Crypto & Coin Database

What is Ethereum?

Ethereum is an open source, public distributed computing platform and operating system. It is based on blockchain technology and features smart contract functionality. It is considered the second biggest cryptocurrency after Bitcoin in terms of market capitalization.



Ethereum is an extended version of Bitcoin because it allows smart contracts to be saved and executed on the blockchain. It was invented by Vitalik Buterin in 2013. The system went live on July 2015 after an ICO that took place between July and August 2014.
The native currency of the Ethereum blockchain is Ether (ETH). Ether is used to pay for gas, which is an execution fee for operations made on the Ethereum platform. Moreover, gas price is decided by the miners, who have to verify transactions.


How does Ethereum work?

Ethereum is a blockchain based platform. We already explain how blockchains work in our basics. In Bitcoin, blocks are used to save transactions. However, Ethereum uses blockchain technology for transactions and computer programs like decentralized apps. Ether is used to pay for creating smart contracts on the blockchain. It is also used as a reward for miners. Ethereum utilizes a mix between proof of work and proof of stake as a consensus mechanism. As proof of work is becoming more and more outdated because of the high power consumption, Ethereum’s development team decided to slowly switch to proof of stake. This planned transition to proof of stake is called “Casper”.


What are smart contracts?

Smart contracts are decentralized applications that execute transactions without third parties. Just like transactions on a blockchain, smart contracts are trackable and not reversible. After signing the contract, it automatically checks if the contract terms have been reached. When the agreed terms are reached, the contract gets settled without a third party. To create a smart contract you have to use a certain programming language. Ethereum offers solidity as the only programming language for smart contracts on the Ethereum platform. There are endless possibilties for useful smart contract applications:

  • Real estate
  • Insurance
  • Logistics
  • Elections
  • Internet of things
  • ERC-20
  • etc.

Smart Contracts (Ethereum)


Ethereum can also be used to build Decentralized Autonomous Organizations (DAO). A DAO is an organization with no single leader. Such organizations are run by smart contracts on the Ethereum blockchain. The contracts are designed to replace the rules and structures of a traditional organization by eliminating the need for leaders or centralized control. Everyone who purchases tokens receives voting rights for a DAO.


DAO Hack and Ethereum Classic

In 2016 a DAO project called “The DAO” got hacked. The project was supposed to be a venture capital firm operating through smart contracts and without humans. The DAO was funded through a token sale which raised around $150 million dollars. After the fundraise the DAO was hacked. The attacker stole Ether worth around $50 million dollars at the time. The attack was made possible by a technical flaw in the DAO software.

After the hack, the stolen funds were moved back to their owners. This decision caused an uproar in the Ethereum community. One part of the community wanted to leave the stolen funds stolen because the basic principle of a blockchain is that transactions are irreversible and unchangeable. Moving the stolen funds back would break the basic principles of a blockchain. Another part of the community wants the funds moved to their traditional owners. Vitalik Buterin decided to move the stolen funds back. This lead to the decision to hard fork the Ethereum blockchain. Ethereum Classic is based on the old Ethereum blockchain with the stolen funds. The hard fork of the Ethereum blockchain is still called Ethereum and the stolen funds were regiven to the owners.


What are ERC-20 tokens?

The smart contract functionality of Ethereum allows users to create their own cryptocurrency. ERC-20 is a technical standard that is used to implement tokens in the Ethereum blockchain. ERC-20 defines rules for tokens on the Ethereum blockchain. There are more than 100000 compatible tokens found on the Ethereum network as of now. Many developers implement their coins in the Ethereum blockchain before launching their own blockchain. Big cryptocurrencies like EOS or TRON have used or still use Ethereum as blockchain.


Enterprise Ethereum Alliance

The Enterprise Ethereum Alliance is a union of companies that aims to customize Ethereum for industry use. It is a mix of large and established companies in their respective industries. However, also startups and smaller companies can become members of the alliance.


Launch members (What is Ethereum?)

Launch members of the Enterprise Ethereum Alliance


How to buy Ethereum

Ethereum is one of the most popular digital currencies, which is why it’s relatively easy to find an exchange to buy it. One of the easiest exchanges to use is Coinbase. It is a trusted exchange that accepts a variety of currencies to exchange Ethereum and select other cryptocurrencies for. Having Ethereum is also important if you want to get involved in ICOs because most of them run on the Ethereum blockchain.