What is Ethereum?
Ethereum is a community-driven software that features smart contract functionalities and helps developers build decentralized applications. It is the second largest cryptocurrency by marketcap and by far the most active blockchain in the crypto industry. Similar to Bitcoin, Ethereum hosts a native token (ETH), which can be used to exchange value and fuel the platform’s activities.
Apart from acting as a foundation for new cryptocurrency projects, Ethereum is also empowering DeFi (Decentralized Finance). The growth of DeFi products is still at its early stages but is expected to experience a massive surge of interest, making Ethereum ever more important in the coming years.
How Ethereum works
Ethereum is often discussed in terms of its platform’s functionalities, and its native token. Each one has a different purpose:
The Ethereum network (blockchain) - By learning Ethereum’s native programming languages and understanding the fundamentals, developers use Ethereum to build decentralized products or cryptocurrencies for a broad range of industries.
The currency (ETH) - The token of the Ethereum network is known as ETH. Unlike Bitcoin, Ethereum does not have a limited supply but introduces a certain number of new tokens into circulation each year. Since December 2020, the project migrated to a Proof-of-Stake (PoS) consensus model, offering recurring staking rewards.
While the fundamental value of Ethereum is very strong, it is not the only factor that makes it worth considering. The project and its native token have many benefits that you should keep in mind.
Decreasing supply growth - Ethereum increases its supply by an average of 4% per year. The amount decreases each year, and the introduced supply is used to fuel the platform’s growth and development.
Established community - In its 5 years of existence, Ethereum has amassed a large community that believes in the future of its token and builds upon its blockchain. Since demand is the only factor driving the price of a cryptocurrency, this feature further increases the current Ethereum price.
Passive income opportunities - Users that hold more than 32 Ethereum in their private wallet qualify for staking rewards that range between 4% and 10% per year. The rewards come from transaction fees of the Ethereum network and are thus subject to fluctuation. In recent times, popular trading platforms also offer the possibility to earn staking rewards by staking less than 32 ETH, through staking pools.
Parent blockchain for emerging trends - Since Ethereum is the underlying blockchain for most new crypto projects, it has become imperative for emerging industries. NFTs are a popular example. Over the past year, we saw explosive growth in digital art being sold on the Ethereum blockchain, and the trend is expected to continue in the years to come.
Popularity - Ethereum claims the second place of the best cryptocurrencies by market cap. It is listed on most exchanges globally and empowers decentralized trading platforms. It is thus easily recognizable, even by new investors.
Who invented Ethereum
Ethereum was invented by Vitalik Buterin, who co-founded the cryptocurrency in July 2015, along with Gavin Wood, Charles Hoskinson, and Anthony Di Iorio.
Buterin first explained the concept of Ethereum in an early version of the project’s whitepaper. According to him, Bitcoin needed a scripting language for application development. When he failed to gain support from the Bitcoin community, he proposed the development of Ethereum through the official whitepaper.
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