We present a complete guide to understanding Ethereum and it’s technology in the field of cryptocurrency development. We include helpful explanations, illustrated guides, historical data, and technical details. This article is brought to you by Digital Financial Market.
Last Updated: 10/17/2022
The Ethereum Cryptocurrency
Ethereum (ETH) is a blockchain cryptocurrency based on creating networks of decentralized applications. The power of Ethereum and its network is that an application can be developed to create smart contracts and a tokenized cryptocurrencies that serve a purpose as an NFT (Non-fungible Token).
This Ethereum-based Token is then traded through the blockchain using the ERC-20 Network. In which the sender must pay a transaction fee, also called Ethereum Gas fee, in order for Data Miners to secure and send the tokens successfully through the blockchain.
Ethereum Price Chart
Ethereum (ETH) Price
Ethereum Gas Fees: The Price of Network Transactions
Users bid ETH for Gas transactions, and if the bid is too low, no Miners will accept the transaction, and the ETH gas fee that was paid will simply be lost, sometimes referred to as burning gas.
Although the process of transactions are expensive and somewhat unreliable, the Ethereum Network and blockchain provides an extraordinarily powerful platform for creating widely available NFT Tokens for applications, digital tools, and video games.
As an example, ETH can be traded for any Token on the Ethereum Network because ETH is the standard currency that covers the Gas Fee, however not every Token can be traded for ETH.
ETH can be traded for an ERC Token based on the initial launch platform, however an ERC Token can only be exchanged for ETH if there are sellers that are willing to purchase your specific ERC Token.
An Example of ERC Token Distribution
A great example would be Gitcoin (GTC), an ethereum based Token. Say you wanted to buy Gitcoin, you would visit the platforms official site, in this case Gitcoin.co. Then from their platform, they have decided that 50% of all GTC will be distributed to those who are awarded it through open-source projects or purchase it on their platform.
For every award or direct purchase, the company Gitcoin.co will send the amount GTC through the ERC network, pay a gas fee, then the investor or contributor will have the GTC tokens deposited in their GTC wallet that they have specified.
Understanding the Value of Ethereum Tokens
As an example of the timeline of the value of Gitcoin. GTC was first distributed as early as 2017, and people could purchase or trade the token, however the value was somewhat arbitrary. Gitcoin decided in 2021 that they are further expanding the platform and declaring an open market price of $3.05 USD.
Beyond that, it is the markets decision for where the value of the token goes. GTC has been a successful project, so the price has risen because there is a lot of value in the platform.
However, other projects have seen less success, and the result is that a Token may lose all of its value or becomes unable to be traded for anything else.
Keep in mind that every Ethereum trade that isn’t in a Closed Exchange will cost a gas fee, which averages $45 USD of ETH as of 2021.
Ethereum Mining
Ethereum (ETH) is earned through the process of data mining the ETH blockchain. In most cases, one may have to join a mining pool in order to receive a payout because the block size takes a very large amount of computing power to complete.
Anyone can mine Ethereum using a computer CPU or GPU. However, it is highly recommended to use a GPU because CPU is inefficient and costly. Most GPUs can be configured to mine the blockchain, next-gen Nvidia GPUs have been very popular for this purpose.
Related Links On Ethereum Mining
See the official Ethereum Mining page.
See a tutorial on setting up a GPU Ethereum Miner and Earning ETH.
The Difference Between Ethereum and Ethereum Classic
In 2016, the community of Ethereum (ETH) had experienced a major hack where $50 Million USD worth of ETH was stolen due to a security flaw. After this occurrence, the community, or DAO (Decentralized Autonomous Organization), decided to develop a new protocol for advancing the Ethereum network.
From this decision, the Ethereum blockchain created two new independent blockchains, Ethereum Classic (ETC) which kept the same features, and Ethereum (ETH) which converted to a proof-of-work protocol.
When blockchains decide to split like this, it is known as a hard fork. The blockchain for Ethereum and Ethereum classic are identical for any transactions made before the hard fork in July of 2016.
Ethereum (ETH) Current Price
Ethereum Classic (ETC) Current Price
Ethereum vs. Bitcoin
The Ethereum network is the direct competition Bitcoin. ETH is crowned the largest cryptocurrency network outside of the Bitcoin blockchain. The decentralized Ethereum network is based on the premise of developing tokens to be used as cryptocurrencies for creating and developing applications. The ETH blockchain can be found on the website etherscan.io.
Key Differences Between Ethereum and Bitcoin
- Ethereum can be mined with a GPU, while Bitcoin is limited to CPU.
- ASIC Devices dominate Bitcoin Mining, while Ethereum has a very large GPU support.
- There is no transaction fee for Bitcoin transactions, Ethereum charges Gas Fees to complete transactions.
- Ethereum allows applications and tokens to be developed and launched on the network. Bitcoin is only intended as a transactional network.
- Ethereum has a clear and transparent ownership, Bitcoin founders have disappeared under mysterious circumstances.
The History of Ethereum
Ethereum was created by Canadian Software Engineer Vitalik Buterin in 2013. The project was later launched publicly in July of 2015 with fellow Ethereum Co-founders. Many protocol upgrades have advanced the Ethereum blockchain, and one hard fork in 2016 resulted in the creation of Ethereum classic (ETC).
In January 2018, Ethereum reached its former all-time high of about $1,300 before the Crypto Bubble burst and it lowered down to between $100 – $200 for years. In the 2021 Crypto growth, ETH beat its previous all-time high and achieved a legendary valuation of over $4,800 in November of 2021.
In 2021, there have been two protocol upgrades named “Berlin” in early 2021 and “London” upgrade later in the year. Issues at hand include the challenges of Gas Prices, which are volatile and somewhat unstable. It was initially proposed that a protocol be implemented to stabilize gas fees and “burn” the transactional ETH rather than reward the miner. However, there was significant pullback from the mining community and an alternative solution was proposed through ETH2.
Ethereum 2 (ETH2)
The community decided that a solution would be created in a 3 phase upgrade to Ethereum 2 (ETH2), a newly proposed proof-of-stake protocol. Ethereum 2 is directly linked in price with ETH, and is yet to be a considered a hard fork. ETH2 is still in beta, called Phase 0, and will be reaching Phase 1 in early 2022.
By using proof-of-stake, Ethereum holders can stake, or lend, their ETH for interest rewards using the blockchain protocol. The current rate for ETH2 staking is 5% APR return. You can currently stake your ETH on Coinbase.
The Merge: A Historical Blockchain Change From PoW to PoS
In September of 2022, the greater Ethereum community decides to change, or fork, the entire network to a Proof-of-Stake Network that uses a new consensus protocol and no longer uses GPU or CPU processing to mathematically process and mine Ethereum Blocks.
The new mainnet was tested significantly by Vitalik Buterin and developing leaders in ETH to use a new network structure called “sharding” which splits big data transactions in a more efficient way.
This led to the creation of a new forked token, ETH Pow, which crashed over -44% within hours of the fork.
Founders of Ethereum
Vitalik Buterin
Ethereum Founder
At TechCrunch Conference 2017 in San Francisco, California
Full List of Ethereum Founders:
- Vitalik Buterin
- Charles Hoskinson
- Gavin Wood
- Mihai Alisie
- Joseph Lubin
- Anthony Di Iorio
- Amir Chetrit
- Jeffrey Wilcke
Of the founders of Ethereum, only 3 are still involved in the project. Vitalik Buterin is currently the leader and figurehead for the cryptocurrency and protocol upgrades. Joseph Lubin and Mihai Alisie are working on projects in the Ethereum community including EthSuisse, a Swiss-based company.
The other founders have focused their efforts on other projects and industries.
Ethereum Blockchain Explorer: Etherscan
The wonders of blockchain technology have now allowed a new level of transparency in digital finance. The famous website EtherScan.io is a community project that displays the blockchain transactions for anyone to view.
This tool allows you to track your transactions through the blockchain, see the current hash rate and miner rewards, and determine a good bidding range for gas prices.
Etherscan.io Explained
Below is a snapshot of the Etherscan front page. We will dive into the details into what each highlighted section means.
How To Use Etherscan
Colors are coordinated with highlighted image.
Market Cap: Displays the current market value of every ETH multiplied by the total supply.
Search Bar: Type in a Token Symbol, Wallet address, or Transaction Hash to find transaction information on the blockchain.
Latest Block: Shows the latest block awarded, displaying the Miner who received the ETH, and the amount awarded.
Latest Transactions: Transparently shows the latest transactions across the blockchain. Includes receiving and sending wallet address
Difficulty: A display of the current Mining difficulty to earn a block (2 ETH), measured in TeraHash.
Related FAQ
What is Ethereum?
What is ETH?
What is Ether?
What is Etherscan?
Why is Ethereum So Valuable?
Why is Ethereum Better Than Bitcoin?
How Does Ethereum Work?
What is the Ethereum Blockchain?
How Can I See the Ethereum Blockchain?
How Do I Mine Ethereum?
Who Made Ethereum?
What is the History of Ethereum?
What is a ERC Token?
What is an Ethereum Gas Fee?
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