Into the Ether: A Guide to the Ethereum Blockchain  

Bitcoin (BTC) inaugurated the cryptocurrency revolution, but Ethereum (ETH) took decentralized technology to the next level. With its ambitious vision and groundbreaking software design, the Ethereum blockchain continues moving toward its goal of becoming a permissionless version of the internet (aka web3). On Ethereum, developers have the tools to build innovative decentralized applications (dApps), and traders enjoy the freedom to use these services without worrying about centralized counterparties, significantly expanding cryptocurrency’s use cases. 

Despite scalability hurdles and increasing competition, Ethereum remains the “elephant in the room” for web3 development and a major force in crypto categories like decentralized finance (DeFi). Anyone curious about cryptocurrency’s future potential can’t ignore what’s happening in the Ether. 

Ethereum’s history

The idea of Ethereum began in 2014 when the developer Vitalik Buterin published a whitepaper outlining a new way of using blockchain technology to support intermediary-free web-based applications. In July 2014, the growing team of devoted Ethereum developers launched an initial coin offering (ICO) for their Ether coin (ETH) to put their technical blueprint into action. With $18 million from this ICO campaign, the non-profit Ethereum Foundation led research and development of the Ethereum blockchain, and the beta version of Ethereum (aka Frontier) launched in 2015. 

In 2016, Ethereum entered its “Homestead” alpha phase and supported an ambitious peer-to-peer (P2P) crowd-funding governance protocol known as the decentralized autonomous organization (DAO). Shortly after the DAO went live, a hacker discovered a code vulnerability and drained $60 million from the treasury, causing the Ethereum blockchain to split into two networks: the new “Ethereum” chain with reimbursed digital funds and the original “Ethereum Classic” (ETC) chain. 

Following the DAO hack, Ethereum moved forward with multiple upgrades to enhance its efficiency, most significantly “The Merge” in 2022. Following The Merge, Ethereum transitioned from using Bitcoin’s Proof-of-Work (PoW) mining system to a Proof-of-Stake (PoS) algorithm as its base consensus protocol. Overnight, the switch to PoS dropped Ethereum’s energy consumption by 99.9%, and developers plan to build on the PoS foundation to enhance Ethereum’s usability and scalability.

How does Ethereum work? 

Since the 2022 Merge update, Ethereum has used a PoS consensus algorithm in which computers (aka nodes) lock (or “stake”) cryptocurrency on Ethereum’s “Beacon Chain” to get the chance to confirm transactions. Whenever Ethereum’s algorithm chooses a node to verify transfer data, it broadcasts and posts this info on a distributed payment ledger to receive ETH as compensation.

However, this transaction verification process is only one of Ethereum’s functionalities. Unlike prior P2P payment blockchains, Ethereum welcomed third-party developers to build dApps on top of its base layer. Using automated commands called “smart contracts,” it’s possible to design intermediary-free web-based experiences on Ethereum. Smart contracts understand “if/then” statements and fulfill their pre-programmed task when the conditions on the Ethereum blockchain fit their parameters. The introduction of smart contract technology on top of Ethereum’s blockchain makes it possible for programmers to deploy automated applications with limitless use cases. 

Ethereum FAQs

What is the Ether coin? 

The Ethereum coin price listed on crypto exchanges refers to Ethereum’s native Ether coin. In Ethereum’s ecosystem, ETH is essential for securing the network through staking, incentivizing node operators with rewards, and paying for transaction costs (aka gas fees). Ether is a fungible cryptocurrency with a 1:1 market value and a transparent Ethereum price chart.   

What are Ethereum gas fees?

Whenever developers use Ethereum to deploy smart contracts or traders transfer crypto on Ethereum, they pay transaction costs known as “gas fees.” Part of these fees are deleted (aka burned) with every transaction, while the rest go to node operators to compensate them for running the network.

What is wrapped Ethereum? 

Although the price of Ethereum is the same as wrapped Ethereum (wETH), these cryptocurrencies have unique coding standards and aren’t interchangeable. Unlike Ethereum, wETH fits an Ethereum-based token standard called ERC-20, which allows traders to use it within dApps to pay for products or engage with DeFi services. Since ETH doesn’t fit these coding standards, it doesn’t work on dApps as a form of direct payment; instead, ETH is primarily used to pay for gas fees and incentivize node operators. 

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