Understanding Ethereum’s Currency: Ether

Lessons > Understanding Ethereum’s Currency: Ether
Course Content
Introduction to Ethereum
⦁ What is Ethereum? Welcome to the first lesson of our course, "Introduction to Ethereum for Beginners." Today, we will dive into the world of Ethereum and start exploring this fascinating technology. Ethereum, in the simplest terms, is an open-source, blockchain-based platform that enables developers to build and deploy decentralized applications (dApps). It was proposed in late 2013 by a cryptocurrency researcher and programmer named Vitalik Buterin and development was funded by an online crowdsale in mid-2014. The Ethereum platform has its own cryptocurrency, known as Ether (ETH), which is used primarily for two purposes: as a digital currency, like Bitcoin, and is used inside Ethereum to run applications and even to monetize work. But Ethereum is so much more than just a cryptocurrency. It's a whole ecosystem that allows developers to build and run smart contracts - self-executing contracts with the terms of the agreement directly written into code. This means that Ethereum is not just a platform but also a programming language (Turing complete) running on a blockchain, helping developers to build and publish distributed applications. Ethereum's vision is to create a "World Computer" - a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud, or third-party interference. ⦁ The History of Ethereum As we continue our journey into the world of Ethereum, it's important to understand its roots. The history of Ethereum is not just a timeline of events, but a story of innovation, collaboration, and the drive to create a decentralized future. Ethereum was conceived in 2013 by Vitalik Buterin, a programmer involved with Bitcoin. Buterin saw the potential of Bitcoin and blockchain technology but felt that it was limited in scope. Bitcoin was primarily a currency, and its blockchain could not be used for other applications. Buterin proposed a new platform, Ethereum, which would feature a general scripting language and allow developers to create any kind of application on its blockchain. Buterin's proposal was met with enthusiasm, and in January 2014, Ethereum was formally announced at the North American Bitcoin Conference in Miami. The core Ethereum team consisted of Vitalik Buterin, Mihai Alisie, Anthony Di Iorio, and Charles Hoskinson. Later, Joseph Lubin, a co-founder of Ethereum who has been a significant contributor to the ecosystem, founded ConsenSys, a blockchain technology company. In order to fund the development of Ethereum, the team decided to conduct a crowdsale of Ether, Ethereum's native cryptocurrency. The crowdsale took place between July and August 2014 and was a huge success, raising over $18 million. The development of Ethereum was divided into four stages: Frontier, Homestead, Metropolis, and Serenity. Each stage added new features and improvements to the platform. Frontier, the initial stage, was launched in July 2015. It was intended for developers and technical users, allowing them to mine Ether and create smart contracts. Ethereum has had its share of challenges along the way. One of the most significant events in Ethereum's history was the DAO attack in 2016. The DAO (Decentralized Autonomous Organization) was a complex smart contract on the Ethereum blockchain that was hacked, leading to the theft of 3.6 million Ether. This event led to a hard fork in the Ethereum blockchain, resulting in two separate chains: Ethereum (ETH) and Ethereum Classic (ETC). Despite these challenges, Ethereum has continued to grow and evolve. It has become the leading platform for decentralized applications and has paved the way for the Decentralized Finance (DeFi) movement. Today, Ethereum is not just a platform but a vibrant ecosystem of developers, innovators, and users who are shaping the future of the internet. In the next section, we will delve deeper into Ethereum's purpose and how it aims to revolutionize the world of software development and finance. So, let's move on to the next topic: Understanding Ethereum's Purpose. ⦁ Understanding Ethereum's Purpose As we continue our exploration of Ethereum, it's crucial to understand its purpose. Why was Ethereum created, and what problems does it aim to solve? Let's dive into this topic to gain a deeper understanding of Ethereum's mission and vision. Ethereum was created with the intention of taking the blockchain technology that underpins Bitcoin and adding a programming layer on top of it. This layer, known as the Ethereum Virtual Machine (EVM), allows developers to write smart contracts and decentralized applications (dApps) that can run on the Ethereum blockchain. But why is this important? To answer this question, we need to look at the problems that Ethereum is trying to solve. ⦁ Centralization: In the traditional internet, most applications and services are controlled by a few large companies. These companies can censor content, restrict access, and misuse user data. Ethereum aims to solve this problem by creating a decentralized platform where applications are run on a network of computers, not controlled by any single entity. ⦁ Trust: Traditional contracts and transactions require intermediaries, like banks and lawyers, to ensure trust between parties. With Ethereum's smart contracts, the terms are written in code and automatically executed by the blockchain, eliminating the need for intermediaries and reducing the risk of fraud. ⦁ Innovation: By providing a platform for developers to write decentralized applications, Ethereum opens up a whole new world of possibilities for innovation. Developers can create anything from decentralized finance (DeFi) applications to decentralized social networks. Ethereum's purpose, then, is to enable the creation of applications that are not only decentralized but also immutable, transparent, and free from the control of any single party. It's about taking back control from centralized authorities and giving it to the users. In essence, Ethereum seeks to be the backbone of a new, decentralized internet - often referred to as Web 3.0. In this new internet, users control their own data, applications are resistant to censorship, and trust is established not through intermediaries but through code and consensus algorithms. In the next module, we will dive deeper into the technology that makes Ethereum possible - blockchain. We'll explore what blockchain is, how it works, and how it's connected to Ethereum. So, let's move on to the next module: Understanding Blockchain and Ethereum.
0/7
Understanding Blockchain and Ethereum
Ethereum Vs. Bitcoin
Understanding Ethereum’s Currency: Ether
Decentralized Applications (DApps) on Ethereum
Smart Contracts on Ethereum
The Future of Ethereum
Official Ethereum Resources
Ethereum Blockchain For Beginners.
About Lesson

Understanding Ethereum’s Currency: Ether

What is Ether?

Ether, often symbolized as ETH, is the native cryptocurrency of the Ethereum platform. It’s more than just a digital currency; it’s the fuel that powers the entire Ethereum ecosystem.
Just as the US Dollar is used as a medium of exchange in the United States, Ether is used within the Ethereum platform to facilitate transactions and incentivize participants to perform certain actions.
When you hear people talking about buying, trading, or paying with Ethereum, they’re typically referring to Ether, even though the terms are often used interchangeably.

The Role of Ether in the Ethereum Network

Ether serves two main purposes within the Ethereum network:

⦁ Fuel for the Network: Every action on the Ethereum network requires computational resources. Ether is used to pay for these resources. This ensures that the network remains efficient, as it discourages wasteful transactions.
⦁ Incentive for Miners: Miners validate transactions and add them to the Ethereum blockchain. They’re rewarded with Ether for their work. This incentivizes miners to continue supporting the network.
Ether vs. Bitcoin

While Bitcoin was created primarily as a digital currency, Ether has a broader use within the Ethereum ecosystem. It’s not just a currency; it’s a key component of the platform’s infrastructure.
In the next sections, we’ll delve deeper into how you can acquire Ether and the various uses of this versatile cryptocurrency. As we progress, you’ll understand why Ether is such a crucial part of the Ethereum platform and why it’s more than just a digital currency.
In the next lesson, we will discuss how to acquire Ether and the various methods available for doing so. Stay tuned!

⦁ How to Acquire Ether
Now that we understand what Ether is and its role in the Ethereum network, let’s explore the various ways you can acquire Ether.

Buying Ether

The most straightforward way to acquire Ether is to buy it. Many cryptocurrency exchanges allow you to purchase Ether with traditional currencies (like USD, EUR, GBP) or other cryptocurrencies (like Bitcoin). Here are a few popular exchanges where you can buy Ether:
Coinbase: This is one of the most user-friendly platforms for beginners. It allows you to buy Ether with your local currency using a debit or credit card.
Binance: This is the world’s largest cryptocurrency exchange in terms of trading volume. It offers a wide variety of cryptocurrencies for trading, including Ether.
Kraken: This exchange is known for its security features and transparency. It allows you to buy Ether with fiat currencies or other cryptocurrencies.
Remember, it’s crucial to do your research and choose a reputable exchange. Always consider factors like security, fees, and customer support when choosing an exchange.

Mining Ether

As we discussed in the previous section, Ether is also rewarded to miners for validating transactions and adding them to the Ethereum blockchain. This process is known as mining.
However, mining requires a significant investment in hardware and electricity, and it’s not recommended for beginners. It’s also worth noting that Ethereum plans to move away from mining in the future with the introduction of Ethereum 2.0.
Earning Ether

Another way to acquire Ether is by earning it. Some platforms pay users in Ether for performing certain tasks or services. For example, you can earn Ether by:
Blogging on Steemit: Steemit is a blogging and social media platform that pays users in cryptocurrency for creating and curating content.
Working on Gitcoin: Gitcoin is a platform where you can get paid in Ether for working on open-source projects.
Remember, the value of Ether can fluctuate significantly, so it’s important to consider this when deciding how to acquire it.

Uses of Ether
Now, let’s delve into the various ways Ether is used within the Ethereum ecosystem. Understanding these uses will provide a clearer picture of why Ether is more than just a digital currency.

Use as a Digital Currency
Just like Bitcoin, Ether can be used as a digital currency for peer-to-peer transactions. You can send and receive Ether anywhere in the world, making it a global currency. It’s important to note that while Bitcoin was created primarily as a digital currency, Ether’s use as a digital currency is just one of its many applications.

Gas for Transactions and Smart Contracts

One of the primary uses of Ether is as “gas” for transactions and smart contracts on the Ethereum network. Every transaction or smart contract execution on Ethereum requires computational resources. Ether is used to pay for these resources, with the cost referred to as “gas.”
The gas system ensures that the network remains efficient by discouraging wasteful transactions. It also incentivizes miners to validate and add transactions to the blockchain, as they receive the gas fees as a reward.
Staking in Ethereum 2.0

With the Ethereum 2.0 upgrade, Ethereum has transition from a proof-of-work (PoW) system to a proof-of-stake (PoS) system. In a PoS system, validators are chosen to create a new block based on the number of Ether they hold and are willing to “stake” as collateral.
In Ethereum 2.0, Ether holders will be able to stake their Ether to help secure the network. In return, they will receive rewards in the form of additional Ether. This provides a new use for Ether and an incentive for individuals to hold and use Ether.

Participation in ICOs
Initial Coin Offerings (ICOs) are a popular method for blockchain projects to raise funds. Many ICOs on the Ethereum platform accept Ether as a form of payment. Therefore, if you want to participate in an ICO on the Ethereum platform, you may need to acquire Ether.

Powering Decentralized Applications (DApps)

Finally, Ether is used to power the various decentralized applications (DApps) built on the Ethereum platform. DApp users typically need to pay in Ether for transaction fees or for using specific features within the DApp.
To sum up, Ether plays a crucial role in the Ethereum ecosystem. It’s not just a digital currency, but the lifeblood that powers the entire network. Its uses are diverse, ranging from fueling transactions and smart contracts to staking in Ethereum 2.0 and powering DApps.
In the next module, we will delve into the world of Decentralized Applications (DApps) on Ethereum. Stay tuned!

 

Join the conversation
Previous
Next
Bookmark