What is Ethereum (ETH)? | Complete Guide

Ethereum is a decentralized application (dApp) platform that uses a native token by the name of Ether (ETH).


Jump to: History | Partnerships | Features | Smart Contracts | Roadmap | Buy ETH


Ethereum is an open source system that gives app developers the opportunity to create decentralized applications (dApp or dApps) in an easy way through Ethereum Virtual Machine code (EVM) empowered smart contracts.

Ether (ETH) is the native currency of the Ethereum network. It is used to create and distribute applications, raise funds and make payments.

A product of Bitcoin (BTC)

When Bitcoin (BTC) was developed, it mainly majored on being a digital currency. However, Ethereum changed the way cryptocurrencies are viewed and used by bringing on board the ability to solve real-life problems using the blockchain technology.

As a result, most cryptocurrencies being developed today have a specific real-time problem that they are trying to solve. Most of them are using Ethereum’s blockchain model of providing a decentralized platform for developers to build, deploy decentralized applications.

In fact, most of the altcoins being developed have borrowed the smart contract technology from Ethereum, and most of them start with an ERC-20 token before launching their main net tokens

Helpful Ethereum (ETH) resources:

The history of Ethereum

The project is developed by a Swiss non-profit foundation known as Ethereum, after the name of the protocol. The project is the work of a cryptocurrency researcher by the name of Vitalik Buterin, a Bitcoin Magazine contributor at the time.

Ethereum was started in 2013 when Vitalik first described the blockchain in a whitepaper.

The crowdsale

Later on, the foundation hosted an online crowdsale that was launched in August 2014 to fund the project. The project then went live on 30th July 2015 with around with 11.9 pre-mined coins.

You can see the original blog post by Vitalik Buterin himself regarding the details of the crowdsale posted on July 22, 2014.

What is Ethereum (ETH)? | Complete GuideLater on, in 2016, a decentralized autonomous organization (DAO) was created on the Ethereum platform. The DAO was a set of smart contracts, which was very successful since it was able to raise US$150 million in a crowdsale.

The DAO hack

But the DAO project was hacked in June the same year, 2016, when US$50 million worth of ether, which is the token used in the Ethereum blockchain, were stolen.

What is Ethereum (ETH)? | Complete GuideThe hack resulted in a very turf confrontation among the members of the Ethereum community with some feeling that something needed to be done to recover the stolen ether and also boost the security of the Ethereum platform.

This scandal resulted in a hard fork and the Ethereum blockchain split into two: the Ethereum (ETH) and the Ethereum Classic (ETC).

The Ethereum sought to increase the DDoS protection, de-bloat the network and also put in place the right measures to prevent any further hacking.

Suggested: Ethereum Classic (ETC) gets listed on Coinbase!


Ethereum being one of the major cryptocurrencies has earned itself a number of lucrative partnerships. The most recent partnerships are:

  • Partnership with Amazon to Streamline Enterprise Blockchain Deployment through the launch of Kaleido, a blockchain business cloud for simplifying the process of creating and deploying private blockchain networks for enterprises.
  • Partnerships with big banks like J.P. Morgan, Chase, and Banco Santander.
  • Partnership with tech giants like Microsoft and Intel.
  • The team is also working with various governments on ETH implementations

Ethereum features

In addition to smart contracts, Etherum has other features which makes it a great blockchain network. These features include:

Ethereum Virtual Machine (EVM)

The EVM is the runtime environment which supports smart contracts in the Ethereum blockchain. Its register stack is 256-bit, and it is the fundamental consensus mechanism.

THE EVM platform is actually a Turing program that runs on the Ethereum blockchain. It acts as the basis of decentralized application development since it enables anyone to run any program using any programming language provided there are enough time and space for the program to run.

Through the EVM platform, developers have an easier time developing blockchain based decentralized applications since a developer will not need to learn a new programming language to be able to come up with a program on the Ethereum network.

They can develop programs with whichever programming language they are best in provided it is recognized and supported by the EVM.

The EVM supports C++, Python, Go, Java, JavaScript, Ruby, Web Assembly, Rust, and Haskell programming languages. This gives developers a wide range of programming languages to choose from depending on which language they are best in.What is Ethereum (ETH)? | Complete Guide

Want to know more about EVM? See our Complete Guide and Infographics to EVM

Ethereum (ETH) transaction speeds

The average Ethereum block time is 15 seconds, which makes it quite fast compared to other blockchain networks like Bitcoin.

New coins are generated at a consistent rate

When mining Ethereum Ether (ETH) coins, the ETH coins are generated at a constant rate of 5 ETH coins per every mined block.

This is different from the other cryptocurrencies since for most of them the rate at which the coins are generated during mining reduces over time. This rate of generating ETH coins can only change due to a hard fork.

What is Ethereum (ETH)? | Complete GuideEthash Proof-of-Work (PoW) verification protocol

Contrary to the local currencies where the verification process is centralized to the central banks, blockchain technologies involve the whole network in verifying its transactions. Ethereum, in particular, uses the Ethash Proof-of-Work consensus mechanism in verifying its transactions.

The Ethash Proof-of-Work verification protocol is an improvement of the normal PoW consensus mechanism in that its computational overhead is normally reduced and hence the fast transactions speeds since once the transaction is verified, then the transaction can be allowed to take place.

Ethash uses as the Ethash DAG, which is a 1GB dataset and a 16MB cache, which is for the light clients. Miners acquire shares of the DAG and use them in generating mix-hashes using data from the transactions and receipts, alongside cryptographic nonce.

Flexible transaction fees

The transaction fees vary depending on the complexity of the transaction, the storage needs and the bandwidth that is set aside for the transaction.

Ethereum smart contracts

Ethereum is a decentralized blockchain platform/network that runs smart contracts. Ethereum was the first protocol to implement smart contracts in the context of virtual currencies.

A smart contract is an automated contract executed by a computer based on a set of rules or criteria. The terms of the agreement between the involved parties are put down in the form of a program, which is embedded into a blockchain network.

Smart contracts make it possible for parties to transact in a trusted manner without the need for a mediator between them. One the smart contract is started, both parties are assured that all the terms of the agreement that are laid down in the smart contract will be executed without fail.

The smart contracts have revolutionized the blockchain industry in that it renders cryptocurrency transactions carried out among anonymous parties to be transparent, traceable and irreversible. It has also made things very easy for decentralized application developers.

How does an Ethereum smart contract work?

What is Ethereum (ETH)? | Complete GuideThrough smart contract technology, Ethereum has attracted very many developers/programmers since they can develop, and run their own software on the Ethereum blockchain network.

The developers are able to come up with programs that are compatible with a blockchain network without having to learn a lot of programming.

The whole process of creating decentralized applications has been completely revamped and made a hundred times easier by smart contracts. As a result, decentralized application developers can now come up with blockchain solutions for the real world industries.

Use cases for Ethereum smart contracts

Ethereum smart contracts have a variety of use which is mainly geared towards developing blockchain decentralized applications:

Using smart contracts, dApp developers can:

Develop decentralized application

Developers can use the Ethereum blockchain to build blockchain applications to solve specific real-life problems.

An example of dApps which developers have managed to develop on the Ethereum blockchain include ETH Town game, DopeRaider, CryptoTask and FreedomDEX among many more.

The developer is in turn rewarded when users on the blockchain network purchase their dApps.

Design and issue new cryptocurrency

A developer may choose to have a new cryptocurrency for the dApp that he/she has developed. Ethereum allows the developer to create a tradable digital token that can be used as a currency to purchase services and products.

Such cryptocurrencies are generally compatible with any wallet, contract or exchange using the standard being used since they use a standard coin on your smart contract.

Developers can choose to have a fixed supply token, a central bank that can give out money or a puzzle based token.

Fund projects through a crowdsale (ICO)

For most developers, the initial process of raising capital is very rigorous, and at times very it becomes hard to raise the amount of capital that is required by banks or venture capitalists.

Smart contracts can be used in such cases to raise the amount of capital required through an Initial Coin Offering (ICO).

An ICO is the issuance of a new cryptocurrency, coin or token to help fund a project. By using Ethereum (ETH) smart contracts, project owners can easily raise money in a trustless way from anyone in the world.

Further, the Ethereum platform allows for the creation of ‘intermediary’ tokens, known as ERC20 tokens. Projects owners issue an ERC20 token specific to their project in exchange for the investors’ money. Ultimately, these projects launch their own blockchains and native tokens.

What is Ethereum (ETH)? | Complete Guide

Smart contracts help in outlining the legal tender between the developers and the contributors who want to support the project with funds for starting capital. Both the developer and the contributor are very secure when they enter into a smart contract.

For the contributor, the funds that he/she contributes is normally locked until the project becomes completed and it cannot be refunded till then. If the project becomes a success, the developer does not refund the funds.

However, if the project fails, then the smart contract will automatically refund the contributor with his funds because of the rules stipulated in the smart contract.

Smart contracts have made ICO more simple and secure.

Also, apart from ICOs, smart contracts are also used for selling virtual shares in any blockchain organization through acrowdsale.

Hiring people to handle the accounts and manage the dApp project

After developing a decentralized application and deploying it through the Ethereum blockchain, you will need to hire managers and CFO to manage the account of your project.

The process of collecting applications from interested people, interviewing and shortlisting the interviewees can be very stressing.

But that should not worry anyone! You can leave all that work to the Ethereum smart contracts. They can collect the applications from the interested parties and pass them through a very transparent voting process which is free from external interference.

Therefore, the managers that you will employ will be chosen due to their qualifications but not through any form of corruption.

The smart contract can only choose someone following what it was programmed to use during the shortlisting process. There are no chances of external influencing.

Advantages of developing dApps using Ethereum smart contracts

Immutability: there are chances of having a third party making changes to the data of the application.

Free from censorship: Ethereum network is formed around the consensus principle which makes it very hard for anyone to tamper with the codes.

Security: Smart contracts are embedded into a blockchain network, meaning they are still secured through cryptography technology. Therefore no chances of hacking. The involved parties are also guaranteed that in case the laid out terms are not honored by one of the parties, then the other party is entitled to a refund of his funds.

No downtime: Decentralized that are made using the smart contracts can never go down or get switched off.

Ethereum Roadmap

The founder of Ethereum, Vitalik, outlined four crucial problems that Ethereum must deal with for it to be successful. The four included: privacy, Scalability, consensus safety and smart contracts.

These four objectives are to be dealt with in four phases which include:

  1. Frontier;
  2. Homestead;
  3. Metropolis; and
  4. Serenity

Frontier was the first phase, and it is already complete. It involved the initial release of Ethereum in 2015. It gave the miners the leeway to start mining. It also made it possible for crypto exchanges to list ETH.

Homestead was the second phase, and it is also already complete. It involved upgrading the Ethereum ecosystem to the system that is being used at the moment. The main upgrades were on the protocols.

Metropolis is the third phase, and it is still ongoing. It is divided into two parts. The first part is known as byzantine, and it has started, and it involves solving the issue with scalability through Plasma and sharding technologies.

Plasma makes it possible for transactions done through smart contracts to be verified on a side chain so as to free up the main chain.

Sharding, on the other hand, involves splitting the data that is handled by a chain in a way that every node handles only a small portion of the whole chain instead of the whole chain going through a node.

The second part of the third phase of the roadmap is referred to as Constantinople, which is set to introduce Capser Proof-of-Stake consensus mechanism.

At the moment, Casper Proof-of-Stake is under test. After the upgrade, most of the transactions will still remain under Ethash Proof-of-Work with only the 100th transaction being verified through the Casper Proof-of-Stake.

Serenity is the fourth and last phase of Ethereum roadmap.at this time Casper Proof-of-Stake will be fully operational.

Where to purchase Ethereum (ETH)

Ether (ETH) can be purchased at any of the following exchanges:

Buy ETH with USD, EUR, CAD and more

If you are looking to exchange your local currency (fiat) for Ethereum (ETH), we recommend the following trusted exchanges:

Buy ETH with Bitcoin and other cryptocurrencies

Buying ETH is not limited to your local currency. In fact, it’s easier, quicker and cheaper to do so with other currencies. The following are trusted exchanges and services to buy ETH with other virtual currencies like Bitcoin, Litecoin, etc:

After acquiring the Ethereum (ETH) coins, we strongly recommend storing them in a hardware wallet such as a Trezor or a Nano Ledger S.

Leave A Reply

Your email address will not be published.