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## What Is Ethereum (ETH)?

Ethereum is a decentralized open-source [blockchain](https://coinmarketcap.com/alexandria/glossary/blockchain) system that features its own cryptocurrency, Ether. ETH works as a platform for numerous other [cryptocurrencies](https://coinmarketcap.com/alexandria/article/what-are-cryptocurrencies), as well as for the execution of decentralized [smart contracts](https://coinmarketcap.com/alexandria/glossary/smart-contract).

Ethereum was first described in a 2013 whitepaper by Vitalik Buterin. Buterin, along with other co-founders, secured funding for the project in an online public crowd sale in the summer of 2014. The project team managed to raise $18.3 million in Bitcoin, and Ethereum’s price in the [Initial Coin Offering](https://coinmarketcap.com/alexandria/glossary/initial-coin-offering-ico) (ICO) was $0.311, with over 60 million Ether sold. Taking Ethereum’s price now, this puts the [return on investment](https://coinmarketcap.com/alexandria/glossary/roi) (ROI) at an annualized rate of over 270%, essentially almost quadrupling your investment every year since the summer of 2014.

The Ethereum Foundation officially launched the blockchain on July 30, 2015, under the prototype codenamed “Frontier.” Since then, there has been several network updates — “Constantinople” on Feb. 28, 2019, “Istanbul” on Dec. 8, 2019, “Muir Glacier” on Jan. 2, 2020, “Berlin” on April 14, 2021, and most recently on Aug. 5, 2021, the “London” [hard fork](https://coinmarketcap.com/alexandria/glossary/hard-fork-blockchain).

Ethereum’s own purported goal is to become a global platform for decentralized applications, allowing users from all over the world to write and run software that is resistant to censorship, downtime and fraud.


### Who Are the Founders of Ethereum?

Ethereum has a total of eight [co-founders](https://coinmarketcap.com/alexandria/article/who-founded-ethereum) — an unusually large number for a crypto project. They first met on June 7, 2014, in Zug, Switzerland.


* Russian-Canadian [Vitalik Buterin](https://coinmarketcap.com/alexandria/people/vitalik-buterin) is perhaps the best known of the bunch. He authored the original white paper that first described Ethereum in 2013 and still works on improving the platform to this day. Prior to ETH, Buterin co-founded and wrote for the Bitcoin Magazine news website.
* British programmer [Gavin Wood](https://coinmarketcap.com/alexandria/people/gavin-wood) is arguably the second most important co-founder of ETH, as he coded the first technical implementation of Ethereum in the C++ programming language, proposed Ethereum’s native programming language Solidity and was the first chief technology officer of the Ethereum Foundation. Before Ethereum, Wood was a research scientist at Microsoft. Afterward, he moved on to establish the Web3 Foundation.

Among the other co-founders of Ethereum are: - Anthony Di Iorio, who underwrote the project during its early stage of development. - [Charles Hoskinson](https://coinmarketcap.com/alexandria/people/charles-hoskinson), who played the principal role in establishing the Swiss-based Ethereum Foundation and its legal framework. - Mihai Alisie, who provided assistance in establishing the Ethereum Foundation. - [Joseph Lubin](https://coinmarketcap.com/alexandria/people/joseph-lubin), a Canadian entrepreneur, who, like Di Iorio, has helped fund Ethereum during its early days, and later founded an incubator for startups based on ETH called ConsenSys. - Amir Chetrit, who helped co-found Ethereum but stepped away from it early into the development.


#### What Makes Ethereum Unique?

Ethereum has pioneered the concept of a blockchain smart contract platform. Smart contracts are computer programs that automatically execute the actions necessary to fulfill an agreement between several parties on the internet. They were designed to reduce the need for trusted intermediates between contractors, thus reducing transaction costs while also increasing transaction reliability.

Ethereum’s principal innovation was designing a platform that allowed it to execute smart contracts using the blockchain, which further reinforces the already existing benefits of smart contract technology. Ethereum’s blockchain was designed, according to co-founder Gavin Wood, as a sort of “one computer for the entire planet,” theoretically able to make any program more robust, censorship-resistant and less prone to fraud by running it on a globally distributed network of public nodes.

In addition to smart contracts, Ethereum’s blockchain is able to host other cryptocurrencies, called “tokens,” through the use of its ERC-20 compatibility standard. In fact, this has been the most common use for the ETH platform so far: to date, more than 280,000 ERC-20-compliant tokens have been launched. Over 40 of these make the top-100 cryptocurrencies by market capitalization, for example, [USDT](https://coinmarketcap.com/currencies/tether/), [LINK](https://coinmarketcap.com/currencies/chainlink/) and [BNB](https://coinmarketcap.com/currencies/binance-coin/). Since the emergence of [Play2Earn](https://coinmarketcap.com/alexandria/glossary/play2earn-play-to-earn) games, there has been a substantial increase in interest in the [ETH to PHP price](https://coinmarketcap.com/currencies/ethereum/eth/php/).

## Ethereum London Hard Fork

The Ethereum network has been plagued with high transaction fees, often buckling at seasons of high demand. In May 2021, the average transaction fee of the network peaked at [$71.72](https://ycharts.com/indicators/ethereum_average_transaction_fee).

In addition to the high cost of transactions, the leading altcoin also suffers from scalability issues.

As already mentioned, there are plans to transition to a proof-of-stake algorithm in order to boost the platform’s scalability and add a number of new features. The development team has already begun the transition process to ETH 2.0, implementing some upgrades along the way, including the London hard fork.

The London upgrade went live in August 2021. It included five Ethereum Improvement Proposals (EIPs), namely EIP-3529, EIP-3198, EIP-3541, and most notably EIP-1559 and EIP-3554.

EIP-1559 is arguably the most popular upgrade out of all the EIPs.


### What Is EIP-1559?

The EIP-1559 upgrade introduces a mechanism that changes the way gas fees are estimated on the Ethereum blockchain. Before the upgrade, users had to participate in an open auction for their transactions to be picked up by a miner. This process is known as a “first-price auction,” and as expected, the highest bidder wins. 

With EIP-1559, this process is handled by an automated bidding system, and there is a set “base fee” for transactions to be included in the next block. This fee varies based on how congested the network is. Furthermore, users who wish to speed up their transactions can pay a “priority fee” to a miner for faster inclusion.

EIP-1559 also introduces a fee-burning mechanism. A part of every transaction fee (the base fee) is burned and removed out of circulation. This is intended to lower the circulating supply of Ether and potentially increase the value of the token over time.

Interestingly, less than two months after the London upgrade was implemented, the network had burned over $1 billion worth of Ether.

### Ethereum 2.0

In 2022, Ethereum plans to switch to [proof-of-stake](https://coinmarketcap.com/alexandria/glossary/proof-of-stake-pos) with its [Ethereum 2.0 update](https://coinmarketcap.com/alexandria/article/a-dive-into-ethereum-2-0). This switch has been in the Ethereum roadmap since the network's inception and would see a new [consensus mechanism](https://coinmarketcap.com/alexandria/glossary/consensus-mechanism), as well as introduce [sharding](https://coinmarketcap.com/glossary/#sharding) as a scaling solution. The current Ethereum chain will become the Beacon Chain and serve as a settlement layer for smart contract interactions on other chains. 

In late 2021, Ethereum's [Arrow Glacier update](https://coinmarketcap.com/alexandria/article/ethereum-s-arrow-glacier-upgrade-to-delay-ice-age-s-difficulty-bomb-till-summer-2022) was delayed to June 2022. Until then, Vitalik Buterin expects the road to the network's [endgame](https://vitalik.ca/general/2021/12/06/endgame.html) to be shaped by [optimistic rollups](https://coinmarketcap.com/alexandria/glossary/optimistic-rollup) and [Zk-rollups](https://coinmarketcap.com/alexandria/glossary/zero-knowledge-rollups). 

In January 2022, the Ethereum Foundation [announced](https://coinmarketcap.com/alexandria/article/ethereum-2-0-is-dead-well-kinda) the decision to remove the “Ethereum 2.0” terminology to “save all future users from navigating this confusing mental model.” It went on to explain that the previously-referred-to terms of “Ethereum 1.0” would be branded the “execution layer,” while “Ethereum 2.0” will be called the “consensus layer”. This is ultimately to provide a more accurate version of the Ethereum roadmap.  \
 \
In an update on the progress of the Merge, on April 13, 2022, Ethereum developer Tim Beiko [tweeted an update](https://coinmarketcap.com/alexandria/article/the-merge-coming-soon-says-ethereum-developer) on the progress of the Merge, stating that they are “definitely in the final chapter of PoW on Ethereum.” He also mentioned that users can expect it to occur a few months after June, although no exact date was provided. This came on the back of the [first mainnet shadow fork](https://coinmarketcap.com/alexandria/article/ethereum-launches-first-mainnet-shadow-fork) — to test the transition to PoS on Ethereum — that was successfully implemented on April 11, 2022. 

#### Related Pages:

New to crypto? Learn how to buy Bitcoin [today](https://coinmarketcap.com/how-to-buy-bitcoin/).

Want to keep track of Ethereum price live? Download the [CoinMarketCap mobile app](https://coinmarketcap.com/mobile/)!

Want to look up a transaction? Visit our [block explorer](https://blockchain.coinmarketcap.com/chain/ethereum).

Curious about the crypto space? Read our educational section — [Alexandria](https://coinmarketcap.com/alexandria/).


#### How Many Ethereum (ETH) Coins Are There In Circulation?

In September 2021, there were around 117.5 million ETH coins in circulation, 72 million of which were issued in the genesis block — the first ever block on the Ethereum blockchain. Of these 72 million, 60 million were allocated to the initial contributors to the 2014 crowd sale that funded the project, and 12 million were given to the development fund.

The remaining amount has been issued in the form of block rewards to the miners on the Ethereum network. The original reward in 2015 was 5 ETH per block, which later went down to 3 ETH in late 2017 and then to 2 ETH in early 2019. The average time it takes to mine an Ethereum block is around 13-15 seconds.

In the August 2021 Ethereum network upgrade, the London hard fork contained the [Ethereum Improvement Protocol](https://coinmarketcap.com/alexandria/glossary/ethereum-improvement-proposal-eip), EIP-1559. Instead of the first-price auction mechanism where the highest bidder wins, EIP-1559 introduces a “base fee” for transactions to be included in the next block. Users that want to have their transaction prioritized can pay a “tip” or “priority fee” to miners. As the base fee adjusts dynamically with transaction activity, this reduces the volatility of Ethereum gas fees, although it does not reduce the price, which is notoriously high during peak congestion on the network.

One of the major differences between Bitcoin and Ethereum’s economics is that the latter is not deflationary, i.e. its total supply is not limited. Ethereum’s developers [justify](https://docs.ethhub.io/ethereum-basics/monetary-policy/) this by not wanting to have a “fixed security budget” for the network. Being able to adjust ETH’s issuance rate via [consensus](https://coinmarketcap.com/alexandria/glossary/consensus) allows the network to maintain the minimum issuance needed for adequate security.

With the introduction of EIP-1559 however, the base fees used in transactions are burned, removing the ETH from circulation. This means higher activity on the network would lead to more ETH burned, and the decreasing supply should lead to appreciation of Ethereum price, all things equal. This has the potential to make Ethereum deflationary, something ETH holders are excited about — a potential appreciation in Ethereum price today.


#### How Is the Ethereum Network Secured?

As of August 2020, Ethereum is secured via the Ethash proof-of-work algorithm, belonging to the Keccak family of hash functions.

There are plans, however, to transition the network to a proof-of-stake algorithm tied to the major [Ethereum 2.0](https://coinmarketcap.com/alexandria/article/a-dive-into-ethereum-2-0) update, which launched in late 2020.

After the Ethereum 2.0 Beacon Chain (Phase 0) went live in the beginning of December 2020, it became possible to begin staking on the Ethereum 2.0 network. An Ethereum stake is when you deposit ETH (32 ETH is required to activate validator software) on Ethereum 2.0 by sending it to a deposit contract, thus helping to secure the network by storing data, processing transactions and adding new blocks to the blockchain. At the time of writing in mid-September 2021, the Ethereum price now for 32 Ether is roughly $116,029. The amount of money earned by Ethereum validators right now is a return of 6% APR, which equates to around 1.91952 ETH, or $6960 in Ethereum price today. This number will change as the network develops and the amount of stakers (validators) increase.

Ethereum staking rewards are determined by a distribution curve (the participation and average percent of stakers): some ETH 2.0 staking rewards were at 20% for early stakers, but will be lowered to end up between 7% and 4.5% annually. 

The minimum requirements for an Ethereum stake are 32 ETH. If you decide to stake in Ethereum 2.0, it means that your Ethererum stake will be locked up on the network for months, if not years, in the future until the Ethereum 2.0 upgrade is completed.


#### Where Can You Buy Ethereum (ETH)?

Given the fact that Ethereum is the second-largest cryptocurrency after Bitcoin, it is possible to [buy Ethereum](https://www.binance.com/en/buy-Ethereum), or use ETH trading pairs on nearly all of the major crypto exchanges. Some of the largest markets include:

* [Binance](https://www.binance.com/en/price/ethereum)
* [Coinbase Pro](https://coinmarketcap.com/exchanges/coinbase-pro/)
* [OKEx](https://coinmarketcap.com/exchanges/okex/)
* [Kraken](https://coinmarketcap.com/exchanges/kraken/)
* [Huobi Global](https://coinmarketcap.com/exchanges/huobi-global/)

Popular Ethereum price pairs include: [ETH/USD](https://coinmarketcap.com/currencies/ethereum/eth/usd/), [ETH/GBP](https://coinmarketcap.com/currencies/ethereum/eth/gbp/), [ETH/AUD](https://coinmarketcap.com/currencies/ethereum/eth/aud/) and [ETH/JPY](https://coinmarketcap.com/ja/currencies/ethereum/).

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