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The Ethereum network can be a bit hard for those newer to cryptocurrency to get their heads around.
It extends beyond being a cryptocurrency – in fact, Ethereum itself doesn’t even refer to the crypto, that’s Ether (ETH). As their own website says, “Ethereum is a technology that’s home to digital money, global payments, and applications.”
The capabilities of the Ethereum platform or network are far-reaching and may seem complex at first, but as it has now become one of the world’s leading digital economies it makes sense to brush up on your ETH knowledge.
You don’t need to be an expert in all things Ethereum to get started with investing in cryptocurrency, but this article will cover the basics. So here we go with what you need to know in order to jump into the Etherereum and do your thing.
The idea for Ethereum was conceived in 2013 by Vitalik Buterin. Buterin, along with co-founders managed to raise $18.3 million in the public initial coin offering (ICO) in 2014. The Ethereum foundation officially launched the Etheruem blockchain in 2015 and since then it has had several updates and improvements.
In 2016 the Ethereum blockchain had a hard fork, creating Ethereum classic in the process. This was a result of a disagreement within the Ethereum community on whether to make updates to its blockchain. Ethereum classic is a legacy chain of Ethereum, meaning its network contains the original blockchain that shows every transaction.
The price of ETH in its official ICO was $0.311 USD. Since then it has done over a 1,000,000% return.
Related: Ethereum live chart
Are the two largest blockchain companies in the world so different? In short, yes. And this is an important distinction to make before delving deeper into what exactly Ethereum is.
Ethereum states that “you can get the control and security of Bitcoin mixed with the services provided by financial institutions. This lets you do things with cryptocurrencies that you can’t do with Bitcoin like lending and borrowing, scheduling payments, investing in index funds and more.”
Gavin Wood, Ethereum’s Co-Founder, probably gives one of the best examples. Bitcoin is primarily a currency – it is one use of blockchain technology, the same way e-mail is one use of the internet. Ethereum utilises blockchain technology for a currency, Ether, but also for many varied purposes and applications.
The Ethereum platform itself is a blockchain platform. The Ethereum platform features its own cryptocurrency, Ether (ETH), though various other cryptocurrencies have also been built of the Ethereum blockchain.
Ethereum also has its own programming language, called Solidity.
Ethereum itself offers a way to send and receive money that has the potential to bring cryptocurrency into everyday life like never before. It also powers applications, or dApps, in industries such as online gaming, healthcare, food safety management, supply chain logistics etc., making them safer than ever.
The Ethereum network relies on a decentralized system of computers called miners that verify and check what’s happening. These nodes are run by real people, allowing for greater security to protect against any potentially malicious activity from hackers or other bad actors in the crypto space.
We’ve mentioned Ethereum’s technology relies on something called a blockchain, but what exactly is a blockchain?
A blockchain is a digital ledger that is basically a network of computers that keeps everyone honest. It is a ‘computer source accountant’ if you like. It keeps all the transactions and other records straight and verifies them. (It can be used, for example, to track and monitor bitcoin transactions.)
Ethereum likes to refer to the blockchain as a database. It is programmable because miners can add new blocks and code.
Ethereum is an open-source technology. That is KEY; open source is not owned by a proprietary interest and anyone can work with it. It is not private property, in short. The Ethereum virtual machine (EVM) is a decentralized computer that allows developers to create their own applications.
The technology expedites the exchange of cryptocurrency (and other things such as apps, digital art, and games etc.).
Ethereum uses decentralised applications (dApps) which have two core features in which they rely on:
Ethereum says to think of a DApp like a vending machine. The vending machine is the user interface, and the function (i.e. money + snack selection = snack dispensed) is the terms written into the smart contract.
DApps could potentially exist for almost any scenario or purpose: from entertainment to banking to healthcare. By running on the blockchain they have multiple key benefits. These include being open-source, autonomous, easier for developers to implement, and secure.
Because smart contracts are so pivotal to Ethereum, we’ll take a closer look.
Smart contracts can be thought of as a special type of computer code designed to execute automatically when certain conditions are met. No single authority gives the tick of approval: the contracts are entirely self-operated.
Say you want to pay a contractor once they’ve submitted a 1000 word article on football. A smart contract could hypothetically execute a release of payment once the article has been submitted and all conditions (word-limit, topic etc.) have been met.
Ethereum is the venue, the platform, the network. ETH is their cryptocurrency; that is the main takeaway on this point.
The price of ETH fluctuates a lot, and its all-time high in 2021 was above $5000 AUD. However, you don’t have to fork out over 5 grand to get an ETH. You can Buy 1 ETH or up to 18 decimals of one. This means anyone can invest in Etheruem, no matter how much money they have.
Ethereum wallets are applications that let you interact with your Ethereum account. Think of your wallet as an internet banking app MINUS the BANK (and the ongoing banking fees). Your wallet lets you “store” your ETH and can come in a variety of forms.
There are a number of different types of digital wallets in which can store your Ethereum. For instance, if you buy Ethereum on Swyftx, it will be automatically stored in the wallet integrated into your account. This is referred to as an exchange wallet.
Ethereum can also be stored in hardware wallets, mobile wallets, desktop wallets, paper wallets or web wallets. Some of these options are safer than others. Read our guide on the best Ethereum wallets in Australia.