Before we dive into what ETH is, let’s first touch on its brief history. In 2012, 17-year-old Vitalik Buterin was introduced to Bitcoin by his father and became interested in its technology. Vitalik began writing for Bitcoin Magazine and suggested improvements to the Bitcoin platform. When these improvements were not made, he decided to make his own Cryptocurrency instead. His idea was ETH, and it went live in 2015. Since it started, ETH’s price has gone up a lot and it now has a ‘market cap’ of 500 billion. Now that you know a brief history of ETH, we can dive into its definition.
What is ETH?
ETH is a Cryptocurrency that offers a way to use the power of the internet without trusting apps like Facebook, Google, or an online bank.
Apps like Facebook and Google collect and store user information in servers, meaning that user data is kept at an extremely small number of locations. This could pose a threat if one of these locations were hacked.
ETH works by removing the need to trust apps with private information through decentralization using Blockchain technology.
All About Blockchain
ETH’s version of the internet is one where servers and clouds are replaced with a network of systems called nodes. Nodes store and maintain a shared database called a Blockchain.
There are thousands of nodes in the network storing the entire Blockchain. The more nodes there are, the safer the network and its data become. The information that a person enters into the record can only be controlled by them, it is not stored on their computer or in a central server. It is stored across the entire network of nodes.
The information held on the Blockchain is verified by consensus, meaning that more than half of the nodes must agree that information is correct before it is allowed onto the Blockchain.
Hacking this kind of system is nearly impossible, as you need to control more than half of the network to force a consensus. Even if you did control more than half of the network, it would cost you too much money to complete the attack that it would not be worth it.
A Deeper Dive Into ETH: Blockchain 2.0 and Its Uses
The ETH Blockchain, often referred to as Blockchain 2.0, uses similar technology to Bitcoin, but it is more advanced. It can do much more than the Bitcoin Blockchain and does so in two main ways.
The ETH Blockchain is designed so that transactions can only take place when certain conditions are met. The rules deciding these conditions are called ‘smart contracts.”
Once one of these contracts is written, it cannot be changed. This is why they are called ‘trustless’ transactions. You do not need to trust individuals on the network – if the conditions of the contract are not met, it will not happen.
Decentralized applications, or dApps for short, are applications that do not run on a traditional central server. Instead, they run on a Blockchain, using it to decentralize its server. dApps are at the core of ETH’s design.
How Does ETH Work?
Ether is the currency of ETH. Oftentimes, the two are confused, but it is simpler if you try to remember that ETH is the system and Ether is its currency.
If you want to get anything done on the system, you will need some Ether. Ether fuels the ETH system, and it is often referred to as ‘gas’ for this reason. Each transaction on ETH needs a certain amount of ‘gas’ to get the job done. The bigger the job, the more gas you will need.
Ether is the digital fuel for the automated smart contracts of the ETH network. There is no cap on how much Ether can exist and Ether-fueled smart transactions take seconds.
Where to Buy ETH
You can buy ETH from three main sources:
Brokerages are coin exchanges like Coinbase, which buy and sell ETH for a fee. They are simple to use, but can be expensive. You can use them to buy ETH with fiat currency (USD, EUR, etc.) using a credit/debit card or with a bank transfer.
Trading platforms like Cex.io connect the buyer and the seller in exchange by using a middleman (Cex). This is what traders use to trade one cryptocurrency for another.
Peer-to-peer platforms like LocalEthereum allow buyers and sellers to contact each other directly to negotiate prices. This option is riskier than the other two as you are trading directly with someone you do not know. There is no middleman, so you do not pay any fees, and you can pay using cash.
Another great option would be purchasing Ether coins via Simplex, a fintech company aimed at providing transaction safety and fluidity. Here, you can buy Ether with fiat money using a credit/debit card.
Now that you know what ETH is, how it works, and where to buy it, you are ready to start your ETH journey! Good luck!