To help you understand, what is Ethereum, and why it is so important, let us first dive into some generalities.
The surge of the cryptocurrency market at the start of 2021 had made a lot of people take serious interest in blockchain technologies and decentralized finance.
Some people came into the industry with an intention to make money, some, out of hate and desperation. Some others view crypto as humanity’s next big breakthrough and a way to make global economics more open, safe, fast, inclusive, and free.
The downsides of a mainstream legacy financial system are becoming evident even to a layman. The executives of a central financial authority singlehandedly decide how much new money they want to print. Printing money without any restrictions is like a drug. It gives an illusion that the said central institution has an infinite source of value. It is not quite so.
Each unit of fiat money represents less value, the more of them are printed “out of thin air” daily. The total value of goods in the world (or a country) does not reflect the amount of money that circulates in the economy. So when you see the prices rising—although the value of products should gradually decrease thanks to mass production and automation—it merely reflects the money inflation: the fact that money itself is becoming cheaper.
Should we even mention that most of the money is out of circulation and the consequences that their reappearance on the market would entail?
Cryptocurrencies are mostly deflationary.
Their emission is controlled by an algorithm and can never go rampant. It is true about Bitcoin; and this is why you witnessed its price jump from $1 to $60,000 in about a decade. It is true about Ethereum, too, although its total supply is not limited, like Bitcoin’s.
What is Ethereum?
Ethereum is a blockchain-based technology that allows payment processing and the decentralized processing of other contracts over the Internet.
In fact, lots of cryptocurrency makers state that the purpose of their coin is to serve as ‘a store of value and a means of exchange’. Making such a crypto proved to be fairly easy, and there are quite a lot of them by now. Unfortunately, it is not enough to engage the audience or to keep the price of such a coin stable and attractive.
What is Ethereum blockchain?
To put it simply, blockchain is a technology that allows to store data in such a way that the validity of all the data blocks can be verified at any moment. Suppose that I want to cheat and broadcast a transaction that makes 100 digital coins appear in my wallet out of nowhere. All the other network users don’t have this transaction in their records, so they’ll reject an attempt to write it to the blockchain. Encryption makes it even harder to cheat.
What is Ethereum coin?
The currency of the Ethereum blockchain is Ether (ETH). There is a particular event in the history of Ethereum, known as the DAO hard fork that occurred in July 2016. Back then, an unknown hacker (or a group) exploited the code vulnerabilities of the DAO project, which resulted in massive losses of investments. It made some people demand to rewind the state of the whole network to the state when they still had their money. The other share of Ethereum users, including some of those who lost their investment, took the position that “code is code”: although the abuse of DAO’s weaknesses was unethical, it was nonetheless perfectly legit and should not impact Ethereum blockchain as a whole.
The confrontation eventually resulted in the emergence of two separate blockchains and two coins, respectively: Ether, the “rewound” network, and Ethereum Classic, (ETC).
When you hear anyone asking, ‘What is the Ethereum blockchain’, they probably mean ETH. The latter is being constantly improved and sees increasingly wide adoption while ETC is more conservative and a lot less popular.
Similarly, when you search out what is Ethereum cryptocurrency, you will run into the description of the two abovementioned coins.
Now back to the original question: What is Ethereum coin?
Ethereum coin is a unit of value used over the Ethereum blockchain.
In contrast to the legacy financial system, Ethereum coin emission is carried out via mining in a controlled fashion.
Who uses Ethereum?
A short (and rather meaningless) answer to this would be: companies and individuals.
As we wrote above, blockchain allows the exchange of value over the Internet. In case with Ethereum, not only native coins, Ether, can be exchanged, but any compatible digital asset: an ERC token, a game asset (like an Axie or a Cryptokittie), or a plain message. Each transaction is recorded to the blockchain and can be verified at any moment.
Bitcoin is nothing more than a blockchain-powered public ledger while Ethereum elaborates upon the ideas introduced by Bitcoin and adds more applicable areas like custom token creation and smart contracts.
Investopedia puts it better:
“Ethereum was created to enable 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.”
What is Ethereum used for?
Apart from the things we have already mentioned, Ethereum is used for profit. Buy it long term, hold for at least half a year and reap the reward. Or just hold it longer, according to the situation.
What is Ethereum used for? Investors and traders don’t much care, paying more attention to the price chart instead. Ether keeps rising in price and strengthening its positions in relation to Bitcoin. Although the market is being shaken by the tweets of Elon Musk weekly, lots of experienced traders expect to see the prices crawl back.
What does Ethereum mean as a technology? It is a game changer in the domain of finance. Being a second most popular cryptocurrency after Bitcoin, it holds a significant share of responsibility for shaping the future of all crypto.