Ether (ETH) is one of the most popular cryptocurrencies in the world, second only to Bitcoin in market capitalization. As of late 2022, there were approximately 122 million Ether tokens in circulation. To understand Ether, one must first understand Ethereum—the decentralized blockchain platform that serves as its foundation. Ethereum is not merely a medium of exchange or an investment asset; it is a versatile application platform. But what exactly are Ether and Ethereum? What changes did the Ethereum ETH 2.0 upgrade bring? Let’s break it all down.
Note: The first major update after the Ethereum Merge is scheduled for 2023. Named the Shanghai upgrade, it will enable stakers to withdraw their assets and improve the network’s data capacity, which is expected to reduce transaction fees.
Understanding Ethereum
Ethereum is the first and largest decentralized application platform built on blockchain technology. It allows anyone to build and deploy applications such as smart contracts and decentralized apps (DApps).
It was initially proposed in 2013 by Vitalik Buterin and developed by a team of nine founders, officially launching in July 2015. Ethereum was created to address limitations in Bitcoin’s design. Buterin, a former Bitcoin developer, had proposed making Bitcoin a more extensible platform. When his ideas were rejected, he decided to build Ethereum.
Ethereum leverages blockchain technology—a distributed ledger system—to provide security, openness, and scalability. These attributes make it suitable for a wide range of technological applications.
What is Ether?
Ether (ETH) is the native cryptocurrency of the Ethereum blockchain. It is the second-largest cryptocurrency by market capitalization after Bitcoin. Think of Ether as the “fuel” that powers the Ethereum network.
For example, if you want to build a DApp on Ethereum, the network relies on miners (or validators) to process and confirm your transactions. This computational work requires payment in Ether. The more complex the operation or the longer it takes, the more Ether you will need to pay.
Ether has many use cases, but the core idea is simple: every blockchain network, like every country, has its own currency. In Taiwan, people use the New Taiwan Dollar; in the US, the US Dollar. On the Ethereum blockchain, the currency is Ether.
| Ethereum & Ether Quick Facts | |
|---|---|
| Founder | Vitalik Buterin |
| Launch Date | July 30, 2015 |
| Underlying Technology | Blockchain |
| Currency Code | ETH |
| Native Token | Ether |
| Currency Symbol | Ξ |
| Governance Model | Decentralized |
| Total Supply | No maximum cap (with annual burns to control inflation) |
| Current Ranking | #2 |
Ethereum vs. Ether: What’s the Difference?
It’s easy to confuse Ethereum and Ether, but they refer to different things:
- Ethereum is the decentralized network or platform itself.
- Ether is the cryptocurrency used to pay for operations on that network.
Ethereum cannot be bought or sold—only Ether can. Ethereum is a programmable blockchain-based technology, while Ether is a crypto asset that enables its operations.
How Does Ethereum Work?
Ethereum is a multipurpose platform built using programming languages. It is highly controllable and has a low error rate, which allows it to support a variety of functions and technologies.
Two of its most important applications are:
- DApps (Decentralized Applications): These are applications that run on a decentralized network rather than a centralized server. Unlike traditional apps like Facebook or YouTube, DApps don’t require approval from any central authority. Anyone can develop and launch a DApp on Ethereum.
- Smart Contracts: These are self-executing contracts with terms directly written into code. They run on the Ethereum blockchain and automatically execute when conditions are met. Because they are decentralized, they don’t require intermediaries like lawyers or banks. This reduces cost, time, and the risk of fraud.
Smart contracts also enable NFT ownership verification and transfers.
The Role of the Ethereum Virtual Machine (EVM)
The Ethereum Virtual Machine (EVM) is the core of Ethereum’s operating system. It is a decentralized computer that ensures all rules are followed during transactions or smart contract executions. Every node in the network runs its own EVM.
Here’s how it works:
When a transaction or smart contract is initiated, every node processes it through its EVM. All nodes must agree on the outcome for the transaction to be considered valid and recorded on the blockchain. This agreement mechanism is part of what makes Ethereum secure. Executing these operations requires Ether to pay transaction fees.
How Does Ether Work?
Ether supports Ethereum’s financial system and keeps the network running. Because Ethereum is decentralized, there is no central bank to print currency or verify transactions.
So how does a transaction from User A to User B work?
The network relies on nodes (computers) to validate transactions. This process is often called “mining,” and the people who do it are miners. Miners use computing power to solve complex mathematical problems that verify transactions and add them to the blockchain. In return, they earn Ether as a reward.
Users pay a fee—known as the gas fee—in Ether to miners for processing their transactions. Gas fees fluctuate based on network demand. The busier the network, the higher the fee.
What is Ethereum 2.0?
Ethereum 2.0 refers to a major upgrade aimed at making the network faster, more secure, and more efficient. The most significant change was the shift from a Proof-of-Work (PoW) consensus mechanism to Proof-of-Stake (PoS). This transition, known as the Merge, was completed in September 2022.
The upgrade is expected to reduce Ethereum’s energy consumption by 99.95% and enable greater scalability.
Here’s a brief overview of the key changes:
| Ethereum 1.0 vs. Ethereum 2.0 | |
|---|---|
| Consensus Mechanism | Proof-of-Work (PoW) → Proof-of-Stake (PoS) |
| Chain Structure | 1 main chain → 1 beacon chain + 64 shard chains |
| Native Asset | ETH → ETH |
The upgrade occurred in three phases:
- Phase 0: Introduction of the Beacon Chain, which manages validators and implements PoS.
- Phase 1: The Merge—combining the original PoW chain with the new PoS chain.
- Phase 2: Introduction of shard chains, which spread transactions across 64 new chains to increase capacity.
Ether vs. Bitcoin: What’s the Difference?
Although both are cryptocurrencies, Ether and Bitcoin serve different purposes.
Bitcoin is primarily a store of value and a medium for peer-to-peer transactions. Ether, on the other hand, is used to power a broad ecosystem of decentralized applications, financial services, and games.
Key differences include:
- Bitcoin has a fixed supply of 21 million coins; Ether has no hard cap but uses a burn mechanism to control inflation.
- Bitcoin uses Proof-of-Work; Ethereum now uses Proof-of-Stake.
- Bitcoin transactions take ~10 minutes; Ethereum transactions take ~5 minutes.
- Bitcoin is often called “digital gold”; Ether is more like “digital fuel.”
For a more in-depth comparison, see the table below:
| Ether vs. Bitcoin Comparison | |
|---|---|
| Launch Date | 2015 (ETH) vs. 2009 (BTC) |
| Supply | No max (ETH) vs. 21M (BTC) |
| Consensus | PoS (ETH) vs. PoW (BTC) |
| Transaction Fee | Varies with network congestion (ETH) vs. ~$1.25–5 (BTC) |
| Transaction Time | ~5 minutes (ETH) vs. ~10 minutes (BTC) |
How to Check the Price of Ether
You can check the real-time price of Ether on various cryptocurrency exchanges and tracking platforms. Some popular options include:
- Coinbase: User-friendly interface with customizable time frames.
- BitcoinWisdom: Tracks prices across multiple exchanges.
- CoinDesk: Provides detailed price data and charts.
- Bitcoinity: Allows users to track multiple cryptocurrencies.
How to Buy Ether
You can buy Ether in three simple steps:
- Choose a cryptocurrency exchange: Select a reputable exchange that supports ETH.
- Create an account and deposit funds: Complete any required verification steps and deposit fiat currency (e.g., TWD).
- Place an order: Use the exchange’s trading interface to buy ETH at the current market price.
After purchasing, it’s important to store your ETH securely. You can use:
- Hot wallets: Connected to the internet; convenient but less secure.
- Cold wallets: Offline devices; ideal for long-term storage of large amounts.
How to Mine Ether
Ethereum originally used mining to secure the network and validate transactions. However, since the Merge, Ethereum has transitioned to Proof-of-Stake, making traditional mining obsolete.
Previously, miners could mine Ether in three ways:
- Solo mining: Using your own hardware (expensive and inefficient).
- Mining pools: Combining resources with other miners.
- Cloud mining: Renting computing power from a service (high risk of scams).
Under Proof-of-Stake, individuals can now “stake” ETH to become validators and earn rewards for helping secure the network.
Risks of Investing in Ether
All investments carry risk, and cryptocurrency is no exception. Here are some risks specific to Ether:
- Inflation: Unlike Bitcoin, Ether has no supply cap, which could affect its long-term value.
- Security risks: The more complex the platform, the more potential vulnerabilities there are.
- Market correlation: Ether’s price is still heavily influenced by Bitcoin’s market movements.
- Competition: Newer platforms like Binance Smart Chain, Cardano, and Solana offer alternatives to Ethereum.
It’s important to invest only what you can afford to lose and to diversify your portfolio.
Conclusion
Ethereum is a scalable, programmable, and secure decentralized platform. Its applications span DeFi, NFTs, gaming, and more. Although it faces challenges and competition, it remains the leading platform for developers and businesses building on blockchain technology.
Ether is the essential asset that powers this ecosystem. Whether you’re a developer, investor, or enthusiast, understanding Ethereum and Ether is key to navigating the crypto world.
Frequently Asked Questions
Q: Should I invest in Bitcoin or Ether?
A: It depends on your goals. Bitcoin is better for long-term value storage and peer-to-peer payments. Ether is more suitable if you’re interested in decentralized applications, smart contracts, and staking. Diversification is generally recommended to manage risk.
Q: What are some ways to invest in Ethereum without buying Ether directly?
A: You can invest through Ethereum-focused trusts (e.g., Grayscale Ethereum Trust), ETFs, or stocks of companies involved in the Ethereum ecosystem (e.g., Coinbase). However, these may not provide direct exposure to ETH’s price movements.
Q: How does staking work in Ethereum 2.0?
A: Staking involves locking up ETH to become a validator on the network. Validators are responsible for processing transactions and creating new blocks. In return, they earn rewards paid in ETH. Staking requires a minimum of 32 ETH, but users can also join staking pools with smaller amounts.
Q: Can I still mine Ether after the Merge?
A: No, traditional mining is no longer possible on Ethereum. The network now uses Proof-of-Stake, which replaces miners with validators. However, you can earn ETH through staking.
Q: What is gas fee and why is it sometimes so high?
A: Gas fees are payments made to process transactions on Ethereum. They fluctuate based on network demand. When the network is congested, fees rise. 👉 Learn how to estimate and reduce gas fees
Q: Is Ethereum environmentally friendly?
A: Yes, since transitioning to Proof-of-Stake, Ethereum’s energy consumption has dropped by over 99%. It is now one of the most energy-efficient major blockchains.