Among the myriad of cryptocurrencies out there, one name stands tall: Ethereum. But what exactly is Ethereum? Don’t worry, because I’m going to take you through a beginners guide to Ethereum.
In this complete beginners guide to Ethereum, we’ll unravel the intricacies of Ethereum, step by step, ensuring that you emerge as a well-informed enthusiast ready to navigate this brave new world.
So, fasten your seatbelts and get ready to dive into the captivating world of decentralized innovation!
It’s more than just a digital currency; it’s a revolutionary platform that has sparked a new era of possibilities.
Now, you may be wondering, “But isn’t Bitcoin the reigning king of cryptocurrencies?”
Ah, you’re in for a delightful surprise!
While Bitcoin paved the way for decentralized currencies, Ethereum took the concept to a whole new level.
It introduced the concept of smart contracts, enabling developers to build decentralized applications (dApps) on its platform.
This game-changing innovation opened the floodgates to a universe of possibilities beyond mere financial transactions.
Ethereum isn’t just a playground for developers and tech wizards; it’s a thriving ecosystem that fosters creativity, collaboration, and wealth creation.
From crowdfunding to decentralized finance (DeFi), from non-fungible tokens (NFTs) to digital art, Ethereum has become a hotbed of innovation, attracting brilliant minds and investors alike.
So, whether you’re an aspiring crypto investor, a tech enthusiast, or simply curious about the future of finance, Ethereum has something to captivate you.
What Exactly is Ethereum?
First things first, Ethereum is a cryptocurrency, just like Bitcoin. However, it goes beyond being a mere digital currency.
Ethereum is a decentralized platform that enables the creation and execution of smart contracts and decentralized applications, also known as dApps.
At its core, Ethereum is a blockchain-based technology.
A blockchain is a distributed ledger that records and verifies transactions across multiple computers, ensuring transparency, security, and immutability.
However, Ethereum’s blockchain goes beyond simple transaction records.
It incorporates a Turing-complete programming language, which means it can execute any algorithm or application logic, making it highly versatile.
The primary currency of the Ethereum network is called Ether (ETH).
Ether is used for two main purposes: as a medium of exchange, similar to traditional cryptocurrencies, and as “gas” to power and execute transactions and smart contracts on the Ethereum network.
One of the key innovations of Ethereum is the concept of smart contracts.
Smart contracts are self-executing agreements with predefined rules and conditions written into code. They automatically execute and enforce the terms of the contract once the specified conditions are met.
Think of a traditional contract—a legally binding agreement that requires intermediaries like lawyers or banks to ensure its enforcement.
With Ethereum, smart contracts automate this process.
Once the predefined conditions in the code are met, the contract executes itself without the need for intermediaries.
Smart contracts remove the need for intermediaries, such as lawyers or banks, and enable trustless, transparent, and efficient interactions between parties.
Ethereum also allows for the development and deployment of decentralized applications, or dApps.
These are applications that run on the Ethereum blockchain, leveraging its decentralized and secure infrastructure.
dApps can be anything from financial applications, games, social networks, supply chain systems, and more.
They inherit the benefits of blockchain technology, including transparency, security, and censorship resistance.
Who is The Founder of Ethereum?
The founder of Ethereum is Vitalik Buterin.
He is a Russian-Canadian programmer and writer who conceptualized and co-founded Ethereum.
Buterin first became interested in cryptocurrencies and blockchain technology when he learned about Bitcoin in 2011.
He saw the potential for blockchain technology to be used for more than just digital currency transactions and envisioned a platform that could support the development of decentralized applications and smart contracts.
What Year was Ethereum Created
Ethereum, the popular blockchain platform, was created in 2015.
It was conceptualized by Vitalik Buterin, and its development involved a team of developers from various parts of the world.
Ethereum’s initial whitepaper, outlining its design and principles, was released by Buterin in late 2013.
The network’s genesis block, the first block in the Ethereum blockchain, was mined on July 30, 2015, marking the official creation of the Ethereum network.
Since then, Buterin has played a significant role in guiding the development and growth of Ethereum, advocating for its potential and promoting its use cases.
Where to see Live Ethereum Price
To see the live price of Ethereum (ETH), you can refer to various websites, or use dedicated cryptocurrency price tracking apps.
Here are two (2) popular options:
1. CoinMarketCap (coinmarketcap.com) – CoinMarketCap is one of the most widely used platforms for tracking cryptocurrency prices.
It provides real-time price data, market capitalization, trading volume, and other relevant information for Ethereum and various other cryptocurrencies.
2. CoinGecko (coingecko.com) – CoinGecko is another popular crypto data platform that offers real-time prices, market charts, and comprehensive information about Ethereum and other cryptocurrencies.
It provides a user-friendly interface and a range of useful features.
How is New Ethereum Created
In the past, new Ethereum was created through a process called mining, similar to Bitcoin.
However, Ethereum has transitioned from a Proof of Work (PoW) consensus mechanism to a Proof of Stake (PoS) mechanism.
This transition is known as Ethereum 2.0.
Proof of Work (PoW)
Under the PoW mechanism, new Ethereum was created through a process called mining.
Miners compete to solve complex mathematical problems using computational power.
When a miner successfully solves a problem, they add a new block of transactions to the Ethereum blockchain and are rewarded with a certain amount of newly minted Ether.
This process requires significant computational resources and energy consumption.
Proof of Stake (PoS)
With the transition to Ethereum 2.0, Ethereum moved to a PoS consensus mechanism.
In PoS, instead of miners, validators participate in the consensus process.
Validators are chosen to create new blocks based on the number of Ether they hold and are willing to “stake” as collateral.
Validators lock up their Ether as a security deposit, which can be forfeited if they attempt to act maliciously or against the network’s interests.
In the PoS mechanism, new Ethereum is not created through mining.
Instead, validators are rewarded with newly minted Ether as an incentive for their participation in block validation and securing the network.
Read More: What is Crypto Staking and How Does It Work
Key Components of Ethereum
These components are vital to comprehending the inner workings and functionalities of the Ethereum platform.
So, let’s explore Ethereum’s native currency, Ether, the concept of smart contracts, and the intriguing notion of gas and fees:
1. Ether (ETH)
At the heart of Ethereum is its native cryptocurrency called Ether.
While Bitcoin’s primary function is to serve as digital money, Ether serves a dual purpose within the Ethereum ecosystem.
Firstly, it acts as a means of exchange, enabling transactions on the network.
Secondly, Ether is used to power and incentivize the execution of smart contracts and decentralized applications.
Think of Ether as the fuel that drives the Ethereum network.
2. Smart Contracts
Smart contracts are a groundbreaking feature of Ethereum.
These self-executing contracts are encoded with predefined conditions, rules, and terms that automatically execute once those conditions are met.
Smart contracts eliminate the need for intermediaries, providing trust, transparency, and efficiency.
They can be utilized for various applications, from managing financial agreements to facilitating decentralized governance and much more.
Smart contracts are written in a programming language called Solidity and are stored on the Ethereum blockchain.
3. Gas and Fees
To execute transactions and run smart contracts on the Ethereum network, users need to pay for computational resources.
This brings us to the concept of “gas.”
Gas is a unit of measurement that quantifies the computational effort required to perform specific operations on the Ethereum network.
Each operation in a smart contract or transaction consumes a certain amount of gas.
The gas acts as a safeguard against spam and misuse of the network, ensuring that resources are allocated fairly.
Consequently, users must pay fees, denominated in Ether, to cover the cost of gas and incentivize validators who validate and include transactions in blocks.
Key Differences between Ethereum and Bitcoin
Ethereum and Bitcoin are both prominent cryptocurrencies, but they have distinct differences in terms of their purpose, technology, and functionality.
Here are some key differences between Ethereum and Bitcoin:
Bitcoin was primarily designed as a digital currency and a decentralized payment system. Its main objective is to serve as a store of value and enable peer-to-peer transactions without the need for intermediaries like banks.
Ethereum, on the other hand, aims to provide a platform for building decentralized applications (dApps) and executing smart contracts.
While it has its native cryptocurrency (Ether or ETH), Ethereum goes beyond transactions and enables developers to create programmable applications and execute self-enforcing agreements through smart contracts.
2. Blockchain Functionality
Bitcoin and Ethereum have different approaches to blockchain functionality.
Bitcoin’s blockchain is focused on securely recording and verifying transactions. It maintains a decentralized ledger of all Bitcoin transactions, ensuring transparency and security through the consensus mechanism of Proof of Work (PoW).
The primary goal of Bitcoin’s blockchain is to enable secure peer-to-peer transactions and store transactional data.
Ethereum’s blockchain, on the other hand, is more versatile.
It not only records transactions but also supports the execution of smart contracts.
Ethereum’s blockchain incorporates a Turing-complete programming language, enabling developers to build decentralized applications and execute complex computations within the network itself.
It provides a platform for developers to deploy and interact with smart contracts and build decentralized applications.
3. Smart Contracts and Decentralized Applications
Bitcoin does not have built-in support for smart contracts.
While it is possible to build simple scripts and add certain conditions to Bitcoin transactions, the scripting language is limited compared to Ethereum.
Bitcoin’s scripting language primarily focuses on transaction outputs and unlocking conditions.
Ethereum, however, offers robust and powerful smart contract functionality.
It allows developers to create self-executing contracts with programmable conditions and actions.
Smart contracts on Ethereum enable a wide range of decentralized applications, such as decentralized finance (DeFi) protocols, non-fungible token (NFT) marketplaces, and decentralized exchanges.
4. Development of Community and Ecosystem
Both Bitcoin and Ethereum have vibrant development communities and ecosystems, but they differ in focus.
Bitcoin’s development community primarily focuses on maintaining and improving the Bitcoin protocol, scalability solutions, and enhancing its use as a digital currency.
It has a strong emphasis on security, decentralization, and censorship resistance.
Ethereum’s development community is more diverse, with a focus on building decentralized applications, expanding the capabilities of smart contracts, and exploring the potential of blockchain technology beyond transactions.
Ethereum has a wide range of development tools, frameworks, and libraries that support the creation of dApps.
5. Monetary Policy
Bitcoin and Ethereum have different monetary policies and issuance mechanisms.
Bitcoin has a capped supply, with a maximum of 21 million coins that will ever be created.
This limited supply is halved approximately every four years through a process called “Bitcoin halving.” As a result, Bitcoin is often considered a deflationary asset.
Ethereum, on the other hand, currently does not have a capped supply.
It also transitioned from Proof of Work (PoW) to Proof of Stake (PoS) with Ethereum 2.0.
The PoS mechanism introduced staking.
Getting Started with Ethereum
Now that you have a good grasp of Ethereum and its ecosystem, to get started with buying and storing Ether, you should follow the steps below:
- Choose a reputable crypto exchange that supports Ethereum:
- Create an account on the chosen exchange:
After you choose a crypto exchange, create your account and complete the necessary verification process.
- Deposit funds into your exchange account:
This can usually be done through bank transfers, credit/debit cards, other supported payment methods, or receiving Ether from someone who owns it already.
Once your purchase is complete, you can store or trade your Ether for profits.
NOTE: You don’t have to buy 1 full Ethereum, you can buy as little as $100 worth of Ether.
We have explored the depths of this revolutionary digital currency and gained a deeper understanding of its significance in the world of blockchain technology.
Ethereum, with its smart contracts and decentralized applications, has truly transformed the way we perceive and interact with the digital realm.
It has opened doors to endless possibilities, empowering individuals and businesses alike to create, innovate, and thrive.
Now armed with knowledge about Ethereum’s origins, its robust network, and the potential it holds for the future, you are well-equipped to dive deeper into this captivating world.
Whether you’re an aspiring investor, a budding developer, or simply a curious mind, Ethereum offers an ocean of opportunities to explore and conquer.
As the wise Ethereum enthusiasts say, “The only limit is your imagination.” So, embrace the power of Ethereum, and let it unlock a world of infinite possibilities.
Thank you for reading our “Beginners Guide to Ethereum” I hope you found it helpful.
To help you get better with Bitcoin and cryptocurrencies we have prepared additional resources below which we believe you will find useful.
You can also interact with us in the comment section, tell us what you think about the post, and suggest any topic you want us to cover NEXT.
- What is Crypto Staking and How Does It Work
- What Exactly is Bitcoin and How Does it Work
- How Bitcoin is Different from Money
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- How to Start Trading Cryptocurrencies as A Beginner
IMPORTANT; you must never send money to anyone you meet online asking to help you invest in cryptocurrency. They are scammers. Crypto is easy, and you can do it all by yourself.
The information presented here should not be used as the sole basis of any investment decisions, nor should it be construed as financial, tax, legal, or accounting advice. I will also advise that you invest in cryptocurrency only what you are comfortable living without, at least temporarily.