Learn Cryptocurrency
14 Jan 2021

What is Ethereum? Everything You Need To know

CoinSwitch Kuber

Ethereum is a blockchain platform with its own Cryptocurrency, called Ether (ETH) or Ethereum. Ethereum stands out among other cryptocurrencies as it is intended to be much more than simply a medium of exchange or a store of value like bitcoin. 

Like all cryptocurrencies, Ethereum works based on a blockchain network. The Ethereum blockchain enables developers to build and publish Smart Contracts and distributed applications (dApps). We’ll get into Smart Contracts and (dApps) later in the article. 

History of Ethereum (ETH)

The co-founder, perhaps the most essential person behind Ethereum, is Vitalik Buterin, a cryptocurrency visionary. Buterin wrote the whitepaper for Ethereum in 2013 when he was just 19 years old.

Ethereum has come a long way since its inception. Ethereum was launched in July 2015 by a small group of blockchain enthusiasts. Today, Ethereum is the second most popular Cryptocurrency after Bitcoin. It is also the second-largest Cryptocurrency in terms of market capitalization.

How Does Ethereum Work?

The programming language used for developing smart contracts and building decentralized applications (DApps) is none other than solidity. But wait, what is a smart contract?

Smart contracts are self-executing code in the blockchain. While blockchains can record transactions, smart contracts enable complex transactions. With their help, a blockchain can execute deals. Smart contracts are the key to decentralized applications (Dapps) and non-fungible tokens (NFTs). 

Simply put, smart contracts are the substitute for pesky middlemen. Smart contracts help save a lot of time, expenses and remove manpower from the picture.

Ethereum and other cryptocurrencies are powered by Blockchain technology distributed and spread across the network with no centralized entity (or organization) controlling it.

The network is secured by cryptography, keeping hackers away from the blockchain. What distinguishes Ethereum is that users can build and run DApps that run on the blockchain. Interesting, isn’t it?

This feature has allowed Ethereum to scale significantly while allowing other blockchains to access its framework and utilize its features. To date, more than 3000 decentralized applications (or DApps) are built on Ethereum. Also Read: What is EIP-1559 & Its effect on ETH Price

Understanding Ethereum

Ethereum Mining

Mining is the lifeblood of all proof-of-work (PoW) based cryptocurrencies. Ethereum mining is similar to bitcoin mining; they both use proof-of-work. Ethereum mining involves miners worldwide using their time and processing power to solve cryptographically hard puzzles. If successful, the miners will add blocks to the Ethereum blockchain and earn a reward in return.

Ether and Ethereum: What’s The Difference?

Ether is a cryptocurrency used for investment purposes or as a digital currency to buy goods and services in stores offline and online. Ethereum is the blockchain that has its Cryptocurrency named Ether (ETH).

Ether (ETH) is a mode of payment on the Ethereum blockchain. Ethereum brands itself as the ‘world’s programmable blockchain’ with notably hosting thousands of Dapps on its network.

Might be wondering what DApps are?

With the word decentralized already in its name, it speaks of the applications free from a central authority. DApps are computer programs that run on blockchain and are distributed across a large number of networks. Isn’t it interesting that your DApp resides on someone’s computer? 

How to Earn an Ethereum Coin?

You can earn Ethereum through two procedures broadly:

  • Mining: It is the process of generating new coins by validating the transactions happening on the digital ledger. This doesn’t mean that you can end up mining coins with your laptop. The power consumption and processing speeds have made it a difficult task to compete with personal computers.

You can earn Ethereum by validating the transactions happening on the blockchain that involves solving complex mathematical equations.

  • Investing: Ethereum has shown very positive returns over time. It is a speculative piece of investment as Ethereum 2.0 is already about to launch. This will scale it to a much greater extent with low fees, higher transactions per second, and better stability.

Ethereum 2.0 will process 1,00,000 transactions per second, contrary to processing only 30 transactions per second.

How to Trade Ethereum (ETH) in India?

The P2P (Peer to Peer) trade is a route that could be preferred if you are looking to buy cryptocurrencies. You can also buy Ethereum from someone you know or from Decentralized Exchanges or DEX that connects you with buyers and sellers to purchase Ether. However, if you are new to this, we might suggest you take a simple route.

There are plenty of options to explore for buying cryptocurrencies, with dozens of applications and websites offering to invest in cryptos easily. CoinSwitch Kuber is one of the leading market players that allows buying Ethereum with just a click!

Its easy-to-use interface, quick KYC process, and low starting amount make it a perfect place to start for people who are new to Cryptocurrency. It allows for a wide range of payment options such as UPI or Netbanking, and anyone can start with just Rs100.

Risks of Investing in Ethereum

Investing in cryptocurrencies or any other traditional investment comes with its own share of risks. Cryptocurrency is notoriously known for its risk factor and its returns of investment. So, risk will always be a factor whether the coin in question is Ethereum, Bitcoin, or any other Altcoins. 

So, what are the risks involved in investing in Ethereum? One of the features of Cryptocurrency is its volatility, and investing in Ethereum comes under this volatile market. For example, in May 2021, Ethereum slipped down by 40%, reducing the market cap to a larger extent. But in November 2021, Ethereum (ETH) price soared to new heights.

Should you Invest in ETH?

If you are already on this part of the blog, we know that you are amazed by Ethereum and what it offers. Coming to whether Ethereum is a good choice of investment, I would like to add up some of its future developments.

Ethereum 2.0, which is set to release later this year, will help scale transactions from 30 TPS (transactions per second) to 1,00,000 TPS. Not only this, but it will also implement a Proof-of-Stake consensus algorithm that will help to add up to a cleaner form of mining. 

With all these developments and Ethereum sustaining the second position after Bitcoin in market cap, we feel it is a very prospective coin that has massive upside potential in the near future. However, as we say, please Do your own research (DYOR) before investing. Check the current ETH to INR price.

FAQs

What is Ethereum? How does it work?

Ethereum is the second most popular Cryptocurrency, after Bitcoin according to market cap. Ethereum operates on a decentralized computer network, or distributed ledger called a blockchain, which manages and tracks the currency. 

What does Ethereum actually do? 

Ethereum describes itself as “the world’s programmable blockchain.” Ethereum enables developers to build and publish smart contracts and distributed applications (dApps) that can be used without the risks of downtime, fraud, or interference from a third party.

How does Ethereum make money?

Users pay fees to use dApps on the Ethereum platform. These fees are called “gas” because they vary depending on the amount of computational power used. The median fee for gas was above $10 per transaction in early 2021, according to the Ethereum Gas Report.

Disclaimer : Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. The information provided in this post is not to be considered as investment/financial advice from CoinSwitch. Any action taken upon the information shall be at user's own risk.

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CoinSwitch Kuber

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