Where & how to buy Ethereum (ETH) Guide

What Is Ethereum (ETH)?

Ethereum is a public, decentralized blockchain that was launched in 2015 by Vitalik Buterin. It permanently records all transactions on its network without needing a central authority for operation or security, thus functioning independently of a trusted third party. It was the first blockchain to enable developers to create and deploy decentralized applications (dApps) on top of it. The currency used within the Ethereum protocol is known as Ether (ETH).

Prior to Ethereum, early cryptocurrencies had limited functionalities and primarily served as digital currencies, each with unique features. Vitalik Buterin envisioned a protocol that would facilitate the creation of various decentralized applications without requiring developers to build their own blockchains. This vision led to the creation of the "Ethereum Virtual Machine (EVM)," which functions as a decentralized global computer, allowing users to execute programs using blockchain resources.

How Ethereum (ETH) Works

The operation of Ethereum relies on node operators who process transactions, for which users pay fees known as "gas" in ETH. These fees can vary, allowing users to influence the speed of transaction validation. Ethereum supports various applications beyond monetary transactions, powered by smart contracts—self-executing programs that run on the blockchain when specific conditions are met.

As user demand increases, Ethereum faces scalability challenges, exemplified by network congestion during events like the 2017 CryptoKitties craze, leading to slower transactions and higher fees. While some blockchains have opted for centralization to solve this, it compromises their decentralized nature.

To address scalability, Ethereum developers are considering sharding, a technique that partitions the network's database into smaller segments called shards, allowing node operators to utilize less computational power while still ensuring security. This may lead to increased participation and faster transactions. Additionally, rollups combine multiple transactions into one, reducing individual gas fees.

Ethereum currently employs the Proof-of-Work (PoW) consensus mechanism, where miners secure the blockchain in exchange for ETH. However, it plans to transition to a Proof-of-Stake (PoS) system, where validators, called "forgers," are selected based on the amount of cryptocurrency they hold. This upgrade, known as "the Merge," is expected to enhance the network's scalability, security, and sustainability.

Why Ethereum Stands Out Among Thousands of Crypto Projects

Ethereum’s whitepaper underscores its goal of creating an alternative protocol for building decentralized applications, focusing heavily on security and scalability, primarily through the use of smart contracts. This unique approach allows developers to create decentralized applications that have real-world applicability, such as real estate management systems.

A well-known example of a decentralized application is CryptoKitties, a game where players can buy, sell, and trade unique digital cats. Each cat in the game is one-of-a-kind, possessing verifiable ownership, which means they cannot be duplicated, stolen, or destroyed. Additionally, Ethereum enables users to create their own digital currencies, known as tokens, without needing extensive blockchain knowledge. Notable examples of such tokens include ChainLink, BAT, and VeChain, which started as tokens before establishing their own blockchains.

What is the Ethereum “Merge" (the Merge) and Why?

The Merge was the integration of Ethereum's original Mainnet with the new proof-of-stake Beacon Chain, marking a shift from energy-intensive mining to network security through staked ETH. This significant transition aimed to enhance scalability, security, and sustainability.

Initially, the Beacon Chain operated separately alongside Mainnet but did not process transactions. After extensive testing, The Merge enabled the Beacon Chain to become the consensus engine for all Ethereum data, effectively eliminating proof-of-work. This change did not affect users or holders of ETH; their assets remained unchanged and accessible without any required action.

Post-Merge, validators now secure the network by staking ETH instead of mining. Although certain features, like the ability to withdraw staked ETH, were not included in The Merge, they were enabled later with separate upgrades. The transition also paved the way for future scalability solutions, such as sharding, which has evolved in response to the success of layer 2 scaling technologies.

Ethereum’s Transition: From PoW to PoS

In September 2022, Ethereum made a significant change by moving from its energy-heavy Proof-of-Work (PoW) framework to a more environmentally friendly Proof-of-Stake (PoS) system, known as The Merge. This shift has led to a reduction in Ethereum's energy consumption by more than 99%, as it now depends on staking ETH rather than mining.

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Ready to invest in Ethereum (ETH)?

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