A beginner's guide to understanding Ethereum and how it works.
History Of Ethereum
A crowdsale was conducted to fund the development of this project, The campaign ran from July to September 2014, selling over 60 million Ether — created through the Genesis issuance of 72 million ETH. Investors could acquire 2,000 ETH for one Bitcoin during the first two weeks of the sale, dropping to 1,339 ETH per BTC afterward. Almost 90% of the tokens sold during the first two weeks. Ultimately, the presale raised $18.3 million to fund development and other activities pertaining to Ethereum. It was the largest cryptocurrency crowdsale at that time, the second by Maidsafe coming in at $6 million. General crowdsales-wise, it was a huge success — it was the second-largest crowd-funded project in internet history, and Ethereum only took 42 days.
Ethereum has seen three crucial phases of development:
- Frontier (July 2015) — Transaction activity, virtual machine usage for smart contracts, mining feasiiblity, and stress testing the network.
- Homestead (March 2016) — Ethereum Improvement Proposals integration, faster transactions, Ethereum Foundation begins accepting ETH donations from external parties
- Metropolis (October 2017) — A double upgrade with Byzantium (October 2017) and Constantinopple (2019) for enhanced scalability, transaction processes, and security. Decreasing mining reward.
What Is Ethereum and What Is Ether?
There is no supply cap on Ether at this time.
How Does Ethereum Work?
Several crucial aspects make up the Ethereum network as it is used today. They include:
- Smart contracts: self-executing computer program that automatically execute a set of rules once certain conditions are met. It can be used to determine when funds change ownership on the network and under which conditions that can occur. Smart contracts power many decentralized purposes, including NFTs, DeFi and others.
- The Ethereum blockchain: An immutable record of Ethereum’s transaction and activity history
- Consensus mechanism: Currently, Ethereum uses proof-of-work to validate and record information on the blockchain. However, that algorithm will change to proof-of-stake during the Serenity upgrade.
- Ethereum Virtual Machine (EVM): A crucial cog in the Ethereum machine to execute network rules and enforce those roles on all transactions and smart contracts.
- Ether: The native currency of the Ethereum network
When all these components come together, developers can make exciting things happen on the Ethereum network.
Check out our guide on how to learn Solidity for beginners.
Future Roadmap Of Ethereum
How to Invest in Ethereum?
Before you open your wallet to invest in Ethereum, it is essential to get the basics right. You will need a crypto wallet that supports Ethereum to store the ETH you're buying. Additionally, you need to find the right cryptocurrency exchange for your needs. Some trading platforms do not operate in all countries, which is something to be wary of.
Join us in showcasing the cryptocurrency revolution, one newsletter at a time. Subscribe now to get daily news and market updates right to your inbox, along with our millions of other subscribers (that’s right, millions love us!) — what are you waiting for?
Investing in Ethereum: Centralized Exchanges
- And many others
All of these exchanges will require you to create an account and verify your identity. Doing so is crucial for these companies as they adhere to strict regulatory requirements. Creating an account is free of charge.
After your account has been verified, it is time to add funds to it so you can invest in Ethereum. Most exchanges will let users fund their account with a bank transfer, although some companies accept credit cards or even cash deposits too. Make sure to explore the different options at your disposal and use the one that feels right. Using a bank transfer can take several business days to complete, although same-day deposits may be possible depending on the platform you use.
When you have funds in your account, navigate the exchange interface to find the trading pair for Ethereum and the currency your account is denominated in. Convert [part of] your balance to Ethereum by placing a buy order at the price you are willing to pay. Once completed, the Ether balance will be in your exchange wallet. You can either leave it there or move it to an Ethereum wallet only you know the private key or seed phrase of.
Investing in Ethereum: Decentralized Exchanges
- And many others
Unlike centralized platforms, a decentralized exchange does not require users to create an account. Instead, users can directly trade from their crypto wallet, creating a more streamlined experience.
The trading revolves around converting an asset you own to Ethereum. Submit the buy order to the decentralized exchange and, once completed, the ETH balance will be sent to your wallet directly.
How to Use an Ethereum Wallet
An Ethereum wallet lets users store Ethereum and tokens adhering to the ERC-20, ERC-721 and other network token standards.
There are several types of Ethereum wallets one can use. Some users prefer a software solution they can access on their computer or mobile devices. Others prefer a bit more security and control and opt for a hardware wallet. A hardware wallet is a USB device protected by encryption that needs to be plugged into a computer or connected to a mobile device via Bluetooth to use.
- Ledger Nano S/X
- MetaMask (computer and mobile)
- Opera Browser (iOS and Android)
- And Many Others
Finding the right wallet for you will depend on what you expect from the wallet itself. The functionality will differ between the different options, and not everyone needs unnecessary bells and whistles. Sending and receiving functionality is the most important when investing in Ethereum. However, some people may want to explore the broader landscape, such as interacting with NFTs, decentralized applications, DeFi platforms, and more.
Backing up this information should be done on a piece of paper by writing it down. Storing the information digitally makes it vulnerable to hackers, especially if the text file is stored online.
Once the setup is complete, you will be given an overview of your wallet address(es) and given the option to create a new one if you so desire. This address will be used when you invest in Ethereum and send funds to your wallet.
Regardless of using a centralized or decentralized exchange, make sure to always move the Ethereum you bought to your wallet. The wallet you control ensures you can spend the funds without requiring third-party approval.
It is worth noting the seed phrase associated with your Ethereum wallet is not tied to a specific piece of software or hardware. Therefore, if you ever decide to explore a different wallet, you can easily import your existing addresses and balances. Feel free to play around with the different options, but always protect your account information.