What is Ethereum? The power behind ETH popularity
Being among the earliest projects built on blockchain technology, Ethereum is one of the most successful projects in the crypto industry.
But what is Ethereum exactly and why has it become one of the most prominent projects in the crypto space? In this article, we answer this and many more questions that will help you understand the reasons behind Ethereum’s rapid growth and success.
Table of contents
- What is Ethereum?
- Understanding Ethereum’s infrastructure
- Ethereum’s payment network
- Ethereum & the community behind it
- Upcoming developments and their potential impact
- Fundamentals are the key driver of ETH popularity
- How to buy ETH in a fast and easy way
- Wrapping up
- Frequently Asked Questions
What is Ethereum?
Ethereum is a blockchain network that allows its participants to build their very own decentralized applications (also known as dApps). By doing so, people are able to connect directly with one another, removing the need of a middleman, and paving the way towards a truly decentralized internet.
Here is Ethereum’s founder, Vitalik Buterin, explaining the basics of Ethereum:
Understanding Ethereum’s infrastructure
Decentralized applications are built by using a specific coding language known as Solidity. This programming language is able to create automated contracts that act as the foundation of all decentralized applications. These so called “smart contracts” contain a predetermined set of conditions that, once fulfilled, trigger specific actions. Let us give an example:
When you make a contract at your local gym, you agree to pay a certain amount of money each month to use the equipment of the facility. If you pay $100 in the first week of the month (conditions), then you can continue working out at the gym (action).
Now, a typical contract has many variables that may affect the outcome of the process – enforcement, management, performance, timing, and more. Smart contracts take care of all these aspects by completely automating the process.
For example, if the owner of your gym has a smart contract to collect your monthly payment, he doesn’t need to actively walk up to you and request a payment. Instead, the contract knows if the conditions are met:
- If a payment is made, you will be able to pass the reception desk and enter the facility.
- If a payment is not made, you will not be able to pass through the reception.
Ethereum’s payment network
We have already established that Ethereum is not a currency like Bitcoin. Instead, it is the most popular infrastructure for running decentralized applications worldwide.
That being said, the platform is also used as a peer to peer payment network, and this is where it’s cryptocurrency comes in.
Ethereum’s ecosystem is fueled by tokens known as Ethers or ETH. The digital currency incentivizes the network and is used to pay the necessary fees when making transactions.
Ethereum & the community behind it
The Ethereum community consists of thousands of cryptocurrency enthusiasts, developers, tech innovators and HODLERs.
- If you wish to have a look at all the available online Ethereum communities, as well as community events and meetups, make sure you check this page.
- If you are a developer and want to build a project on Ethereum, consider participating in one of the available hackathons near you.
- Check the Ethereum Alliance website, to find out more about the network’s partnerships.
Upcoming developments and their potential impact
One of the most awaited developments in the Ethereum network is the project’s migration from PoW (Proof of Work) consensus to PoS (Proof of Stake). The upgrade that has been under development since 2016 will allow users with 32+ ETH in their wallet to stake their coins and earn passive income, as well as participate in the ecosystem’s decision making processes. Additionally, the upgrade will also introduce shard chains to the network.
At the time of this writing, the Ethereum network is testing ETH 2.0’s phase 0, and you can get involved in the testing process if you wish to do so.
Fundamentals are the key driver of ETH popularity
Naturally, if you are looking to understand what is Ethereum, you are probably keen to learn more about its past price action, and what the token’s future may look like. Let’s have a quick look at ETH’s performance within 2020:
Ethereum seems to be moving within a positive growth trajectory when looking at the tops and bottoms of the 1-day chart. While the cryptocurrency is slowly on track to a price tag of $500, there are three points we should briefly touch upon:
- The cryptocurrency made a nearly 100% recovery over the first two months of 2020, only to lose all of its gains within a week, due to the pandemic-related crash. In just one week, Ethereum dropped more than 60%.
- As the cryptocurrency starts recovering from the pandemic-related drop, the markets are slowly starting to become more accustomed to the concept of DeFi. The popularity of Decentralized Exchanges, paired with the increased utility of Ethereum, causes a large spike in the price of Ether, and the price reaches a local top of $475.
- While the price entered a consolidation period shortly after its local peak, we can see exponential growth starting to build up when looking at its higher bottoms. This information could indicate that we are about to experience a new bull run, the catalyst of which could very well be the release of ETH 2.0.
Is it worth buying ETH now?
We recently made an Ethereum price prediction and gave a few pointers with regards to the coin’s future. To summarize our thoughts on Ethereum’s potential, we can confidently say that the best is yet to come. As the cryptocurrency continues to become increasingly important in the space and hype shows no signs of slowing down, this could be a great moment to invest in Ethereum.
How to buy ETH in a fast and easy way
Buying Ether is very simple. The guide below offers a simple explanation on how the process works:
1st Step: Create an Ethereum wallet
When you choose to buy Ethereum from an exchange or receive it from another user, you will need to provide an address to indicate where you wish the funds to be sent. These addresses can be found in cryptocurrency wallets.
There are many different options when it comes to Ethereum (ETH) wallets, and they can all be used for coin storage:
- If you wish to use a mobile wallet (phone application), consider using Jaxx.
- When it comes to online wallets, you can use the Metamask Chrome extension (also downloadable as a mobile app).
- If you’re more into desktop wallets, the best option is Atomic wallet.
- As far as hardware wallets are concerned, our favorite option is the Ledger Nano S.
- Finally, you can also use MyEtherWallet; a non-custodial, open-source wallet option.
2nd Step: Head over to Paybis and start a new transaction
As soon as you create your wallet, visit Paybis to buy Ethereum. Register for a new account and make sure you complete the verification process, which takes less than 5 minutes to go through.
- Select the payment method and currency you wish to use for your purchase from the drop-down menu and indicate how much money you want to spend.
- As soon as you enter the amount you wish to spend (on the left box) you will see your expected payout (on the right box). If Ethereum is not selected, make sure you choose it from the drop-down menu.
- When ready to start a transaction, click on “Buy Ethereum”.
- We selected Credit/Debit Card as our payment method since all new users receive one commission-free transaction when they sign up to the platform.
5. At this point, you will be asked to provide your Ethereum (ETH) address. Head over to your private wallet, copy your public address, and paste it in the selection box.
6. As soon as your wallet is entered, click on “Continue”. Note that, if you have not yet verified your account, you will now need to go through the verification process. For verified users, this action will automatically take you to the payment page.
3rd Step: Make a payment and receive your coins
7. As soon as you land on the payment page, you will be prompted to enter the details of your card and complete your payment. Note that, for each payment method, this step might look slightly different, since different information might be needed.
8. When ready to complete your payment, click on “Continue” to finalize your order.
And that’s it. As soon as Paybis receives your payment, you will automatically receive the ETH tokens in your wallet. If your wallet does not depict the value of your newly acquired coins, make sure to use our website to keep track of the Ethereum price.
After reading this guide, you should know why Ethereum is a great opportunity both for investors and for developers. As we are slowly moving into a fully decentralized future, we expect to see a growth in decentralized applications and Ethereum’s potential.
While we are certainly on a good track, we do believe that it might still take a few years before Ethereum becomes a household name and revolutionizes the internet.
Frequently Asked Questions
If you wish to know more about Ethereum’s background and performance, make sure you take a look at the questions and answers below.
What is Ethereum used for?
Ethereum is used for three main purposes:
- It allows participants of the ecosystem to transfer value between each other, using smart contracts. In other words, Ether removes the element of trust when it comes to transactions with unknown parties.
- Blockchain developers are able to build decentralized applications (dApps). By acting as the foundation for such technologies, Ethereum becomes essential for the future of cryptocurrency.
- It allows anyone to create their own Ethereum tokens, including ERC-20, ERC-223, ERC-721, and ERC-777.
Bitcoin vs Ethereum – What is the difference?
Bitcoin and Ethereum are both decentralized cryptocurrencies that can be exchanged between individuals. However, the two projects have their own unique differences:
- Bitcoin’s primary purpose is to act as a decentralized payment system. Ethereum’s primary purpose is to help developers build decentralized applications on the blockchain.
- Bitcoin has a fixed supply of coins (21.000.000). Ethereum has a flexible supply of coins.
- Bitcoin’s consensus mechanism relies on Proof of Work. While, at the time of this writing, Ether is a PoW coin as well, it will soon migrate to a Proof of Stake (PoS) consensus protocol.
- Bitcoin’s founder is anonymous. Ethereum’s founder is Vitalik Buterin. This information constitutes Bitcoin as the only truly decentralized cryptocurrency.
How much is Ethereum worth?
Ethereum’s value is constantly changing. At the time of this writing, ETH is valued at just over $400. However, when looking at its historical performance, we can get more information on its price action.
- Its all-time high price was $1400, a figure that was reached on January 13th 2018.
- When looking at Ethereum’s peak price against Bitcoin, it’s all time high was reached in June 2017 (1 ETH = 0,145 BTC).
- ETH has held the $400 price levels for only 9 months since its creation (November 2017 – July 2018).
What is Ethereum Classic?
To understand Ethereum Classic, we need to look back at Ethereum’s history. One of the most ambitious undertakings in the early days of the Ethereum ecosystem was the formation of DAO (Decentralized Autonomous Organizations). In short, DAO was a smart contract that aimed to fund news decentralized applications based on community voting. Back in June 2016, the DAO smart contract got hacked resulting in over $50 million of lost funds and loss of community trust. To compromise for the loss and refund those affected from the DAO attack, Ethereum underwent a hard fork, splitting the network into Ethereum (the new blockchain that refunded DAO coin holders) and Ethereum Classic (the original Ethereum blockchain). The split is, therefore, more of an ideological battle, and Ethereum Classic is simply the “original” version of Ethereum.
What does Ethereum’s future look like?
The future of Ethereum looks bright, and we expect to see ETH grow in value. There are several reasons for that:
- The Ethereum network is close to releasing its upgrade to ETH 2.0, allowing users to stake Ether and earn passive income.
- The crypto industry is enriched with new Ethereum-based projects on a daily basis. This increases the importance of Ether as a foundational part of the industry’s future.
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