Since its creation, Ethereum has changed the way people work with decentralized applications. Here’s what you need to know about this technology, including how it works, what powers it, and how you can take advantage of it.

What Is Ethereum?

At its core, Ethereum is an open software platform built on blockchain technology. Before we dive into the differences between Ethereum and Ether – one of the core components of the system – let’s take a look at the blockchain and how it works.

Blockchain 101

Blockchain is a technology that aims to record each “transaction” entered into the system permanently. When a request is first made, a group of peer machines known as ‘nodes’ use algorithms to validate and approve it. For example, if you decide to trade a unit of cryptocurrency to someone else, the blockchain will verify that and note the new owner.

While blocks are most often associated with cryptocurrencies, they can also be used to transmit and verify other types of information. A verified block is then added to the ‘chain,’ creating a new piece of information that is permanently and unalterably saved.

Can This Data Really Be Saved Forever?

That’s the idea, although the increasing file sizes of blockchains are a known issue. Most likely, the blockchain will eventually be relegated to powerful servers while ordinary users access it through an online client (much like using a digital wallet).

How Efficient Is The Blockchain?

In a certain sense, blockchains are flat-out inefficient. When you have tens of thousands, or even millions, of machines all processing the same data, that’s an enormous use of electricity and processing power. Essentially, the network trades efficiency for security.

How Does Ethereum Fit Into All Of This?

Ethereum’s focus is running decentralized applications, rather than just trading a cryptocurrency around. The system is robust enough to allow for a wide variety of programs and applications, and perhaps more importantly, it can let people run any program stored within the system.

However, to manage and control the system, users need the unique Ethereum currency, Ether. Aside from its use as a cryptocurrency, Ether acts as a ‘fuel.’ Without enough fuel, the system won’t process things for people, ensuring there’s a limit (and, thus, a value) on what can be done.

There’s a strong emphasis on ‘value’ here. The Ethereum coin only allows so much processing – so developers are strongly encouraged to avoid wasted code or needing to issue updates.

It’s worth noting that Ethereum has an important limitation: The very security of the system also stops easy changes, making it harder to fix bugs or eliminate errors in codes.

Hard Forks – Power And Controversy

While blockchains are meant to be immutable, the truth is that a “hard fork” can be implemented if enough of the network’s users agree to do it. A hard fork can change the block, and its very existence is one of the major controversies. Some of the questions asked include:

  • How often should hard forks be made?
  • Should they be used any time there’s a big enough problem?
  • If so, who decides what’s big enough?
  • Is it work allowing changes and thus reducing the overall value of the system?
  • If so, why should anyone use blockchain instead of something more straightforward?

Simplicity Or Complexity?

Ethereum is built for complexity – developers are allowed to create any kind of operation that the system can run, and that data is permanently stored within the system. However, the fact that programs can be complicated doesn’t mean they should be.

As we mentioned above, it’s extremely difficult to fix problems in a blockchain. In fact, a better solution is often to add new blocks and configure a system to run on those, rather than continuing to reference a now-defunct version of the application.

This preserves the security of Ethereum, but it also adds the chance for ‘junk’ data to fill the chain. That can drastically increase storage costs while providing minimal benefit to people. This isn’t an issue for most end users, but it’s something node owners need to consider.

The Benefits Of Ethereum

There are several major benefits of using Ethereum – especially if you’re more interested in its ability to run applications than its status as a cryptocurrency. These include:

  • Immutable: No individual third-party can make changes to the data. This makes data stored in Ethereum as secure as it has any realistic hope of being.
  • Tamper Proof: All apps that use the Ethereum network run in the idea of consensus, so they cannot be altered or censored by those that dislike the content.
  • Uptime: Network-based apps don’t shut down or switch off – once they’re on, they’re on for good. The only way to cut access to them is to cut access to the network itself.

Also, there are some other benefits for users to consider:


Solidity is a programming language designed to run on Ethereum and create smart contracts. Notably, it allows people to issue their own digital tokens. These tokens can be used as currency, evidence of membership in a group, ownership of a specific asset, or anything else someone designates them as. Tokens can also be limited to a set amount or change based on their original programming.


This shouldn’t be confused with crowdfunding, the technique used by Kickstarter and other platforms. Ethereum’s crowdselling tech allows for creating contracts that hold money for a time, then distribute it based on various criteria. For example, if a project only reaches 90% of its goal, it may have an automatically-executed process to send the money back where it came from.

When used together with the tokens created by Solidity, this allows for advanced techniques like keeping track of rewards, auctioning items, and selling virtual shares of an organization.


One of Ethereum’s most valuable abilities is allowing people to vote on issues and proposals. Everything is run by the initial programming – which can’t be changed – so the voting process is trusted and transparent. There’s no chance of outside influence or hacking since the system itself is essentially unhackable – there’s no single point of failure where a bad actor can gain access.

Ethereum News

Most Ethereum news consists of what people are doing with the system.

For example, Augur is a prediction system that works on “the wisdom of the crowd”. In essence, the idea is that the more people believe a given outcome is likely, the higher the chance it has of actually occurring. Users are allowed to buy a ‘share’ in an outcome, with the chance of real-world profit if they’re correct about a given result.

At the time we wrote this, Augur was still in a beta form – but its release is one of the many pieces of news created by this system.

Ethereum Price

After its initial release, Ethereum remained relatively low in value for about a year. From early 2017 to early 2018, however, the price increased from almost nothing to over $850 – an incredible return over a short period of time for anyone who invested early.

Of course, there is no guarantee that Ethereum will continue to trade high – since it’s also a fuel, people want to use it, and a system that’s prohibitively expensive to run won’t be used.

That said, as new applications are released through Ethereum, it’s likely that the price will continue to rise until the market settles down. The Ethereum live price shouldn’t be measured on its market work, but also on how much it can do within the system.

The Ethereum Wallet

There are many ethereum wallets available, from physical, hardware-based systems to desktop applications. The official wallet is Mist, but other options like MetaMask and CoinBase.

It’s worth noting that many Ethereum wallets also allow you to store and use other cryptocurrencies – up to, and including, trading one currency for another. This allows you to accept a payment in one currency (say, Ether) and spend it in another (Bitcoin). If you’re planning to use multiple currencies, you’ll definitely want to look for a single wallet that supports all of them.

Ethereum is still a relatively new system, so it’s extremely likely that newer, better wallets will enter the market over the next few years. Stay on the lookout for these and consider switching over once they appear.

Ethereum Mining

Ethereum mining works similarly to most other cryptocurrencies. Miners attempt to guess answers to unique puzzles and the winner gets the ether generated (a fixed 5 ether/block). Once a block is mined, the data is sent across the Ethereum blockchain network for verification. Verification is a simple process, so each node can do it without difficulty.

On average, the network mines a block of ether once every 12 seconds. There’s no real way to ‘cheat’ the process, though miners with more computers are correspondingly more likely to get the correct result.

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