What is Ethereum (ETH)


In today’s society, most of our personal information is held by huge companies like Google, Facebook, Amazon, and more. Also, when you want to create a website or even an app, your data will be stored and controlled by a private's firm on its servers. On top of that, you have to pay for their hosting services. Moreover, the financial system and the currencies we use to pay for goods and services are controlled by single entities like the government or central bank. 

It is in 2009 that the world was introduced to the first virtual currency, Bitcoin . Bitcoin is an electronic peer-to-peer payment system and the first-ever cryptocurrency.  Before Bitcoin, the only way people could use money digitally was through bank transfers, electronic cards, or other online payment systems like PayPal, Google, and Apple Pay, etc. Even then, the money used was issued and controlled by governments or banks, which caused constant inflation of the fiat currencies. Further, thefinancial services would then charge you high transaction fees, and the transactions could take days for the money to reach the receiver.


Bitcoin introduced a decentralized currency that allows people to trade directly without the interference of a third party. Bitcoin operates on a technology called the Blockchain, a distributed public ledger. As banks verify transactions of fiat currencies like the dollar and the euro, Bitcoin transactions are verified and confirmed by the Bitcoin network on the Blockchain. The system is run by thousands of computers spread around the world. When someone sends bitcoins to his friend, the transaction will be verified by the computers on the network, also called nodes.

 The nodes will confirm if the sender has sufficient funds and add that transaction to block. Information added on the Blockchain cannot be changed or tampered with. Just like that, Bitcoin created the first decentralized money system which cannot be controlled, hacked, or shut down.

In the meantime, other developers considered that if you could decentralize the payment system, you could do the same for different functions in society. What if you could decentralize the voting system, real estate transfers, or the way applications are created on the Internet. However, for a system to be fully decentralized, it requires a vast network of computers to run it. The first network to ever achieve that was Bitcoin, but it was built to be a payment system only. Ethereum then proposed to build a network that would create more complex systems.

Ethereum founders determined that they could build a Blockchain-based system to decentralize the Internet. They realized the Blockchain itself could be used to create a system on which individuals could develop programs and applications that can run without a central authority. Their goal is that no entity will have absolute control over your data or even suddenly ban your page or app without your permission.

Ethereum allows people to build their own decentralized apps without the need for a third party to store and manage their data. Decentralized apps or Dapps connect the user to the servers directly. For a decentralized app to be fully functional, there has to be a set of rules or conditions according to which it will operate. Those conditions are encoded in a computer as smart contracts. Smart contracts have a pre-programmed set of rules that function autonomously. Therefore, Dapps are powered by smart contracts, plus they are autonomous and immune to censorship. 

Often referred to as the DIY platform for decentralized apps, Ethereum allows anyone with the necessary skills to create his own program or app on its network.For instance, if you want to create another payment system that no one controls like Bitcoin, you can do it on Ethereum. All you need to do is learn their programming language, create your code, and deploy it on the Ethereum platform. Like Bitcoin, Ethereum has thousands of computers, nodes, running it. When someone creates a new program, these computers will ensure that the code executes as written in all honesty. The nodes will also verify all the money transactions on the Ethereum network.

Ethereum itself is not a currency. It is an infrastructure for decentralized apps. It allows people to connect directly without a central authority. For example, individuals can offer driving or housing services to each other and remove Uber or Airbnb as the middle man. However, the network has a native cryptocurrency used to pay for transactions on the platform and reward miners for their services. The cryptocurrency is called Ether. Not only is Ether a digital currency, but it is also a fuel that runs the Ethereum platform. The token is mostly used to incentivize the nodes that take care of the storage, verification, and other necessary tasks to keep the network running. 

Ethereum’s white paper was published in November 2013 by Vitalik Buterin, co-founder of Bitcoin Magazine. In January 2014, the platform was publicly announced by its founder and his friends Mihai Alisie, Charles Hoskinson, Anthony Di Iorio, Gavin Wood, and Joe Lubin. To fund the development of Ethereum, the team held an ICO ​of Ether. The ICO ended in August 2014 after raising $18.4 million.

​Ethereum And Bitcoin

Even though built on the same Blockchain, Ethereum and Bitcoin are different:

The usage: Ethereum and Bitcoin have different goals. Although Ethereum is based on Bitcoin’s blockchain design, it intends to extend the capabilities of the Blockchain. Developers on Ethereum figured that they could use the Blockchain to build applications that go beyond money systems. While Bitcoin only focuses on payment systems, Ethereum aims to revolutionize other domains like the Internet, property transfers, and more.

Transaction: In Bitcoin, a block only records transactions' history. A BTC transaction includes the address of the sender and the receiver. It also contains their signatures, the time, and how much BTC spent. For Ethereum, besides the transactions' history, blocks also include the smart contract code, its storage, its recent state, and every users' balance.

Supply limit: Ether has no supply limit to date, while Bitcoin will cap at 21 million coins.

Average mining time: Ethereum average mining time is less than one minute against Bitcoin’s 10 minutes. What more, the Ethereum proof-of-work algorithm is less complicated than Bitcoin and encourages individuals to take part in the system. Ethereum uses the Etash algorithm to verify transactions on the network. Also, you cannot mine Ether using ASICs computers.

Market Cap: As the first-ever cryptocurrency, Bitcoin is still number one with a market cap of $146.8 billion. As of November 20, 2019, one BTC is worth $8,129.

Ethereum comes second with a market cap of $19.4 billion. As of November 20, 2019, one ETH costs $178.62.

​How Does it work

Ethereum is an open-source, blockchain-based platform that enables developers to create and distribute decentralized applications. The platform offers a system that can’t be controlled by anyone.

 In our society, many businesses and even online services are built on a centralized authority. A centralized system controlled by a single entity can be highly vulnerable to exterior attacks and the risk of downtime. Also, users of a centralized system of governance have to obey the rules enforced by hosting services like Google or YouTube; if not, theycan be subject to censorship. Moreover, central authorities require you to provide personal information to use their services. The consequences with those kinds of systems are that your data risk to get changed or lost in the mass.

Ethereum blockchain

Luckily, the Ethereum platform allows individuals to build decentralized apps using blockchain technology. It takes away the need for a third party for people who desire to develop their own apps. If you have a cool idea about a program that could bring value to your community, you can write your code and submit it to the Ethereum network. Ethereum runs on a blockchain called Blockchain 2.0, and all the apps built on it are publicly verifiable.

Ethereum blockchain uses proof of work algorithm to verify transactions. Blockchain is an ensemble of blocks linked together chronologically, each block containing a list of smart contracts or code snippets. Miners would then run the computation of the smart contracts, and once computers on the network have verified it, it will be added on the Blockchain.

Ethereum’s system is run by thousands of volunteers’ computers spread across the world, meaning that it can never go offline, and is difficult to hack. Anyone can download the Ethereum blockchain to his computer and participate in creating smart contracts and enforcing the rules of the system in exchange for ethers. Smart contracts dictate these rules.

Smart Contracts

Ethereum uses a coding language called “solidity” to write smart contracts. Contracts are a set of conditions (if) and actions (then). Developers on the network write the contract code for their new program and send it to the Ethereum platform to be executed. The system takes care of all the aspects of a smart contract, including enforcement, management, and performance. For example, as a landlord, you could set a new system that would lock out a tenant that fails to pay rent at a specific date. You will write your code and send it to the Ethereum network to be implemented.

Smart contracts are contractual agreements between multiple parties that will automatically activate once specific conditions are met. They are self-operating computer codes that execute automatically when triggered. Let say that you want to sell your house and avoid paying high commission fees to real estate agents and all the paperwork that comes with it. You can write a code that will trigger an action once someone purchases your property at a specific amount or under pre-set conditions. For example, the ownership of your house will be transferred to the new buyer when the prearranged amount of money is sent to the system.

Before a transaction or code is added to the Blockchain, it needs to be verified and validated by computers on the network. The operations on the Ethereum platform are checked and approved by thousands of computers in a process called mining. Nodes on the Ethereum platform compete to solve the proof-of-work algorithm to guarantee the validity of numerous transactions, thus create a new block. Once a miner adds a new block to the Ethereum blockchain, new ethers are generated; at the same time, new smart contracts are deployed on the network. In return, he will get rewarded with ether tokens.

Anyone can create and trigger smart contracts on Ethereum without any third-party interference, downtime, or censorship. However, you need to make sure that the code is implemented correctly and check that it is written perfectly with no bugs to avoid hackers.

Many functions can be pre-programmed in smart contracts and execute precisely as set by their creators. The code of a smart contract includes the terms and conditions pre-planned by both parties (sender and receiver), plus the information about the transaction. You need to remember that smart contracts are self-executing, meaning that they follow the rules to the letter. Whenever a smart contract is deployed on the network, it is immutable; it cannot be corrected or edited.


As mentioned above, Ethereum is a network of multiple computers working together to form a decentralized supercomputer. The supercomputer then executes the smart contracts.

Ethereum network has a native cryptocurrency that people on the network use to communicate and reward each other for services.The currency used on the Ethereum network is called Ether. The token is used as a transfer of value, to send and receive ether. Besides, developers use Ether tokens to create and trigger contracts.Creating a smart contract involves sending a transaction that contains the new app’s code and fees paid in ether.

Ether currency was created to incentivize developers on the network to keep it functional. To send a smart contract or request any other operations, you need to send a miners’ fee to encourage them to include it in a block. That fee is called gas. Developers or other Ethereum users have to reward nodes for their contribution to the Ethereum network, the same way Bitcoin miners are paid to verify transactions. The gas you pay goes to the miners who are using computing powers to keep the supercomputer running.

Gas is a measure of the unit used to determine how much work is needed to add a transaction to the Blockchain. There is a pre-defined amount of gas for each action you want to be executed. To determine your transaction fees, you need to multiply the amount of gas required for that particular transaction with the current gas price. For example, if person A needs to pay person B 10 ETH for his services, he would need to add gas money on top of the original amount for his transaction to go through. A basic transaction on the Ethereum platform requires at least 21,000 gas multiply by the gas price.

The transaction fees or gas prices depend on how long and how much computing power it will take to run your code. The more complex your transaction, the higher the gas price. Besides, gas price rises when the network is crowded.

As stated above, each transaction or smart contract that needs to be included on a block will take up a certain amount of gas. Therefore, whenever you want to send a transaction using ether, remember to add gas money for your operation to be executed. For instance, since many ICOs take place on the Ethereum platform when you want to invest in one, you will need to add gas money to encourage miners to pick up your transaction. When approved, your transaction will activate a contract that will send you new tokens in return.

As a developer who wants to create a Dapp, you will need to specify upfront how much gas you think your project is going to use, called the gas limit.

However, if you miscalculate the gas limit or write inefficient code, your deployedcontract risks to run out of gas and stop operating; as a result, your Dapp will stop mid-way, and you won’t receive any refund. This system highly motivates programmers to be attentive and keep their code optimized. On the other hand, if you overpay and the contract ends up using less gas, you will get refunded.

Again, if you don't include enough gas before sending your transaction, no miner will pick it up. Besides, the higher you are willing to pay for gas, the more miners will compete in running your code, and your transaction will quickly be added to the Blockchain.

​How can you use Ethereum

Ethereum aims to implement its core principles (transparency, trust, security, and efficiency) in different industries and businesses. The network enables individuals to create money managing apps, Decentralized Autonomous Organizations, and other apps involving money but requires additional information like property titles, records, insurance, etc. The Ethereum blockchain has the potential to revolutionize all industries running on established contractual practices such as insurance, bank, and software.

Ethereum’s smart contracts also enable safe and fast trading between multiple parties without an intermediary like trading or exchange platforms. Ethereum is also a platform utilized by ICOs to raise funds and launch their own cryptocurrencies.

What more, as an investor, you can buy ether in hopes of seeing its price rise on the market and make a profit.

You can get Ether by mining it on the network or by purchasing the coins on crypto exchanges like Coinbase, Binance, etc.

​Ethereum Price  Evolution

The Ethereum’s price mainly depends on the demand for the crypto, the higher the request, the higher the value.

  • ​When Ethereum was first listed on crypto exchanges (August 8, 2015), it traded at $2. The price remained slow for the rest of the year, and the crypto closed at $0.9.
  • ​The next year, Ethereum picked up its pace and reached $20.5 in mid-June. However, the DAO hack hit the network very hard as the price dropped dramatically under $13. By the end of the year 2016, ETH was trading at $8.
  • In 2017, Ethereum registered significant growth in popularity throughout the year. On December 22, 2017, one Ether was worth $840. In January 2018, Ethereum’s price reached an all-time high value of $1360. But, the prices started to drop and reached $380 in April.
  • Ethereum’s price rose again to $816 on May 6, 2018, but fell shortly after. Since then, the crypto kept a steady growth between $300 and $170.

​Ethereum Accounts And wallets


There are two types of accounts:

  • Externally Owned Account (EOA): EOAs are Ethereum’s basic accounts controlled by a private key. EOAs can be used to store and transfer ether, but also to create and deploy smart contracts on the network.
  • Contract Accounts are more complex. They don't have a private key, instead of contract accounts have a code associated with them. Contract accounts run on pre-defined codes that manage and trigger them to execute encoded rules. Contract accounts can transfer ether, create, and deploy smart contracts if they are programmed to do so. Their functionality is to hold and secure your coins, plus manage an ongoing smart contract. With a contract account, you can create all kinds of cool apps and build contract wallets. However, they require gas money to use.


To take part in the Ethereum network, you have to own an Ethereum wallet with ether tokens to communicate with other users. An Ethereum wallet provides its holder with a private key and a public address. The private key is a secret password that gives you control over your coins while people can use the public address to send you ether.Some wallets will enable you only to send ether between accounts.Others, named smart contract wallets, will allow you to create and trigger smart contracts.

Depending on your usage of the Ethereum platform, there are two types of clients/nodes:

  • Full nodes hold the entire Ethereum blockchain copy on their computer. Running a full node requires intensive storage memory and computation power. But, it also enables you to verify all the transactions yourself without relying on a third party for information. Although hard to operate, full nodes grant you full participation in how Ethereum runs. All full nodes users act as a smart contract wallet, meaning that they can deploy smart contracts on the network. Contract wallets have the unique ability to power smart contracts. They also include unique features such as two-factor authentication, social recovery, fraud alerts, emergency lockdown, personal black, and white lists, plus rate-limited withdrawals.You can run a full node through multiple programs such as Go Ethereum (Geth) and Mist for non-technical users.
  • Light nodes rely on third party full nodes to gain information on the Ethereum blockchain. Since they don’t hold the Blockchain's full copy, It requires less space and are easier to operate. But, light nodes can't create or trigger smart contracts; they can only secure and transfer ether tokens. Thus, if you are not interested in developing apps or programs, light nodes or wallets are your best choice. 

You can choose between software, hardware, and paper wallets:

  1. Software wallets enable you to store the private key in secured files where you can easily access them. Your software wallet can either be a web wallet (connected to a web browser), desktop, or mobile wallet.
  2. Hardware wallets store your private key on a physical device, and they are the most secure way to hold your coins. However, hardware wallets can be quite expensive; also, they can only send and receive ethers and other tokens.
  3. Paper wallets are a piece of a paper with the private key printed in them like a QR code.

Some of the most popular Ethereum wallets include the Ledger Nano S (hardware), Mist (Desktop), Metamask (desktop), MyEtherWallet (web, and paper wallet), Jaxx (mobile), etc.

​Ethereum Hard Fork

Ethereum smart contracts run on pre-defined codes written by a human, meaning that they are as good as the programmer who writes them. Miners on the supercomputer validate and implement the code as written by its creator and deploy it to the Blockchain. It means that it is up to you to verify many times your code for any error. Once approved and added to the Blockchain, your smart contract will be accessible by anyone. Unfortunately, when scammers detect any mistake in a code, they might exploit it. The only way to stop hackers from exploiting the error is to rewrite the underlying code. However, this process breaches the original blockchain consensus stating that once a block is added to the ledger, it becomes immutable and unchangeable.

One of Ethereum's original goals was to allow individuals to create DAOs, which are fully functional apps running on a pre-programmed set of rules without hierarchical management. DAOs aimed to create a decentralized venture capital fund to develop future Dapps. If investors wanted to participate in decentralized app funding, they would purchase DAO tokens for a specific amount of Ether. With DAO tokens, you would be an official actor in the DAO system, and you would have a voting proposal on how the app was going to operate.

Many programmers were using the DAO concept to raise capital for their new apps or charitable donations.In 2016, a particular decentralized autonomous organization named “The DAO”managed to raise a record $150 million in funding. However, on June 17, 2016, The DAO was hacked by an anonymous person and lost $50 million in etherdue to an error in the code. The hacker(s) was taking money from the DAO into the Child DAO, a system that mirrored the DAO’s structure.

This incident tarnished the reputation of Ethereum blockchain and the entire concept of DAOs. That day, the prices fell from $20 to $13. Fortunately, when developers spotted the error, the money was still in the child DAO. The debate that rose was to determine whether to update the Blockchain to save the funds or leave it as it is and protect the Blockchain immutable nature.

One group wanted to refund all the money that was taken by upgrading the whole system. Another group of anti-hard fork decided to remain in the original Blockchain. The new system was named Ethereum (ETH), while the old Blockchain was called Ethereum Classic (ETC). As of November 20, 2019, one ETC is worth $4.47.


Briefly, Ethereum is an open-source platform allowing users to create and run programs and execute smart contracts. Ethereum is another giant of the cryptocurrency ecosystem after Bitcoin. Some people see the Ethereum network as a platform for development, while others consider Ether as a wise investment opportunity.

Ethereum experienced rapid growth over the years, even though its price has had many ups and downs due to several challenges. However, according to specialists, the Ethereum price is expected to rise past its all-time high in the next five years, meaning that it's an excellent long-term investment opportunity. Shortly, ETH is expected to keep a steady price. Nonetheless, keep in mind that cryptocurrencies are a highly volatile market and that you should invest money you can afford to lose.

Despite being a young platform, Ethereum boasts an active and ever-growing community of developers. They keep working on new updates to improve the network and guarantee cheaper transaction fees. There are multiple successful apps built using the Ethereum blockchain, including Weifund, Etheria, Augur, Provenance, and more. Further, many companies are warming up to the idea of building enterprise software on the Ethereum smart contract platform such as JP Morgan Chase, Royal Bank of Scotland, IBM, Microsoft, Barclays, and many more.

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