What Is Ethereum: Everything You Should Know

As the second most popular cryptocurrency in the world, Ethereum plays an important role within the crypto ecosystem.

What is Ethereum? Simply put, Ethereum is the world’s second-largest cryptocurrency and has enjoyed meteoric success since it first appeared less than a decade ago.

This article will explain what Ethereum is, why it is increasingly popular, and what you should consider before adding this asset to your crypto portfolio.

What Is Ethereum?

Ethereum is commonly described as a technology, a blockchain network, and a computing network. Ethereum describes itself as a “foundation for a digital future” and a community-run crypto technology.

Think of it as a platform that enables a series of decentralized applications. These can include smart contracts, decentralized finance (DeFi) apps, and non-fungible tokens (NFTs).

Since it is based on blockchain technology, participants who transact on the Ethereum blockchain have full visibility into transaction data. Ethereum relies on its own unique cryptocurrency — Ether (ETH) — to pay for all transactions on the platform.

Participants can make crypto transactions, earn interest (via a technique called “staking”), access blockchain-based games, and more. Due to its decentralized nature, Ethereum has been touted as the next leap in the evolution of the Internet — a kind of “next-generation web.”

A Brief History of Ethereum

Initially conceived in a 2013 white paper published by Vitalik Buterin, Ethereum eventually launched in 2015. Its development was crowdfunded in a novel way: an online sale where purchasers bought Ether (ETH), Ethereum’s native token, with another existing digital coin: Bitcoin.

Ethereum has grown to become the second-largest blockchain network in the world and the second-largest cryptocurrency after Bitcoin. Its blockchain roots are essential to understanding its potential.

Understanding Blockchain

Blockchain is a distributed digital ledger. It records transactions and stores information about them in a “block.” This information is immutable — once written, it cannot be modified or overwritten, preserving a secure and permanent record.

Blockchain technology is changing the way major industries operate. Shipping companies, traditional banks, and all sorts of supply chains are relying on it to give them shared, verifiable, and trustworthy records of what went where and when.

But blockchain is also making new applications possible to build. Take smart contracts, for example.

Defining Smart Contracts

A smart contract is a way to automate an existing agreement between parties. It uses “if/then” logic coded into a computer program. When certain conditions specified in the contract are met, the program triggers the next action to be executed.

This means all parties to an agreement can be sure it will be carried out exactly as specified without involving a third party to oversee or enforce the details. Smart contracts also eliminate delays waiting for a response or action by a participant.

These contracts can be used for many digital financial interactions (trading, payments, etc.), supply chain management, insurance, real estate, and even government interactions.

At its core, Ethereum is a decentralized platform that runs smart contracts.

This means it is much more than just a cryptocurrency or platform on which to trade cryptocurrencies. Ethereum can be used for a wide range of functions.

Ethereum’s smart contract capabilities have also had a positive effect on the value of its digital currency, Ether (ETH). Because it’s arguably the most popular platform for creating and trading NFTs, demand for the currency needed to buy and sell Ether (ETH) has helped contribute to its value.

Understanding Ether (ETH)

As mentioned above, Ether is the name of Ethereum’s native token, and is abbreviated as ETH — its ticker name. Ethereum is often used synonymously with Ether or ETH. In addition to being the second-largest cryptocurrency, a higher volume of crypto transactions happens on the Ethereum network than any other blockchain network (with some historical exceptions).

On the Ethereum platform, Ether (ETH) can be sent to another user, spent to power applications, or cover transaction fees. It can also function as a trading asset akin to most other cryptocurrencies.

When it was first issued, Ether was valued under $1 but has seen its value skyrocket to as high as $4,800.

Ether’s Pros and Cons

Pros

Ether (ETH) has real utility. As the native cryptocurrency of the Ethereum platform, Ether acts as a medium of exchange for dApps, NFTs, and other projects that are built on Ethereum.

While second to Bitcoin overall, Ether (ETH) enjoys a broad following from token holders whose interests go beyond just trading or speculating with ETH.

Ethereum also has a decided advantage in transaction processing speed compared to Bitcoin. Validation of new blocks on Bitcoin occurs every 10 minutes, while on Ethereum, the validation occurs every 12 seconds.

Cons

As with any other cryptocurrency — or digital asset, for that matter — Ether is relatively new and subject to extreme volatility.

There is no maximum limit to the number of Ether (ETH) coins that can be created. This means it can potentially be an inflationary currency, in that as its supply increases, it could outpace demand, eroding the purchasing power of each coin.

How Might Ethereum Fit into Your Crypto Plans?

Anyone looking to build a crypto portfolio should have a strategy in mind. Start there, and consider your unique needs, situation, objectives, and risk tolerance. Then, decide how Ethereum might fit into your strategy.

The Ethereum Network

Ether (ETH) maintains several important differences when compared to popular cryptocurrencies like Bitcoin (BTC). ETH's value is linked to its utility, which is derived from the Ethereum network. Consider a few of Ethereum's potential advantages and disadvantages.

Advantages

As a blockchain-based platform, Ethereum is decentralized, interoperable, and open source. No one person can likely dictate its direction, and its literal functioning is spread over a network of computers worldwide, making it next to impossible to go down.

It is also relatively performant platform, allowing for rapid deployment of applications and validation of new blocks added to its blockchain. This encourages a vibrant community of creators and developers to keep innovating on it, further reinforcing its value.

While Ethereum is a public, permissionless network, it also supports permissioned private blockchains, making it suitable for enterprise (large company) use.

Potential Disadvantages

Ethereum’s programming language has been described as complex and difficult to master. It has also been cited as having potential scaling issues because of its design.

Ethereum engineers are working on techniques to drastically boost transaction speeds — and therefore transaction scaling issues — in the platform’s next release, Ethereum 2.0.

How to Buy Ether on Binance.US in 3 Steps

1) Create An Account

After researching which crypto platform is best for you, create an account. Platforms such as Binance.US enable you to convert fiat currency (e.g., money backed by a local government or bank, such as US dollars) into Ether.

Look for a platform that offers features that work for your overall strategy and any cryptocurrency you might be interested in.

Consider the platform’s:

  • Security
  • Range of tokens
  • Trading fees
  • Advanced features, such as recurring buy orders and Real-time order books

The platform you choose will become your partner. Make sure it offers the right features for all its tokens and provides future benefits when you want to diversify your portfolio.

2) Fund Your Account

To buy Ether, transfer funds from a traditional bank account to the account you created in step one.

Most platforms offer a variety of ways for you to fund your account, including:

  • Wire transfer
  • Debit card
  • ACH (from a bank account)
  • Credit card

Before you sign up, make sure the exchange offers the funding method you prefer.

3) Choose When To Buy

Finally, to complete your purchase of Ether, choose when to buy.

Monitor the market to determine when buy and sell orders may fit into your crypto strategy.

Start Your Crypto Journey with Binance.US

Register for a Binance.US account or download the Binance.US app. Once you have your account, you can buy cryptocurrencies on Binance.US using fiat in three ways: via bank transfer, debit card, or wire transfer.

No matter what your crypto goals are, Binance.US can help you get there.

Download the Binance.US app to trade on the go: iOS | Android

Legal disclaimer: This material has been prepared for general informational purposes only and should NOT be: (1) considered an individualized recommendation or advice; and (2) relied upon for any investment activities. All information is provided on an as-is basis and is subject to change without notice, we make no representation or warranty of any kind, express or implied, regarding the accuracy, validity, reliability, availability or completeness of any such information. Binance.US does NOT provide investment, legal, or tax advice in any manner or form. The ownership of any investment decision(s) exclusively vests with you after analyzing all possible risk factors and by exercising your own independent discretion. Binance.US shall not be liable for any consequences thereof.

Risk warning: Buying, selling, and holding cryptocurrencies are activities that are subject to high market risk. The volatile and unpredictable nature of the price of cryptocurrencies may result in a significant loss. Binance.US is not responsible for any loss that you may incur from price fluctuations when you buy, sell, or hold cryptocurrencies. Please refer to our Terms of Use for more information.

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