Ethereum: everything you need to know about ETH

What is Ethereum?

What is Ethereum? Ethereum (ETH) is one of the largest and most well-known cryptocurrencies in the world. It was launched in 2015 by developer Vitalik Buterin and has since experienced tremendous growth. Ethereum is unique because it is not just a cryptocurrency but also a decentralized platform for developing decentralized applications (dApps) and smart contracts. Decentralized means it is not controlled by a company, institution, or other authority. Due to its combination of a cryptocurrency and a digital platform, Ethereum has the potential to completely transform how we conduct business and exchange value on the internet.

How does Ethereum work?

Ethereum operates as an open-source blockchain platform designed to support dApps. The currency is often mentioned alongside Bitcoin but offers more functionality because the platform heavily relies on smart contracts. Ethereum is used as a platform on which developers can build their own dApps and deploy them through smart contracts. Instead of merely executing transactions like Bitcoin, users can perform much more complex actions with Ethereum, such as issuing tokens, setting up decentralized exchanges, and building intricate decentralized applications. Ethereum uses its own cryptocurrency called Ether (ETH) as a means of conducting transactions and covering network fees. 

Proof-of-Work and Proof-of-Stake

In the past, Ethereum operated on a Proof-of-Work mechanism before transitioning to the more energy-efficient Proof-of-Stake in September 2022. What do these terms mean? 

Proof-of-work is a mechanism that allows a blockchain network to reach consensus, meaning agreement on account balances and the order of transactions. This prevents users from "double-spending" their coins and makes the chain highly resistant to attacks or manipulation. 

Proof-of-stake is another type of consensus mechanism used by blockchains to determine the network's state. In proof-of-work, miners prove their stake by expending energy. In proof-of-stake, validators explicitly stake capital to support the network. The staked cryptocurrency (in Ethereum, this is Ether) acts as collateral that can be destroyed if a validator behaves dishonestly or lazily. Validators are responsible for verifying that new blocks added to the network are valid. They may also occasionally create and add new blocks themselves. 

Proof-of-stake comes with several improvements compared to the proof-of-work system: 

• Energy-efficient: No additional computers are needed to provide computational power. 
• No special hardware required, removing a potential barrier to participation. 
• Provides financial incentives and penalties to encourage participants to act honestly and responsibly. 

The ETH token

The ETH token is Ethereum's native cryptocurrency and serves as the fuel for the Ethereum network. ETH, or "Ether," is used for executing transactions and activating smart contracts. Creating new tokens and implementing smart contracts also requires a certain amount of Ether. The total supply of Ether is not capped, but there is an annual inflation rate to maintain and incentivize the network. 

The Technology Behind ETH

The technology behind ETH consists of a decentralized open-source blockchain network designed to enable smart contracts and dApps. Ethereum features a virtual machine on the network, known as the Ethereum Virtual Machine (EVM). The EVM is designed to execute code in the Solidity programming language, which is used to write smart contracts. 

Similar to how a car requires fuel to operate, Ethereum requires "gas" to run applications on the network. To execute a transaction within the Ethereum network, a user must make a payment. The intermediate monetary value is referred to as gas. On the Ethereum network, gas is a unit that measures the computational power required to execute a smart contract or transaction. Therefore, when performing a transaction that updates the blockchain, you must pay gas, and that gas costs ethers. 

In Ethereum, transaction fees are calculated based on a formula: each transaction has gas associated with it, along with a corresponding gas price. Transaction fees are equal to the amount of gas required to execute a transaction multiplied by the gas price. "Gas limit" refers to the amount of gas used for computation and the amount of ether a user must pay for the gas. 

The Ethereum network is managed by the Ethereum Foundation, a non-profit organization focused on the development and support of Ethereum technology. In addition to the Ethereum Foundation, numerous developers and companies contribute to the ecosystem's development and the creation of dApps on the network. 

The Ethereum ecosystem

The Ethereum ecosystem is a vibrant and continually growing network of blockchain technology and dApps running on the Ethereum network. Developers can build and deploy their own applications on the platform, while users can securely conduct transactions using smart contracts. 

DeFi and NFTs

Ethereum is known for its rich diversity of applications, including many DeFi (Decentralized Finance) applications and NFTs (Non-Fungible Tokens). 

DeFi applications are digital financial applications. They are open and programmable, operate without central authority, and allow developers to offer new solutions for payments, investments, loans, and trading. Through smart contracts and distributed systems, developers on Ethereum can easily build secure decentralized financial applications. 

With DeFi applications, users can: 

• Lend and borrow cryptocurrencies between individuals. 
• Earn returns on cryptocurrency holdings. 
• Facilitate trading through decentralized exchanges. 

NFTs are digital assets that are unique and non-fungible. Unlike any random Bitcoin that can be exchanged for another Bitcoin, NFTs carry specific and unique metadata that sets them apart from other tokens. This makes NFTs suitable for capturing unique digital ownership, such as digital artworks, collectibles, and in-game items. NFTs can be traded on specialized marketplaces. The value of an NFT is determined by its rarity, authenticity, and history. 

Benefits of Ethereum

Ethereum is a major and highly popular cryptocurrency in the crypto market. What are the key reasons to invest in ETH? 

• Established and reliable network. 
• Fast transactions. 
• Open-source resources for developers. 
• High level of security. 
• Backed by major financial institutions, including ING. 

Drawbacks of Ethereum

While there's much to gain with crypto, it's still important to exercise caution. What should you consider when investing in Ethereum? 

• The network hosts many currencies and applications, which gradually increases the pressure on the network. 
• A large market cap could potentially lead to slower long-term growth. 
• Competitive networks are beginning to match Ethereum in various aspects. 

Who is the founder of Ethereum?

Ethereum was founded by Vitalik Buterin, a young developer and entrepreneur from Canada. Vitalik had an interest in the possibilities of blockchain technology and had prior experience writing code for Bitcoin. In 2013, he published the Ethereum whitepaper, outlining the fundamental principles of the Ethereum platform. 

Vitalik played a key role in the creation and development of Ethereum and remains actively involved in the project. He is respected within the cryptocurrency and blockchain community, and his vision and insights have had a significant influence on the industry's development. 

Price forecasts

In 2026 experts expect a minimal price of €10,405.06 and a minimal price of €34,371.79 in 2031.

Frequently asked questions