As the second-largest cryptocurrency, only second to Bitcoin, ETH enjoys a great number of users and works actively in the crypto world. The price of ETH is seeing a continuous up-going trend, even stronger than Bitcoin in 2021, being an irresistible magnet for many investors. But do you really know what is ETH or Ethereum and how does it work?
Part of investors may regard Ethereum as ETH. Is that the case? To clarify, let’s start with what is Ethereum.
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What Is Ethereum?
Ethereum is a public blockchain protocol with open source and smart contract functions. It provides a decentralized Ethereum Virtual Machine through ETH to handle the point-to-point contracts.
The decentralized platform means everyone can build and run an Ethereum node like everyone can run a Bitcoin node. Anyone who wants to run a smart contract on an Ethereum node must pay the node operators in Ether (the native cryptocurrency of Ethereum). Therefore, users who run Ethereum nodes provide hashrate and get paid in Ether, the same as Bitcoin node.
The concept of Ethereum was first proposed by coder Vitalik Buterin after being inspired by Bitcoin between 2013 and 2014. The main idea is “the next generation of cryptocurrency and decentralized application platform”. Ethereum began to blossom in 2014 after its ICO.
How Does Ethereum Work?
An App like Ethereum does not require an entity to store and control its data. To achieve this, it borrowed from Bitcoin protocol and blockchain design and adjusted accordingly. Therefore, it can not only work as a currency but also support the development of applications.
The most important thing about Ethereum is the Ethereum blockchain. Very similar to Bitcoin, it shares the entire transaction history of the blockchain. All nodes on the network can save a copy of the transaction history.
The biggest difference with Ethereum is that it stores all transaction information and the latest status of all smart contracts. The network needs to keep a record of the state or current information of all Ethereum applications, including account balances, smart contract codes, and data storage locations.
What Is Ethereum?
Is Ethereum the so-called ETH? No, absolutely not.
ETH, or Ether, the native cryptocurrency of Ethereum protocol, has many of the same functions as Bitcoin. It is a purely digital currency that can be instantly sent to anyone anywhere. The supply of ETH is not controlled by any government or organization, decentralized and scarce. ETH enjoys a huge user base all over the world and is used for payments, serves as a store of value, and guarantee.
Developers who want to create applications on Ethereum blockchain or build Ethereum smart contract need Ether to pay for nodes in the hope of custody, while users of Ethereum-based application may need Ether to pay for service fees in these applications. People can sell their service out of the Ethereum network and accept payments in Ether, or they can sell Ether tokens in cash at exchanges, just like Bitcoin.
At the time of writing, ETH has been standing as the second-highest cryptocurrency by market capitalization for a long period.
How Is Ether Different From Bitcoin?
What are the differences between the two major digital currencies, Bitcoin and Ether?
As a currency used for transactions on the Ethereum network, Ether possesses many basic similarities with Bitcoin. Both are cryptocurrencies based on blockchain technology, widely used in services, contracts, and as a store of value. The popularity has attracted the attention of news publishers who want to better understand how does blockchain technology change the currency landscape over time, as well as of traders who want to be profitable in this crypto world.
Because of the decentralized characteristics, there is a big difference between them and traditional currencies, and not all areas accept this kind of virtual currency. Bitcoin enjoys higher acceptability and is an international digital currency, while Ether is only for Dapps transactions running on the Ethereum network.
Transactions on the Ethereum network may contain executable code, while Bitcoin network data is usually for notes. Other differences include the block time and the algorithms running.
In fact, the main difference between ETH and BTC is that BTC is more inclined to be a “currency”, which mainly functions as a means of payment and a store of value. Ethereum and its native ETH work as a platform on which users can issue smart contracts and their own digital currency. What is used as a “fuel” on the Ethereum platform is the Ether(ETH) that we trade on exchanges.
It can be said that Bitcoin has created a new field of digital currency and represents blockchain 1.0, while Ethereum has further developed this field, representing blockchain 2.0.
Where Can I Buy and Store Ether?
Entering 2021, ETH price shows a clear direction and an upward trend, ever topped $4,000, attracting not only a growing number of investors to invest in Ether but also novice traders. However, most beginners have no idea how to buy ETH or store it.
Where Can I Buy ETH?
Investors can buy ETH from exchanges or from wallets directly.
Exchanges are where users can buy cryptocurrencies using fiat currencies or other cryptocurrencies like BTC. They have custody over any ETH bought until users send it to a wallet they control or other platforms they prefer.
Some wallets support buying crypto with traditional payment methods such as debit/credit card, bank transfer, or even Apple Pay. It also enables users to read balances, send transactions and connect to other applications.
Where Can I Store ETH?
After buying ETH, where can I safely store it for a period of time?
ETH, the same as other cryptocurrencies, can store in some wallets, which works the same as banks where you can send and receive coins. According to the team, there are several types of wallets for your reference:
Physical hardware wallets: Helps to keep your cryptocurrencies offline securely and safely
Mobile applications: Allows you to control and access your crypto assets from anywhere
Web wallets: Enables you to handle your account on a web browser
Desktop applications: Give you a choice to manage your assets on mac OS, Windows or Linux
Despite the flexibility and wide range of applications, there are still risks in investing in Ethereum and Ether as no one can predict price trends. Although they may be of great potential, it is not suitable for everyone. In other words, it has applications put into use outside of the crypto world. Even if the cryptocurrency itself (ETH) cannot succeed in the long run, Ethereum can still be used in other ways.
Be sure to weigh the pros and cons, and consider your own risk tolerance. Whether you choose to invest or not, please make this decision discreetly.