What is Ethereum? Absolutely everything you need to know (Beginner's Guide)


Ok, before entering this guide, you have to do one thing:

Stop thinking about Ethereum as a cryptocurrency.

Honestly! Although Ethereum uses a form of digital currency, it is much larger than money.

Ethereum does not aim to be a global cash system like bitcoin. Ethereum is more like … the network.

It is often referred to as the "world computer", but in simple terms, Ethereum is a platform for anyone to build something with blockchain technology.

Ethereum is a playground. It's like lego. Or Minecraft.

In this guide, we will answer the burning questions: Wis the hat is ethereum? How does it work? Who created and where can you buy ethereum? We will try to answer everyone in simple language. However, you could read our Bitcoin explanation first to understand how the blockchain works.


PART 1: What is Ethereum? (A simple beginner's guide)
PART 2: What is Ether, the currency?
PART 3: Who founded Ethereum? a short story
PART 5: How to buy and store Ethereum
PART 6: What are the prospects and who are the competitors of Ethereum?

PART 1: What is Ethereum? (A simple beginner's guide)

Infographic of Ethereum - explains the ethereum

Courtesy infographics of @angelomilan

Basics of Ethereum

Ethereum is a gateway to build almost anything on the blockchain: apps, games, contracts, even new cryptocurrencies.

But why should someone create an app on Ethereum rather than, for example, on the Apple app store or a regular website?

To understand why, let's take a look at the Apple App Store and its problems.

First, Apple is acting as a gatekeeper. Each app must be reviewed and approved by Apple. In fact, Apple refuses tons of apps or forces them to change the way they operate.

Secondly, all apps are hosted on Apple servers and only accessible to those with an Apple ID

This is the definition of centralization. A company controls many thousands of apps.

Then there are the apps themselves. For example, a banking application saves your personal data, account numbers and balance on its servers. Another example of centralization.

Accentuation of the Ethereum infographics centralization

What's wrong with centralization?

First, there is the philosophical argument. A company, like Apple, really should be the guardian of the apps in the world?

Secondly, there is the practical argument. If all the apps are stored in the same place (Apple server), it is much easier to hack. C & # 39; is a point of error.

The same applies to the app itself. If all the information and personal data are stored on the app servers, it is more vulnerable to thieves.

Even websites are centralized. They are built on cloud servers owned by hosting companies. A gatekeeper A point of failure.

But what if the websites are not hosted on a central server? What if the apps do not need to be approved by Apple and stored in their cloud?

Enter Ethereum …

How does Ethereum work?

Ethereum is like the app store, except that it is not owned or controlled by any person or company.

Everything about Ethereum is supported and verified by thousands of computers, all at once, all over the world. Use blockchain technology to make sure there is no central authority.

Infographic of Ethereum how the ethereum works

It takes what Bitcoin has done for money and applies it to any sector of the planet.

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What is Ethereum

How is Ethereum different from Bitcoin?

Let's make a backup and talk about Bitcoin for a moment. Bitcoin uses the blockchain to record financial transactions with complete transparency and security.

In other words, the bitcoin is all about money.

But blockchain no only keep track of the money. Blockchain can record anything: electoral votes, assets, stocks, oil, contracts, data, property of the house, cartoon cats! (Yes, really.)

Ethereum takes the core technology of Bitcoin and expands it for everything. More importantly, it allows creative developers to build things on it.

vitalik buterin ethereum circle"Bitcoin is a good form of digital currency, but its scripting language is too weak to be able to build any kind of serious advanced application." – Vitalik Buterin, founder of Ethereum.

With that said, Ethereum and Bitcoin share the same core values ​​that make it so strong:

No censorship – Anyone can build anything he wants, without a large company or government that limits their vision. Like Bitcoin, there is no intermediary.

Protected with cryptography – Like everything on the blockchain, building on Ethereum is safe. The transactions are encrypted and there is a single point of error, so it is very difficult to hack.

Immutable – Blockchain transactions can not be reversed or altered.

Transparent – All transactions are stored in the Blockchain forever.

Still confused? Look at the founder of Ethereum Vitalik Buterin explains the whole concept:

Okay, so we know that Ethereum is a gateway to building on the blockchain. But what can you do exactly with this?

Ethereum Dapps (decentralized applications)

Most developers use Ethereum to create Dapp (decentralized applications). The Dapps are just like an app on the phone or a website, but are hosted on the blockchain.

A Dapp is essentially a blockchain project that does something useful.

Bitcoin could be considered a Dapp. It is a Dapp for money transfer without a bank.

There are many thousands of others. For example, you may have heard of Cryptokitties. It's a Dapp to buy and exchange collectible cartoon cats. It's like Pokemon cards but on the blockchain. It might sound ridiculous, but it's actually quite revolutionary. Each collectible encryption is 100% unique and can not be duplicated because it is on the blockchain. The rarity brings a buyer to pay more than $ 100,000 for an encrypted kitty.

cartoon collectible criptokitties on ethereum

The most practical Dapps include Ethlance, a completely transparent freelance job portal. There are no commissions and every contract between freelancer and client is executed on the blockchain. No more chasing payments for freelancers.

Read more: 10 Most popular Dapp on Ethereum right now

Ethereum: a launchpad for new cryptocurrencies

Many of the Dapp built on Ethereum have also launched their cryptocurrencies.

Indeed, some of the largest cryptocurrencies on the planet began on Ethereum.

EOS, TRON, Vechain, is ICON they all started as projects on the Ethereum network. Since then they have branched out and created their blockchain (or mainnet).

A further handful of the top 20 coins are still "hosted" on Ethereum, including OmiseGo, 0x is Binance Coin.

Not only can you use Ethereum to build a new project, you can use it to create new cryptocurrencies.

Ethereum Smart Contracts

Ethereum was also created to run smart contracts.

The easiest way to understand smart contracts is the analogy of the most used vending machine.

A vending machine is a simple contract. It will automatically release a can of coke when the right amount of money is entered.

The smart contracts are the same. The contract will be executed automatically only when certain conditions are met.

In a more practical example, let's say you're buying a home. Normally, a lawyer is responsible for the execution of the contract. They check if the money has been transferred and if the seller has met all the criteria.

On the Ethereum network, there is no human who makes that final call.

The terms of sale are written in advance in the smart contract. When these conditions are met (such as money transfer and completion of the ground survey), the smart contract will be executed automatically.

The transfer is recorded forever in the blockchain. It is irreversible and completely transparent.

Read more: What are Smart Contracts? (A simple and easy to understand guide)

What is the point of Smart Contracts?

Smart contracts eliminate the likelihood of fraud.

In the previous case, no lawyer can manipulate the contract or hide the conditions, because the smart contract simply will not be executed.

It's safe Like Bitcoin, Ethereum's blockchain exists on thousands of computers at once. There is not a single point of error.

Smart contracts also eliminate the need to trust a particular party (such as a real estate agent or a lawyer). The contract is verified by many hundreds of people on the blockchain.

Finally, taxes are lower. With less average men, there are less costs to pay.

The countless cases of use of Ethereum

The potential of Ethereum is phenomenal. It can be used to decentralize everything.

Imagine an electoral voting system on the Ethereum blockchain. Each vote is registered in a transparent manner. No third party can manipulate the results. No more human errors in the count. No more election hack.

Imagine an insurance system built on Ethereum. If your house is flooded and the damage meets all the agreed criteria, a smart Ethereum contract is automatically executed to pay for the agreement.

Ethereum could improve almost every sector of the planet, from health care to finance, from academia to logistics.



Part 2: What is Ether? the cryptocurrency that feeds the blockchain

When people talk about ethereum like cryptocurrency, they actually talk about ether (ETH).

Ether has enjoyed incredible growth (only 10,000% in 2017). But if ether is not a global cash system like bitcoin, what is it?

a graph illustrating the movement of ethereum prices in 2017-2018

The ether is often referred to as "fuel" or "gas" that keeps the Ethereum network running.

It is a form of currency for developers who create apps and smart contracts on the system.

Let's say you're creating an app on Ethereum. You pay a transaction fee to build on the Ethereum network, in the same way you pay a "hosting fee" to build a traditional website.

If you wish to make changes to this app at any time, you pay a further transaction fee. These rates are proportional to the amount of energy needed by the computer.

That ether tax pays "miners" who maintain the Ethereum blockchain and verify transactions.

vitalik buterin ethereum circle"Bitcoin and Ethereum are doing different things: Bitcoin is a digital currency and the protocol is written to support this cryptocurrency: Clearly, the Ethereum platform has ETH, it's also a digital currency, but it exists to support the protocol." – Vitalik Buterin, founder of Ethereum.

In other words, the Bitcoin blockchain exists exclusively to power the cryptocurrency. With Ethereum, it is the opposite. Ethereum cryptocurrency (ether or ETH) exists solely to power the hugely more potent blockchain.

What influences the price of Ethereum?

In theory, the price of ether should be linked to the growth of the Ethereum blockchain. The more developers develop on Ethereum, the greater the demand for ether to pay the transaction fees.

At this time, however, the price is mainly driven by speculation. Like bitcoin, ether is bought, sold and traded worldwide. Most people hold ether because they hope it will increase in value, not to actively build on the network.

The ether is also strongly linked to the price of bitcoins. Despite extremely different use cases, ethereum and bitcoin have a correlation because the cryptocurrency market moves, as a whole, as one.

Unlike Bitcoin, the supply of ether is not limited

While bitcoin has a hard cap (only 21 million bitcoins will ever exist), ether no.

The founder Vitalik Buterin has suggested a limit of 120 million euros for the supply of ether, but it is worth noting that his suggestion was published on the first of April. However, he later confirmed that a hard-cap was worth considering.

Regarding the current supply, 60 million ether were distributed during the first round of crowdfunding in 2014. Another 12 million have been donated to a team of developers working to improve the system, known as the Ethereum Foundation.

Until recently, miners of ether have generated 18 million ethers each year (about five ETHs per block, about 12 seconds). Under a new agreement, the community decided to reduce the reward to two ETHs per block.

Etereum Mining

Mining works in the same way as bitcoins.

ethereum extraction

Miners are responsible for maintaining and verifying transactions through the blockchain. In return, they are rewarded with ether.

Transactions are verified and recorded in the blockchain solving complex puzzles (through computer processing). The first miner to solve a particular puzzle extracts the block and is rewarded with the ether.

Ethereum mining is significantly faster than Bitcoin. While bitcoin blocks are produced every ten minutes, the Ethereum blocks are extracted every 12 seconds.

Another fundamental difference is who draws Ethereum.

The Ethereum community has always emphasized the importance of mining by individuals, not giant corporations and mining pools. In this sense, Ethereum intends to be more democratic and less centralized. (We should emphasize that the large mining basins still dominate most of the mines of Ethereum).

PART 3: Who founded Ethereum? (A short story)

Vitalik Buterin founded Ethereum in 2013 when he was only 20 years old.

Buterin was a big bitcoin fan. In fact, he also founded Bitcoin magazine – one of the main authorities in cryptographic space.

In 2013 he published a white paper that illustrates his vision of Ethereum. Buterin sent the white paper to some close friends for critical feedback. Instead of criticism, however, he had a handful of co-founders!

More than 30 people wanted to work with him on the project. Ethereum was born.

Vitalik Buterin officially launched Ethereum in 2014 and presented the project at a Bitcoin conference. Shortly thereafter, they launched a crowdfunding campaign to sell the ethereal token.

chronology ethereum

Infographic: Brave New Coin

A moment that has forever changed Ethereum

Ethereum has undergone some huge jokes stopping on its way to the second largest cryptocurrency in the world.

The "hard fork" of Ethereum was perhaps the most remarkable.

Here's what happened. In 2016, hackers stole $ 55 million aether. (Like Bitcoin hacks, we should point out that the hack did not violate the Ethereum blockchain itself, but the software was based on it).

The Ethereum community has faced a revolutionary decision.

They could reverse the hack ("resetting" the blockchain) and return the stolen money.

Or they could not do anything, accept the violation and move on.

Both options were problematic.

If they did nothing at this early stage of the development of Ethereum, they would damage the credibility of the project (who will trust their money for a system with such a high profile hacks?)

But if they inverted the hack, it would be fundamentally contrary to the values ​​of Ethereum. The blockchain should be immutable and irreversible.

Ultimately, the community voted to "reset" the blockchain, reversing the hack and returning the stolen money.

However, many Ethereum purists were furious. They believed that the blockchain should never be reset. The decision generated a new cryptocurrency: Ethereum Classic.

Ethereum vs Ethereum Classic

The reset of the Ethereum blockchain has created a difficult fork.

You can think of a rigid fork like a railway that splits into two. Currencies share a single track up to a certain point when they divide and move away in different directions.

The so-called purists have taken a track with the $ 55 million trick still encoded in the blockchain. This is now the blockchain of Ethereum Classic.

The other track is Ethereum as we know it today: the "reset" blockchain, without the 50 million dollars of hacks.

PART 3: How to buy and store Ethereum

How to buy Ethereum

Ethereum is usually bought and sold on the stock exchange, just like bitcoin.

The most popular exchange in the United States is Coinbase, but there are many others around the world.

coinbase to buy ethereum

You will be asked to register for an exchange account, which often means uploading an image of your ID and proof of address. This is to meet the rules KCY (Know Your Customer) and AML (Anti-Money Laundering) (p.s. wants to buy ethereum without ID? Continue reading below).

You can then purchase ethereum using USD or your chosen local currency, depending on the exchange.

Can I purchase Ethereum anonymously?

Yes. There are some exchanges that do not require a photo ID or proof of address. However, it may be necessary to purchase ether using another cryptocurrency to do so.

For example, you can buy bitcoins anonymously using the Bitmex exchange.

You can then use bitcoins to buy ether anonymously on another exchange such as shapeshift.io.

How to buy Ethereum with cash

If you really want to go offline, you can buy ether with money. Localethereum.com connects you anonymously with local ethereum sellers. Sellers are verified and valued by buyers, so here's a trust item.

You can arrange a face-to-face meeting to exchange a crypt or make a private transfer agreement. Even your messages on localethereum are encrypted, so it's private from the beginning.

How to store Ethereum

After purchasing ethereum from an exchange, you need to move it to a secure wallet.

You can leave your ethereum in your Coinbase account or in any exchange you are using. However, this storage method is more vulnerable to hacks. (Hackers are more likely to choose a larger bag than a smaller wallet).

Choose an Ethereum portfolio

The right ethereum portfolio depends on how you plan to use the currency of ether.

If you are investing in long-term ethereum, consider a cold storage option. This keeps your ethere offline so that it can not be used by hackers.

Read more: What is Cold Storage for Criptovalute?

However, if you are using the ether to make transactions or regular exchanges, you may want a "hot wallet" connected to the Internet.

Portfolio recommended by Ethereum – A simple choice is the portfolio recommended by Ethereum, called Nebbia. It allows to memorize ethereum and any other cryptocurrency created on the Ethereum network. You can also use this portfolio to write and execute smart contracts and create Dapp (more information later). The portfolio can be downloaded at ethereum.org.

Hardware portfolio – While the Ethereum wallet is useful for regular use, consider a hardware portfolio for cold storage. This is an external hard disk for cryptocurrencies. While it's the safest option, there's a downside: if you lose your hardware portfolio, your ethereum is gone forever. The most common options include Trezor and Ledger (pictured below).

collector etereum nano cold ledger archive inserted into a laptop

Wallet of paper – A paper wallet is another form of cold storage. It is a simple sheet of paper with your public and private key written ethereum. Paper wallets are incredibly safe because nobody can hack a piece of paper. But if the card is lost or damaged, so is your ether.

Browser wallet – MetaMask is a 'browser extension for Google Chrome. Allows access to Ethereum Dapps and preservation of ether. Please note, however, that your private key is stored by the browser and may be compromised.

Other ethereum portfolios – Another popular option for storing ethereum is MyEtherWallet. It is a unique web portfolio that stores your private key securely on your computer. You can also use it to create smart contracts. Exodus is a desktop portfolio with functionality for seven different cryptocurrencies.

PART 4: Can I build on the Ethereum network and access Dapps?


The main goal of Ethereum is to encourage developers to build on their own ecosystem.

Anyone can create Dapps, write an intelligent contract or create a new cryptocurrency.

Everything revolves around the Ethereum Virtual Machine (EVM): the neuralgic center (or brain) of Ethereum.

The EVM means that developers can build on Ethereum with relative ease (without starting from scratch with a complex code). To be clear, this is still the advanced territory for the average user. While the EVM aims to simplify the process of building Dapp and smart contracts, it still requires advanced technical knowledge.

(Interesting fact: the EVM is 'Turing Complete', which means it has the potential to solve any algorithm launched by the developers. For comparison, the Bitcoin network is not Turing Complete as it only manages the monetary transfer).

Here's where to start when creating or accessing Dapp and smart contracts:

State of the Dapps

screenshot status of dapps

State of the Dapps is a list of all existing artifacts on the Ethereum network. It's the easiest way to see what's out there right now. All the pieces are classified into genres, the most used and the most voted lists. If you have already created a dapp, you can also send it to the site.

Ethereum's mist browser

The Mist browser is the official Ethereum portfolio. It is also a gateway to the world of Dapps and smart contracts.

To get started, download and install the Mist wallet.

When you cast Mist, you are now connected to the Ethereum blockchain. Create an account and you can use this browser to send and receive ether.

You can also press the "Contracts" tab to create your first smart contract.

ethereum portfolios with the card & # 39; contracts & # 39; circled

Finally, there is a search button that allows you to use the many thousands of Dapp on the network.


MetaMask is a "browser extension for Chrome that allows you to access Ethereum Dapps and smart contracts.

The advantage of using MetaMask is that you do not need to download any software (or the blockchain itself).

It works in much the same way as Mist. You can send and receive ether, create smart contracts and navigate the world of Dapps.

Five of the most impressive Dapper of Ethereum

Golem – Golem is a revolutionary project that allows you to "lend" your idle computer power to others. Imagine you are a video producer who temporarily needs more processing power to complete a project. Or a company that needs more data storage space quickly. With Golem, you can simply borrow it from others around the world by connecting to the blockchain. Users are paid into Golem's cryptocurrency (GNT) to rent the power of their computer.

uPort – uPort is a Dapp created to protect and manage your identity. Using the uPort software, enter your personal information in an intelligent contract. Your identity is only shared when certain conditions are met (which you set). In other words, it gives you complete control over your identity and who you share your information with.

Augur – Augur allows you to predict and bet on the outcome of anything. From the presidential elections to the climate to the success of the next Apple iPhone. You make the prediction and then "trade" the result along with thousands of others. Augur has launched its cryptocurrency, REP, which is used to reward those who confirm or "report" the results.

Cryptokitties – We have already talked about crypts kittens, but it is worth repeating. In its essence, the criptokitti allow you to buy and exchange cartoon cats. The exchange of rare cats may not be the most powerful use case for Ethereum, but has become a gateway to the use of mainstream blockchain. It is the first true viral phenomenon in blockchain, to suggest the enormous potential of technology. Introduce people to Ethereum in a fun and engaging way.

Idex – Idex is building a decentralized exchange for the commerce of cryptocurrencies based on Ethereum. Because it is based on the blockchain (and not on a traditional server such as, for example, Coinbase) it is reported that it is safer by hackers. Use smart contracts to perform operations.

There are more than 1,800 dapps currently available with more additions every day.

PART 5: What are the prospects for Ethereum and who are its competitors?

After explosive growth in 2017, ethereum spent most of 2018 cooling off.

However, this does not mean that the platform itself is not growing …

Fortune 500 companies use Ethereum (JP Morgan, Microsoft, Intel, Cisco, Mastercard)

If you think that Ethereum is only for cryptocurrency workers, think again.

Some of the largest companies on the planet are experimenting with technology. Microsoft, Intel, MasterCard, Cisco and JP Morgan are all part of the Enterprise Ethereum Alliance, an organization created to advance Ethereum.

List of companies of Ethereum Alliance

It's still early, but blockchain technology has the power to change entire sectors. Most intelligent companies enjoy this new world and are using Ethereum as a testing ground.

Competition from new projects

Being the first does not always guarantee success.

The platform is now facing fierce competition from the so-called "Ethereum-killer".

EOS it is perhaps the most remarkable. The project, which was built on Ethereum before launching its own mainnet, was created for Dapps. It is arguably faster, cheaper and more efficient than Ethereum.

Other competitors include Zilliqa, which aims to climb faster than Ethereum e NEO which facilitates smart contracts without the complexity of Ethereum.

Ethereum scale problems

One of the big question marks on the future of Ethereum is its ability to scale. How can it become faster and more efficient?

The developers are currently working on a long series of updates to the system. With the codename "Casper", Ethereum is slowly moving from a "work-proof" system to a "pole test" system.

Without becoming too technical, this should reduce the computer power needed to extract the ether and keep the system running.

Ultimately, it will lead to faster transaction times and lower fares.

Watch Vitalik Buterin talk about his plans to resize Ethereum below:

For now, Ethereum remains the reference platform for the construction of new technologies. It's the door to the blockchain, and we're just scratching the surface of its potential.

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