What is Ethereum?

The Ethereum network, which runs the cryptocurrency ether, is becoming increasingly popular. Where Bitcoin uses blockchain technology for financial transactions, Ethereum uses it for decentralised software applications.

Read on to learn more about it, why it’s worthwhile paying attention to and how to show your support.

What is Ethereum?

Ethereum is an open software platform for developers to build decentralised applications. It shares similar traits to Bitcoin, and it has the same underlying blockchain technology.

Essentially, Ethereum removes the need to rely on third parties on the internet, like servers such as Amazon Web Services.

“While bitcoin aims to disrupt PayPal and online banking, ethereum has the goal of using a blockchain to replace internet third parties — those that store data, transfer mortgages and keep track of complex financial instruments.”

Ethereum enables smart contracts

One of the core appeals of the Ethereum platform is the ability to build smart contracts. Smart contracts are contracts that run exactly as programmed without the possibility of any downtime, fraud, censorship or third-party interference.

Because there are no third parties, Ethereum transactions are cheap, transparent and fast. Ethereum’s smart contracts are all applicable to all contracts, not just financial ones, so it’s attracted attention from companies from various industries globally such as BP, ING, Mastercard and more.

Because smart contracts run on the blockchain they are protected from fraud or theft making them transparent and a secure way to trade in assets of value.

Ethereum makes censorship impossible

The way Ethereum works makes it inherently resistant to censorship. The creator of Ethereum, Vitalik Buterin himself wrote a blog post about censorship, and how Ethereum penalises miners for censorship.

“The simplest is to simply penalize everyone for anyone’s non-participation. If 100 out of 100 validators sign a block, everyone gets 100% of the reward. But if only 99 validators sign, then everyone gets 99% of the reward. Additionally, if a block is skipped, everyone can be slightly penalized for that as well.”

This system keeps the miners in check, even if most of them are corrupt.

Ethereum ensures that there’s no downtime or fraud

As the apps that use Ethereum run on the blockchain, they benefit from all of its properties. This means that the apps built using Ethereum will not have any downtime, and there aren’t the same fraud issues that exist with fiat money.

Ethereum can solve almost all computational problems

As long as it’s reasonable and there’s enough computing power and time given, you can use Ethereum to solve any computational problem. This is because of Ethereum’s Turing-complete code, which is sometimes referred to as the Ethereum Virtual Machine (EVM).

What is Ether (ETH)?

Ethereum is the network and ether is the cryptocurrency. Ether is often described as the ‘fuel’ that operates Ethereum. The token ticker for Ethereum is ETH.

“It is a form of payment made by the clients of the platform to the machines executing the requested operations. To put it another way, ether is the incentive ensuring that developers write quality applications (wasteful code costs more), and that the network remains healthy (people are compensated for their contributed resources).”


Unlike Bitcoin, there is no limit on the amount of new ether generated. Here are a few key attributes of Ethereum to help you understand what makes it unique.

What is Ethereum used for?

There are many emerging applications on the Ethereum network ranging from games to social networks. All applications running on the Ethereum Blockchain require ether to operate. Apps on Ethereum are known as ‘Dapps’ which stands for decentralised application.

Some example of Dapps include:

  • CryptoKitties: one of the world’s first blockchain games where you can purchase your own one-of-a-kind Cryptokitty using ether. You can buy, trade or sell your Cryptokitty just like traditional collectables. Think digital beanie babies.
  • Eth-Tweet: Twitter without a third party removing your tweet for spam or inappropriate language. Eth-Tweet is a decentralised version of Twitter running on the blockchain. You can tweet messages with a max of 160 characters however no central entity controls the content, meaning messages can only be removed by the original publisher.
  • Everex: This platform aims to send global payments in a matter of seconds without paying hefty overseas banking transfer fees.

Where did Ethereum come from?

The Ethereum network was created in 2013 by Vitalik Buterin. Using the same blockchain technology that Bitcoin is founded upon, he created Ethereum. Where bitcoin is known to be a store of value for financial transactions, he designed the same concept, but for software applications that are decentralised.

If you’re after more technical information about how Ethereum works, go ahead and read the Ethereum whitepaper. If you’re a software developer, we highly recommend Matt Condon’s Medium article on Getting Up to Speed on Ethereum.

How to get ether

Just like Bitcoin, you can buy and sell ether on an exchange. You may also receive it from someone else, which will require you to have a digital currency wallet. You can also mine it.

Mining ether

Like Bitcoin, Ether uses miners to validate transactions on its blockchain in exchange for newly mined Ether. Developers need ether to create and run smart contracts which like Bitcoin is paid in transaction fees which go to the miners. However, the block times are significantly shorter at 15 seconds compared to Bitcoin’s 10 minutes. Ether still uses Proof of Work which is the process of collecting transactions into blocks, solving a computer problem then publishing the block, however, the proof of work algorithm is also different – ‘Ethash

Miners are people who provide their computing power to validate and collect transactions into blocks to be added to the blockchain. Everytime a miner completes a block they are rewarded with ether. Therefore the volume of ether increases with each block that is mined. However, there is a cap of 18 million ether per year to avoid excessive inflation of the currency.

Mining Ethereum is also essential to secure the network as it verifies, creates and distributes blocks in the blockchain.

Where to store your ether

Just like with all other digital currencies, we recommend getting a digital currency wallet that will hold your private keys securely. To learn about the best wallet for you, read the ‘Keeping your Coins safe’ section of this guide.

Don’t invest unless you’re prepared to lose all the money you invest. This is a high‑risk investment and you should not expect to be protected if something goes wrong. Take 2 minutes to learn more: www.coinjar.com/uk/risk-summary.

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