Ethereum is a blockchain-powered platform best known for its native cryptocurrency, called ether, ETH, or simply ethereum. The distributed nature of blockchain technology is what makes the Ethereum platform secure, and this security allows ETH to accumulate value.
A Brief History of Ethereum
Vitalik Buterin, credited with originally thinking up the Ethereum concept, published a white paper introducing Ethereum in 2013. The Ethereum platform was launched in 2015 by Buterin and Joe Lyubin, founder of blockchain software company ConsenSys. The founders of Ethereum were among the first to appreciate the full potential of blockchain technology beyond simply enabling the secure trading of virtual currency (cryptocurrencies).
A notable event in Ethereum history is the split of Ethereum and Ethereum Classic. In 2016, a group of network participants took control of the majority of the Ethereum blockchain to steal more than $50 million worth of ether, which was used to build a project called The DAO.
The group's success was attributed to the involvement of a third-party developer for the new project. While most of the Ethereum community chose to reverse the theft by invalidating the existing Ethereum blockchain and adopting a blockchain with a revised history, a portion of the community chose to keep the original version of the Ethereum blockchain. The unmodified version of Ethereum was permanently forked to become the cryptocurrency Ethereum Classic, or "ETC".
Since Ethereum's launch, ether has become the second-largest cryptocurrency by market cap. As of 2022, it was surpassed only by Bitcoin.
How does Ethereum work?
Ethereum, like other cryptocurrencies, uses blockchain technology. Imagine a very long chain of blocks linked together, with all the information about each block known to the members of the blockchain network. With every member of the network having the same knowledge of the blockchain, functioning like an electronic ledger, a distributed consensus on the status of the blockchain can be created and maintained.
Blockchain technology creates a distributed consensus around the Ethereum network. New blocks are added to the very long Ethereum chain to process Ethereum transactions and mint new ether coins, or to execute smart contracts for Ethereum dApps (decentralized applications).
A vast network of computers around the world maintains the Ethereum blockchain, and the network requires majority consensus for any changes to the blockchain. An individual group of network participants would need to control the majority of the Ethereum platform’s computing power (a task considered formidable, if not impossible) to successfully manipulate the Ethereum blockchain.
The Ethereum platform can support many more applications than ETH and other cryptocurrencies. Users of the network can create, publish, monetize, and use a wide range of applications on the Ethereum platform and can use ETH or other cryptocurrencies as payment.
How can I buy Ethereum?
Investors can use one of many cryptocurrency exchanges to buy and sell ether. Ethereum is supported by dedicated crypto exchanges, including Coinbase, Kraken, Gemini, and Binance, plus brokerages like Robinhood.
How does Ethereum make money?
Ethereum is not a centralized organization that makes money. The miners and assessors who participate in the operation of the Ethereum network, usually by mining, earn rewards in ether for their contributions.
Ethereum vs. Bitcoin
Ethereum is often compared to Bitcoin. While the two cryptocurrencies share similarities, potential investors should be aware of some important differences.
Ethereum is described as the “world’s most programmable blockchain,” positioning itself as a programmable electronic network with multiple applications. Bitcoin’s blockchain, on the other hand, was created solely to support the bitcoin cryptocurrency.
Ethereum isn’t just used as a digital currency. Anything you own can be represented, traded, and used as non-fungible tokens (NFTs). You can tokenize art and automatically receive royalties every time it’s resold. Or use a token for something you own to get a loan. The possibilities are growing all the time.