What is Ethereum?What is Ethereum?

Ethereum is a decentralised platform that runs on blockchain technology. Vitalik Buterin came up with it in 2014; the network went live in 2015. Where Bitcoin is designed mainly to transfer digital money, Ethereum is far broader: a kind of global computer on which applications run without a central administrator. The network is intended as the backbone of a new kind of internet, one in which no single company sets the rules.

The Ethereum network has its own coin: ether (ETH). You pay for using the network with ether, comparable to petrol for a car. On top of that, ether is widely used as a means of payment, as an investment and to take part in other crypto projects.

After Bitcoin, Ethereum is the second largest cryptocurrency in the world by market value. Since September 2022 the network has run on a new, energy-efficient technique called proof of stake, a major upgrade that was named "The Merge".

Ether and Ethereum are often used interchangeably, but there is a real difference:

• Ethereum is the whole network, the platform that applications can run on.
• Ether (ETH) is the coin that lives on that network. It's the unit you pay with inside Ethereum and the one you reward validators with.

A good comparison: Ethereum is like a rail network, ether is the ticket you need to move something along those tracks. When people say "I bought Ethereum", they usually mean "I bought ether".

Ethereum runs on a worldwide network of computers (nodes) that work together. Every node keeps a complete copy of all the transactions that have ever taken place on the network, and that's what we call the blockchain.

The network rests on three pillars:

• Validators, holders of at least 32 ether who stake (lock up) their ether to verify transactions. In return they receive a reward in new ether.
• Smart contracts, small programs that automatically carry out what they say as soon as the conditions are met. No middleman needed.
• Solidity, Ethereum's own programming language. Developers use it to write smart contracts and applications (DApps).

Roughly every 12 seconds a new block of transactions is added to the Ethereum blockchain. That's much faster than Bitcoin (~10 minutes) and makes Ethereum suitable for a wider range of uses.

Since September 2022 Ethereum uses proof of stake instead of proof of work. That makes the network use around 99.95% less energy than before, a milestone for crypto that was named "The Merge".

Smart contracts are Ethereum's most important innovation. A smart contract is a piece of code that automatically carries out what it says, without a notary, lawyer or company being involved. For example: "if person A sends 1 ether, person B automatically receives a digital ticket". The agreement sits in the code, and the code executes itself.

DApps (decentralized applications) are applications that run on the Ethereum network. Instead of on one company's servers, they run across the whole network at once. Examples of what has been built with DApps:

• Decentralized finance (DeFi), loans, saving and trading without a bank
• NFT marketplaces, art, collectibles and digital ownership
• Gaming, games in which players own their in-game items
• Identity, self-managed digital identity without a central party

According to Ethereum's supporters, this design makes applications safer, more privacy-friendly and harder to censor than traditional apps that sit on one company's servers.

Bitcoin and Ethereum are often mentioned in the same breath, but they were made for different purposes. Bitcoin was designed as digital money: scarce, with a maximum number of coins, aimed at storing value. Ethereum was designed as a platform: flexible, programmable, aimed at applications.

Ether is a versatile cryptocurrency. The four main uses:

• Means of payment, More and more webshops accept ether as payment, and organisations accept it as a donation. Because the network is worldwide, you can transfer ether to the other side of the world in seconds.
• Investment, Many people buy ether to speculate on a price rise. Crypto remains volatile, though; only invest money you can afford to lose.
• Access to DApps, Want to buy an NFT, take out a DeFi loan or start a smart contract? You need ether for that.
• Staking, Do you have 32 ether or more? Then you can become a validator and earn passive income by securing the network. Have less? Through staking services you take part in a pool and share in the reward.

There are three ways to get hold of ether (ETH):

• Buy ether. By far the most used route. At a regulated provider like BTC Direct you buy ether from 30 euros with SEPA transfer or another payment method, with no technical knowledge needed up front.
• Receive ether for goods or services. As an entrepreneur or freelancer you can ask clients to pay in ether. More and more organisations (including BTC Direct) also offer salary in crypto.
• Stake / validate ether. If you already have ether, you can put it to work securing the network and earn a passive reward that way.

For most people, buying through a regulated platform is the simplest and safest route. After that you keep your ether in your own wallet (mobile, software or hardware).