You might have heard about Ethereum and Ether quite a few times over the past few years. Maybe you’re wondering what exactly the world’s second-largest digital currency is and what it is used for.
Below, we explore what Ethereum is, why everyone is talking about it, and why you probably should be too.
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Ethereum explained
Like Bitcoin, blockchain technology, and others you may be familiar with, Ethereum is a decentralized open-source blockchain. It was developed to support scripting and the creation of decentralized applications and smart contracts through its virtual machine (EVM).
Ethereum’s native cryptocurrency is called Ether (its trading ticker is ETH). It has a solid blockchain network that helps people build applications that no one can takedown. In addition, it gives people and organizations access to independent transactions.
Over the years, Ethereum has gained ground and has grown in value. Its value increased even further in 2021, just like Bitcoin did.
The price growth for Ethereum was facilitated by technological updates such as the Berlin update that was meant to pave the way for reduced ETH gas prices and reduced transaction fees. Another technological update was the arrival of Uniswap V3 in May 2021.
This is expected to optimize Ethereum trading further.
We can also say that the rising interest from major institutional investors has contributed to this boom.
Nigel Green, CEO, and founder of deVere Group, even predicted that Ether would reach as high as $5,000 in the near future.
In addition, another remarkable reason for the sudden interest in bitcoin was selling a digital art piece, the world’s most expensive NFT, sold at 38,000 ETH (69.3 million U.S. dollars).
Why is everyone talking about Ethereum?
1. Innovation on the Platform
Ethereum has ensured that it stays ahead of the times with the constant innovation on its platform. With the launch of Ethereum 2.0, more people are getting interested in Ethereum and Ether.
This version has significantly reduced transaction fees which helps people make less expensive transactions than on the first version. In addition, many people were previously concerned about the environmental impact of mining Ether; Ethereum 2.0 is said to eliminate some of these negative environmental impacts.
Also, with the launch of Ethereum futures trading, it will be easier for traders to speculate what Ether will be worth in the future. This helps because uncertainty is the hallmark of many cryptocurrencies.
This innovation is opening the doors to many more people trading the currency, including traditional investment firms and those learning how to buy Ethereum.
2. Non-fungible Tokens (NFTs)
Since Ethereum has existed for more than five years, people have been talking about it for quite a while, but more recently, you might have heard about it being referred to more as regards NFTs.
Non-fungible tokens are some of the best-known applications of Ethereum and have grown rapidly since 2018. In 2018, the market cap of NFTs was about $41M; by 2020, it had risen to $338M. This is a Compound Annual Growth Rate of 187.28% from 2018-2020.
When purchasing an NFT using cryptocurrency, you can get a digital certificate of authenticity. As such, when you upload the digital file as NFTs on blockchains, you can sell them as authentic original files and distinguish them from potential copies.
Thus, purchasing an NFT means you now own an original of whatever digital asset you purchased and can prove it. Most NFT sales occur with segments like crypto art, gaming, sports, collectibles, metaverses, and utility.
One notable NFT is Jack Dorsey’s. The Twitter founder recently minted Twitter’s first tweet as an NFT, which sold for about $3m in March 2021. Christie’s, the auction house which sold the NFT with the highest value as of July 2021, sold for over 38,000 ETH – or 69.3 million U.S. dollars.
3. Trading with ETH
One key problem people used to have with cryptocurrency was trading with it or exchanging it. However, there are now more and more exchanges that offer Ethereum as a form of exchange on their platform.
For example, on platforms like Coinbase and Buy Virtual Currency, you can trade ETH for any coin of your choice.
You even get account managers with great customer service, ensuring that your exchange follows through. Furthermore, for many of these platforms, you do not need Fiat currency to trade.
Many organizations and people also accept ETH as a form of payment. Before now, only cryptocurrencies like Bitcoin were widely accepted. However, it is expected that this number will increase over the next few years with recent innovations.
4. Smart contracts
One of the best things about Ethereum is that it can be used to “codify, decentralize, secure and trade just about anything,” — according to its website.
The whole premise of building Ethereum was to ensure that independent financial transactions could be made. With the Ethereum Virtual Machine (EVM), this is more than possible.
The EVM can run smart contracts representing financial agreements like bonds and swaps. It can be used for something as simple as a wager or as complex as a government contract.
If you’re looking for an escrow to purchase valuable items or fulfill employment contracts, you can use EVM. It ensures that contracts are smart and can be upheld with ease.
Of course, trusted systems that can uphold these are few and far between, so it only makes sense that people who need such services embrace Ethereum more and more.
EVM is now becoming the go-to for anyone looking for a better replacement for regular legal or social contracts. You can use Ether as the cryptocurrency to settle the terms of the smart contracts you have created.
5. Decentralized organizations and applications
One of the products of the byproducts of the smart contracts created on EVM is decentralized organizations. These are full organizations that can run end-to-end without any institutional oversight.
They can function as corporations, buy and sell, negotiate transactions, maximize budgets and hire employees. Organizations can do all of these without any human or institutional interventions.
Of course, many organizations, new and existing, are coming to realize what an asset this is to them and are exploring it further.
Decentralized applications (Dapps) are also being built on the EVM. These apps are currently being developed for Ethereum, and they run through smart contracts. Some of these apps belong to already existing organizations, while others are being conceptualized as it goes.
These include online gambling apps, P2P marketplaces, and payment platforms. Dapps take advantage of a decentralized network to create solutions that do not need a human or organizational overseer.
Without unnecessary intermediaries which one would need on other platforms, processes become more seamless and hitch-free.
What does the future hold for Ethereum?
Ethereum has come a long way since a white paper was written on it by Vitalik Buterin in 2013 and its launch in 2015. Its exponential growth has proved the value that it brings. So what does the future hold for this decentralized finance technology?
We have seen different things happen in the world of crypto, especially with Bitcoin’s rise and continuous fall within the past few months.
However, Ethereum’s future is not as uncertain as it is not exactly a currency. Instead, it is open-source software that facilitates decentralized finance. As such, one can predict that as long as decentralized finance is doing well in the world, Ethereum will continue to do well.
Ether and Bitcoin: Similarities and Differences
Ether and Bitcoin run on something called ‘blockchain technology’. Blockchains are online ledgers where permanent records of information are kept. An independent network of computer nodes works continually to verify this information.
Thus, they are not controlled by any humans or external factors. This technology was invented by Satoshi Nakamoto (real name unknown) when they created bitcoin in 2009. Bitcoin and Ether are some of the thousands of cryptocurrencies that use blockchain technology.
Like the bitcoin blockchain, when the nodes confirm that a transaction has taken place, an Eethereum transaction is confirmed. When this occurs, the verifiers are rewarded in ether for their work; this is called mining.
While Bitcoin blockchain only enables decentralized money, Ethereum’s blockchain can host several other things, including digital tokens, coins, decentralized applications, and organizations.
How to Buy Ethereum
If you’re interested in buying Ether, you can purchase it through popular crypto exchanges such as Coinbase, Binance or eToro. You would need a hardware or software wallet to receive your Ether.
Then, all you need to do is create an account with the provider confirming your identity, link your account, and you can buy ETH. If you would prefer an anonymous method of buying Ether, you could use peer-to-peer exchanges, such as LocalEthereum.
Also, for buying small amounts of Ether, you could find an Ether ATM and use that. However, you must note that these platforms charge fees for buying or exchanging your currency for ETH.
Conclusion
Ethereum has been very functional in helping finance become decentralized.
It also acts as a platform for multiple applications and multi-faceted uses. With the constant innovation on the platform and the autonomous smart contracts built into the EVM, Ethereum has the propensity to get even bigger and better in the future.
