Updated: Aug 16, 2020
As this summer has seen some huge growth for Ethereum and in particular Decentralized Finance, or DeFi in short, I'd like to dedicate this blog post to explaining what Ethereum actually is, and why it has been steadily gaining steam. Before I begin, I'd like to share the vision of Ethereum as explained by the founder, Vitalik Buterin.
Expanding on video, Ethereum is a decentralized network. This means that there is not one single person or entity that own the Ethereum network. In a centralized system, owned by a single entity, you can have a single point of failure. If the entity goes offline or gets hacked, the system will likely fail. Decentralization eliminates one single point of failure while all private information stays with the user, not entrusted to the centralized system.
Before diving deeper, I'd like to clarify that Ethereum is NOT Bitcoin. Whereas Bitcoin aims to be the native currency of the internet, and was the first project to introduce Blockchain technology, Ethereum is a network for app development. Most of the apps developed on the Ethereum platform remove the need for a middleman. In a peer to peer system with no controlling authority, the user and the developer can benefit the most.
As a network for app development, most apps are developed as "smart contracts." Smart contracts are built to run without any downtime, fraud, control, or interference from a third party. They can do this due to the decentralized nature of the network. The Ethereum blockchain is constantly being validated by nodes all around the world, who receive rewards for volunteering their computing power. This is called Proof of Work and is a type of cryptocurrency "mining," since rewards are earned from the work. If one computer shuts down, no problem! The system goes on. The Ethereum blockchain will move over to Proof of Stake in the near future. Proof of Stake is a much less energy intensive way to secure the network.
Smart contracts require no controlling authority and self execute when the parameters are met. A smart contract does not require you to trust the other party. There can be no breaking of a contract or reneging on the terms. It executes the terms. Period. It can also be executed with minimal fees, thus an extremely cost effective way of doing business!
Now before you go off and start mining Eth on your mom's computer, please note that computers do use electricity to run! That electricity costs money! In order to make a profit mining, you will likely need an advanced computing chip and a lot of computing power. We do have a selection of mining gear available on the site.
Software developers working on Ethereum develop Decentralized Apps, or Dapps for short. Dapps can range from things like a forecasting app that pays rewards for correct predictions (Augur), to apps that provide secure, uncensored communications (EtherTweet). In most cases, the app is built using MIX, a program that allows developers to write code and develop on the Ethereum browser. The apps are then tested in the Ethereum Virtual Machine (EVM), a sandbox-like testing tool that is isolated from the Ethereum network.
Ether is the currency token that pays for the computational resources required to run an application or a program on the Ethereum blockchain. Most other tokens built on the blockchain are issued in the form of ERC-20 (see below) and ERC-721 tokens (such as CryptoKitties!). ERC-20 tokens are simply tokens developed to be compatible with and run on the Ethereum network. They follow a certain set of rules and standards. Some commonly known projects built on the Ethereum blockchain in the form of ERC-20 tokens include Chainlink, Basic Attention Token, Maker, DAI, Compound, Kyber Network, and many more! The coins listed above are all available on Coinbase. The success of these projects and others is growing the demand for Ethereum!
So to recap, Ethereum in a nutshell is basically the world's computer! A decentralized network of everything. Decentralized Apps for almost any use.
If you'd like to buy ETH, Coinbase is a great place to start! You can start today by downloading the Coinbase app from Google Play (Android) or the App Store (iOS) to purchase your first ETH! You'll get $10 for FREE if you buy $100 or more using the Coinbase link above.
For more information on how to use Coinbase, check out our blog post, Coinbase - The Best Place to Get Started With Crypto!
In addition we have a large variety of Ethereum Merchandise available on our site. Click the link to start browsing!