 by one of its founders, Vitalik Buterin. It was later picked up and pursued by co-founders Joseph Lubin and Gavin Wood. During July and August in 2014, Ethereum raised money through a crowdsale, and then formally launched the platform in July 2015.
Ethereum was largely responsible for the cryptocurrency bubble that took place in 2017. This bubble inflated the price of Ether to $1432.88 USD. Ethereum, as a platform made it very simple for people to create their own token, or cryptocurrency. This in turn fuelled a rally in the industry, with most projects raising millions of dollars for their project with nothing more than just a whitepaper. Much like when a company is taken public in an Initial Public Offering (IPO), the cryptocurrency equivalent is called the Initial Coin Offering. ICO’s became very easy to build, launch, and implement with Ethereum as a base platform.
The ease of creating new tokens came from engineering a “template coin” or token that allowed for anyone with a basic understanding of Ethereum to launch their own token. This template standard is known as ERC20, and thus you will frequently read that a token or coin is an ERC20 token.
With many projects choosing Ethereum as a platform in which to run their newly crafted cryptocurrency, problems with scaling the network became an issue. Ethereum can process between 20 and 30 transactions per second. When comparing this number to VISA or Mastercard, Ethereum falls short of being able to handle a global load of transactions.
The Ethereum Foundation, which is the governing body that guides the development of Ethereum have planned several milestones and upgrades to the Ethereum network that in theory, will allow the network to scale to become the global transaction supercomputer that it originally promised to be. These upgrades are dubbed Byzantium, Constantinople, and Serenity. The upgrades range from support for secure random numbers, to sharding. Once completed and deployed, these upgrades will form the Ethereum 2.0 network.
Ethereum has a thriving developer, and user ecosystem. This is the largest advantage of using Ethereum. Community involvement and activity should not go under valued, as having a community of users to aid and assist you in your crypto journey is important when you come across situations and questions that you need answered.
Ethereum also has a thriving dApp ecosystem. This is another advantage as it allows for a wide range of things that you can do with your Ethereum tokens. It is fairly easy for anyone to create or publish their own tokens on the Ethereum Blockchain. This reduces the barrier to entry to fundraising, as well as implementing a proof of concept.
Ethereum is not without its faults. It is important to know about the various issues with Ethereum before getting involved. Ethereum has trouble with scalability, meaning the relative number of transactions per second is low. VISA can process 65,000 transactions per second, which makes it capable of handling a global load of transactions. Ethereum is at the lower end, able to process only 25 transactions per second.
There are more than a dozen instances of Ethereum smart contract hacks that have taken place since the inception of Ethereum. It is important that you are aware of this, when trusting a smart contract with your funds. Although this hinges on a lack of security, it is important to take note that the developer community has been over top of mending such hacks as they occur.
Ethereum is different than Bitcoin. They don’t do the same thing, therefore they are not a fair comparison. Bitcoin serves the purpose of being a digital gold for the world of cryptocurrency, whereas Ethereum is an application platform for a wide range of use cases.
Some of the fundamental concepts from Bitcoin were used in the implementation of Ethereum, such as the consensus mechanism Proof of Work. As time progresses, and Ethereum updates its software, it is becoming more and more different from the Bitcoin blockchain.
There are many forks of Ethereum, although only one of them is worth noting. Ethereum classic is the original fork of Ethereum, that was created after the DAO hack of 2016. The main difference between these forks is that Ethereum reversed the hack and continued onwards as if it never happened.
A smart contract, simply put, is an automation tool.
While the notion of smart contracts were introduced by Nick Szabo in 1994, the technology to properly facilitate and execute smart contracts didn’t exist until the birth of Ethereum in 2015.
Ethereum’s main innovation is smart contracts. Smart contracts allow programmers to design systems that automate the handling of funds, assets, decisions, or data. Until Ethereum’s smart contracts, it was difficult for programmers to build applications that automate the handling of money in unique or creative ways.
Smart contracts open up a wide variety of use cases involving finance that the cryptocurrency industry has decided to call “Decentralized Finance” or “DeFi”.
Ethereum Classic is the name of the first Ethereum fork. After the DAO hack of 2016, Ethereum Classic opted to not reverse the hack. Ethereum on the other hand altered the blockchain and reversed the hack.
Depending on who you ask, the future of Ethereum is very bright. Ethereum has made many promises on the wide range of use cases that can exist on the platform. Due to issues with scalability and adoption, these use cases have not grown as rapidly as expected. The development community of Ethereum is vast and competent, giving confidence to the broader community that Ethereum will one day be a platform where useful, fun, and engaging applications may live and thrive.
Decentralized Applications, or dApps, are applications that are built on decentralized networks, like blockchain. Decentralized applications inhabit several properties that make them fundamentally different than their centralized counterparts. These properties range from censorship resistance to network durability.
Ethereum is a global supercomputer, giving people an ability to rent CPU time. The reason why this works is that Ethereum uses a consensus mechanism that allows the transactions that occur on the network to be trusted. The consensus mechanism that Ethereum uses is called Proof of Work, which is the same mechanism that the Bitcoin network uses.
In order to interact with the Ethereum network and send a transaction to be processed, you need to pay a small transaction fee. This transaction fee is called GAS. The gas allows for the computers that will be processing your transaction to be compensated proportionately to the amount of CPU time that will be used.
The smart contracts range from being a custom token to a decentralized application (dApps). Any interaction with these smart contracts requires the user to approve the transaction, making Ethereum a well refined and secure network to use for a wide range of purposes.