Bitcoin was the uncrowned king of the crypto world. Many cryptocurrencies came, some stayed, and most vanished, yet the market share of bitcoin remained unmatchable. It was only in 2015 that a cryptocurrency named Ethereum was launched that transformed the crypto norms and paved the way for many tech developments.
The idea behind Ethereum was published in a white paper in 2013 that described an alternative platform that would allow developers to create their own decentralized applications using a built-in programming language. Many developers were drawn to this idea because these new applications would be accessible to a global audience, highly secure, and much faster to build because there are no intermediary services to integrate.
What is Ethereum?
Ethereum is the world’s second-largest crypto project by market capitalization and was the first to introduce smart contract functionality to the industry. Ethereum is not merely a store of value or a medium for exchange; instead, it calls itself a decentralized computing network built on blockchain technology.
“Ethereum serves two purposes: One, it acts as money and can be a store of value, But Ethereum is also like a highway for decentralized finance.” ~ Bill Noble, chief technical analyst at Token Metrics
This additional feature in cryptocurrency that Ethereum introduced led to the foundation of NFTs, DeFi, stablecoins and other smart contracts built on blockchains. Co-creator of Ethernet, Vitalik Buterin, now has his eyes set on decentralizing social media, gaming, governance and more to further explore the vast potential Ether blockchain holds.
The units used in Ethereum are not called Ethereum or Ethereums. Ethereum is the protocol itself, but the currency that powers it is simply known as ether (or ETH).
Ethereum vs Bitcoin
Ethereum is very different from Bitcoin in terms of the purpose of creation. While Bitcoin was created with the goal of disrupting online banking and day-to-day transactions, Ethereum’s creators aim to use the same technology to replace internet third parties and to give users more control of their finances and online data. This vision if executed according to plan would shortly introduce social media platforms that users would trust with their data.
How does Ethereum work?
The basic working of Ether is through a blockchain network like all cryptocurrencies. A blockchain is a decentralized, distributed public ledger where all transactions are verified and recorded. All participants of the Ethereum network have access to this ledger that shows all past transactions. The network isn’t operated or managed by any centralized entity; instead, it’s managed by all of the distributed ledger holders.
The thing that differentiates the working of Ether from bitcoin and other traditional cryptocurrencies is that the network can perform computations as part of the mining process. This computational capability enables Ethereum to function as a decentralized global computing engine and openly verifiable data store.
Ethereum does have its fair share of volatility and instability but like Bitcoin, Ether too has shown an upward growth graph which makes it the most reliable among the rest. Ethereum was also used as an investment vehicle as the interest in the crypto space elevates in recent years. Ethereum hit an all-time high late in 2021, and ever since it has been gaining on Bitcoin in terms of global market capitalization.
The mining process of any cryptocurrency is integral to securing and updating the blockchain. Miners put transactions on the blockchain through complex computations which is a costly process, and as a reward, the protocol rewards them with ether. They also receive freshly-generated ether – 2 ETH at the time of writing.
Unlike Bitcoin, Ethereum does not have a set limitation on how many of the currencies could ever exist. The token emission schedule for Ether remains open-ended, as it stays focussed on using the blockchain as a foundation for decentralized applications.
How to buy Ethereum?
There are three major steps that most people take in buying Ethereum:
- Choose a cryptocurrency exchange.
Ethereum is trending and widely circulated cryptocurrency thus all cryptocurrency exchanges offer it. Crypt exchange ranges from online brokers, centralized exchanges and decentralized exchanges.
- Decide how to pay.
Ether can be bought through fiat currency (paper money) or some other cryptocurrency.
- Store your Ethereum.
Digital assets require digital wallets, which store the private keys you can access or spend your digital currencies. You can choose from on-platform wallets and non-custodial wallets, both having their pros and cons.
Future of Ethereum
No matter which cryptocurrency you invest in, it’s vital to understand the risks, including the potential loss of your entire investment. Crypto investments are volatile and risky thus a measured approach with considerable risk tolerance is necessary for all investors.
The crypto news outlet Coinpedia predicted ETH could end 2022 between $6,500 and $7,500 if the upswing that started in mid-2021 were to continue. However, 2022 witnessed a downturn in the crypto market, reinforcing the risk in cryptocurrencies. The blockchain now has considerable competition from similar platforms that are filling in its gaps while the Ethereum team works to transition to its second-generation updates.
Ethereum launched a new update, Ether 2.0, which could potentially make Ethereum more affordable for users to mint and develop products, the service fees to use Ethereum are extremely high for now. As per coinpedia predictions, Ether’s price could rise up to $12,962.33 in 2022 if Ethereum’s upcoming transition to Ethereum 2.0 is successful.