Ethereum is the second biggest cryptocurrency and the crypto that pioneered the broader use of blockchain as a technology.
Created in 2015 by 19-year-old prodigy Vitalik Buterin, Ethereum inverted the Bitcoin model, emphasising the blockchain over the currency itself. If blockchains could verify monetary transactions, then why not shipping manifests, airline bookings, website code or home ownership?
Ethereum’s biggest innovation in this respect was what Buterin termed ‘smart contracts’ – programmable and unalterable contracts that would auto-execute when certain conditions were met. This simple idea meant Ethereum could become the first true blockchain platform: a blockchain upon which decentralised apps and blockchains could be built.
Participants pay so-called “gas” fees to use the network, which are denominated in Ethereum’s native cryptocurrency, Ether (ETH). The more demand there is, the higher the gas fees.
While there’s no hardcoded upper limit on the amount of ETH to be created like there is with Bitcoin, Ethereum has introduced a mechanism that means a certain amount of ETH is burnt in every transaction, helping to reduce inflationary pressures.
The network is powered by the same Proof-of-Work consensus as Bitcoin, although it’s moving to a less-energy intensive model called Proof-of-Stake in the near future. This means that people who hold a certain amount of ETH can stake it to help verify transactions, receiving newly issued ETH in the process.
These days many of the biggest and most exciting projects in the crypto space are built on Ethereum. The platform’s ERC-20 standard is the architecture that powers more than 20 of the coins on CoinJar – including all the major DeFi projects – while NFTs (non-fungible tokens) came into being thanks to ERC-721.
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