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What is Ethereum?

Basic information

Ethereum is the second largest cryptocurrency and at the same time the largest smart chain.

More about Ethereum

Ethereum is the largest decentralized smart chain blockchain, and most decentralized applications, smart contract platforms, DeFi projects, and stablecoins are built on it.

ETH and inflation

The main difference between Ethereum and bitcoin is that Ethereum does not have a fixed finite number of tokens. For BTC we know there will be a maximum of 21 million BTC, but for ETH no one knows what the final number will be.

Bitcoin inflation is 1.8% per year, which is very similar to gold inflation. However, unlike gold, BTC inflation will decrease every four years. For Ethereum, its inflation is around 4% annually. In the future, ETH inflation will mainly be decided by the community, so it is possible that it will increase, but it may also remain the same.

The most popular smart chain

‍Ethereum is an essential cryptocurrency of the decentralized world, mainly because it introduced something we call smart contracts. These are decentralized applications that operate based on conditions pre-programmed by their developers. Security is ensured by the EVM – the Ethereum Virtual Machine, which is a device that uses the computing power of all ETH blockchain nodes.

ERC-20

As we mentioned before, ETH is currently the largest smart contract blockchain. It also owes this to the fact that it enabled other cryptocurrencies to function on its network with the help of the ERC-20 protocol, originally built for the needs of the Ethereum cryptocurrency.

Thanks to this option, thousands of other cryptocurrencies, referred to as ERC-20 tokens, have been created on this network.

Some of these tokens have found significant use. A prominent example of this are stablecoins such as Tether (USDT), which are tokens tied to a certain currency, for instance the US dollar, where 1 USDT = 1 USD.

Proof-of-Work vs. Proof-of-Stake

Similarly to BTC, ETH used to work on the Proof-of-Work concept, yet it switched to a Proof-of-Stake mechanism on September 15, 2022, because it is more secure, less energy-intensive, and better for implementing new scaling solutions. The Proof-of-Stake concept means that users can earn ether by locking their coins in to validate transactions.

DeFi projects

DeFi projects have become a big hit on the Ethereum blockchain. DeFi is still in its early stages and represents a particularly risky investment.

Where do I buy ETH?

‍List of stock exchanges we have experience with – including fees, transfers, and tools.

Conclusion

Ethereum is currently one of the strongest players on the market, and the transition to Ethereum 2.0 is potentially solving one of its biggest problems: high gas fees. However, ETH 2.0 still has its own problems, such as a potential lack of decentralization, the large amounts of ETH needed to become a validator, or the security issues of a fairly new PoS mechanism. Although there might be some positive attributes to becoming Proof-of-Stake, only time will tell how things will unfold.

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