When most people think of cryptocurrency, they think of Bitcoin. Also known as BTC, Bitcoin is the most popular cryptocurrency in the world right now; but it’s not the only cryptocurrency around. Ethereum is the second most used cryptocurrency, and thanks to the rise of NFTs (Non-Fungible Tokens) as well as other baked-in features, it’s growing all the time – and some think it might eventually eclipse Bitcoin altogether.
On this page we’ll explain everything you need to know about Ethereum; from what it is, to why it’s different from Bitcoin – and what features have propelled it into second place in the hugely crowded and competitive cryptocurrency market.
Before we continue, it’s worth mentioning that although Ether (ETH) and Ethereum are used interchangeably in most places, Ethereum is the network and ETH or Ether is the name of the actual currency.
When did Ethereum start?
Etherueum first appeared in 2013 after being outlined in a whitepaper by its founder Vitalik Buterin, but it was only in 2014 that you could buy Ether – and predictably, with Bitcoin. In the years since, Ethereum has gained momentum and new features with it, making it the second most popular cryptocurrency in 2022.
How does Ethereum work?
Ethereum is much like other cryptocurrencies in the sense that it’s both decentralised and also allows peer-to-peer payments – no banks or third-party institutions are needed. Instead, every transaction is verified and logged by users to create a shared cloud of receipts known as a blockchain. Every single piece of Ether, every owner and every transaction is logged in the blockchain.
What’s the difference between Bitcoin and Ethereum?
The Bitcoin blockchain exists solely to record transactions using BTC, but the ETH blockchain is more versatile. As well as logging every Ether transaction, Ethereum’s transparent, robust blockchain can also be paired with digital files to create NFTs or Non-Fungible Tokens. NFTs are unique digital files, from photography to music – and the Ethereum blockchain can be used to prove their uniqueness and give them provenance. Simply put, the Ethereum blockchain dies the heavy lifting and proof behind NFTs.
How is Ethereum mined?
Ether is mined in the same way Bitcoin is; it requires powerful computers to crack increasingly complex equations. This makes Ether both scarce and valuable, but also makes mining extremely energy-intensive – one of the reasons why Ethereum and cryptocurrency is often labelled as bad as the environment. Simply put, mining is exchanging electrical energy for cryptocurrency – one of the reasons why mining worldwide now consumes more power than a small country.
Right now, the Ethereum environment relies on a proof of work concept, but with the roll out of Ethereum 2.0, it’ll soon be a proof of stake – a system which requires far less computing power and therefore energy.
How to buy Ethereum
Buying Ether is virtually identical to buying Bitcoin – you simply substitute BTC for ETH. First you’ll need to find a suitable crypto exchange that sells Ether, and you’ll also need to set up a crypto wallet to put it in. While some crypto exchanges provide you with a wallet, others will require you to have one ready to go.
If you’ve already got cryptocurrency you can trade it for ETH, but it’s also possible to trade fiat or conventional currency for ETH. Chances are you’ll be doing the latter. Once verifying your details, make sure you’re happy with any fees involved and then select the amount of ETH you want to purchase.