Ethereum (ETH): what kind of cryptocurrency and how does it work?

Let's look at the history of the Etherium coin. The rate chart for all time will also be presented in the article.

The first version of the Ethereum cryptocurrency protocol, called Frontier, was launched on July 30, 2015. At that moment, there was essentially no such thing as the value of Ethereum. Yes, it was possible to draw certain conclusions about the value of ether coins based on data from pre-sales conducted from July to September 2014 (~$0.3-0.45 per 1 ETH). But it was too early to talk about the price, which is formed on the basis of the exchange supply/demand ratio. There was one week left before the first listing on the cryptocurrency exchange.

What is Ethereum in simple words

If we adhere to dogmatic terminology, the Ethereum platform is designed for the creation and operation of decentralized applications based on the blockchain using smart contracts.

The creators of Ethereum, among whom Vitalik Buterin stands out, when launching this platform, pursued the standard goals for cryptocurrency authors - improving Bitcoin. However, ether can hardly be called Bitcoin 2.0. They are similar in some ways, but there are also a number of conceptual differences between them.

Few people talk about this, but the cryptocurrency boom of 2016-2017 is associated precisely with the launch and popularization of Ethereum. The new environment made it possible to maximize the potential of blockchain in the fintech sector and gave impetus to the launch of new startups and projects, which in turn attracted huge investments.

The internal currency of the platform is ether or ether. The abbreviation is ETH. Ethers are used not only as a unit of account. They also guarantee the execution of smart contracts, acting as a kind of “fuel” for the network.

ETH has firmly captured the status of the second most popular cryptocurrency in the world and the most revolutionary. In this material we will talk about the features of Ethereum in a language understandable to the average reader, without delving into the technical details.

Difference between Ethereum and Ether?

Ether and Ethereum are often used in the same context, but they are completely different from each other.

✅ Ethereum

Ethereum is a decentralized global platform, and its value is that it allows you to write code to manage assets and create applications that can be accessed from anywhere in the world. With the advent of Ethereum, developers have the opportunity to create and deploy decentralized applications.

Ethereum does not belong to anyone, programs and services that maintain the working state of the platform require computing power, and it is not free. It is for these purposes that Ether or Ether was created.

✅ Ether or Ether

Ether (ETH) is the native unit of account of the Ethereum platform, a carrier of digital assets similar to securities or bonds, and is used as the “currency” of the platform. Ether is like cash that does not require a third party to confirm or verify the transaction.

A Brief History of the ETH Cryptocurrency

To understand what Ethereum is, it is important to at least briefly know the history of this virtual coin. Let's look at the chronology:

• 2013
  - the platform was founded by Vitalik Buterin, who set the task of expanding the capabilities of blockchain technology and increasing the scope of its application. He created a new virtual coin (so far only on paper), the functionality of which was not limited to transfers and investing.
• 2014
  - ICO started, with the help of which it was possible to collect about 31.5 thousand BTC. Already at that time this was a record amount, which was enough to implement the idea. Vitalik Buterin managed to convey to the community the advantages and features of Ethereum, what it is and how it works.
• 2015
  (July 30) - full launch of the project.
• 2016
  . Immediately after its creation, the virtual coin was actively purchased by network participants, which led to a sharp increase in ETH. In the same year, the protocol changed to HomeStead, and another significant event occurred. Due to external influence, The DAO platform was damaged, as a result of which almost 40% of the funds raised during the ICO were stolen. The money was returned, but the platform's reputation suffered. For this reason, a fork of Ethereum appeared in 2016 - Ethereum Classic. The reason for the separation was a split in the cryptocurrency community, which continues to this day. Many predicted a quick collapse of ETC, but as of September 5, 2022, the ETC virtual coin ranks 15th in capitalization and is gradually gaining in price.
• 2017
  . The mentioned problems gradually became a thing of the past amid the difficulties that emerged with the Bitcoin cryptocurrency. In particular, complaints about the lengthy confirmation of transactions within the network have become more frequent. Some transactions took up to 1-2 days, which made people very nervous. In comparison, using Ethereum allowed for less waiting for the transfer to complete. Many people realized what the Ethereum currency was and began to use it as a means for transactions and investments. Smart contracts based on Ethereum were no less in demand. Against this background, the exchange rate price already exceeded $220 by the summer of 2017, and by the end of the year it even approached the $1,000 mark.

Vitaly Buterin continued to improve his brainchild, which only increased the level of trust in cryptocurrency among Internet users. Generally speaking, the emergence of Ethereum has revived the interest of the virtual community in cryptocurrencies. The Ethereum platform has shown that participants have at their disposal not only a powerful asset for investing and conducting transactions, but also something more - a convenient tool that allows them to create useful startups.

All-time ETH price: 2016 - DAO, hackers and Ethereum Classic

On January 11, 2016, the price of Ethereum finally breaks through the $1 mark again and rushes up, never to return to it again. Over the course of two months, the Ethereum rate has been growing rapidly against the backdrop of information about the previous replacement of the network protocol with a more stable version (Homestead) and reaches its first serious high ($15) on March 13. At this moment, the capitalization of Ethereum goes beyond $1 billion for the first time. And the very next day there is a clear demonstration of the popular trading proverb “Buy on rumors, sell on news!”: On March 14, when the mentioned hard fork took place, a sharp correction began, as a result of which By the end of April, the price of ether is halved - $7.3 per coin.

The next event that brought the price of Ethereum to its highest value for the entire year ($20.6) was widespread media coverage of the successes of the DAO project, which collected more than 12 million ETH (~$150 million) as part of the token sale. It was one of the pioneers of the upcoming ICO era, choosing Ethereum to raise funds from investors.

However, what happened next was that the ether price was knocked out - taking advantage of a vulnerability in the DAO code, on June 16, 2016, hackers stole about $50 million in ETH from the project. Panic began in the market, due to which Ethereum fell in price by almost half in 2 days - to $11. It was known in the crypto community that Ethereum co-founder Vitalik Buterin strongly supported DAO, and this was one of the reasons why the ETH rate suffered.

Over the course of a month, there were heated discussions about Buterin’s proposal to return the stolen funds by conducting a hard fork to restore the network to the state it was before the attack. Amid these discussions, the price of Ethereum fluctuated seriously: reaching $14.3 a week after the incident, it subsequently went even lower - on July 7, 1 ETH was given $10.

On July 20, the controversial hard fork went through, thus giving birth to the Ethereum Classic project, which was followed by supporters of a censorship-free and interference-free blockchain. 2 days after this, the Ethereum rate, which had recovered to almost $15, again went into a steep dive and reached $8 by the beginning of August.

A few days later, the price of Ethereum recovered to $11 and within a month and a half consolidated in the range of $10-12.25.

In mid-September, amid news of the addition of Ethereum support to the Ledger Nano S hardware wallet, growth resumed, bringing the rate to $15 for the last time this year.

On September 22, it became known about a DDoS attack on the Ethereum network, as a result of which its work slowed down significantly. This news triggers the start of a local downward trend, which lasts 2.5 months and ends on December 5 at $6. Until the end of the year, the rate will consolidate in the range of $7-9.

Who created Ethereum

The creator and main inspirer of Ethereum is the Canadian developer of Russian origin Vitalik Buterin. He became interested in cryptocurrencies back in 2011, publishing Bitcoin Magazine for some time. At the same time, he closely studied programming and thought about creating an improved platform running on the blockchain.

Here's how Buterin himself recalls it:

“The idea to create Ethereum did not come immediately. At first I tried to promote her in the project I was working for. But they told me that it would take a year to implement it. Then I quit. I remember walking around San Francisco, thinking, and then I wrote a white paper, sent it to my friends, and they sent it to theirs. That's how it all started."

It was 2013. Already in 2014, fundraising for the development of the platform began through crowdfunding. The Ethereum ICO raised 31,191 BTC (more than $18 million), and the project itself also attracted banks and financial institutions. The platform was launched in July 2015. However, it only became fully operational in March 2016 with the release of the Homestead protocol.

Ethereum: all-time price chart

As soon as you enter the query “ETH chart for all time” into a search engine, dozens of sites will immediately appear, offering to see with your own eyes how the value of the cryptocurrency has changed over the course of six years.

Here, for example, is the all-time Ethereum chart from https://coinmarketcap.com:

If you look at Ethereum's all-time chart, you can see that the cryptocurrency has experienced both ups and downs.

Why was Ethereum created?

Ethereum has provided completely new opportunities for creating decentralized projects and startups based on blockchain and smart contracts. One such startup was The DAO. This is a platform for finding projects for investment, built on smart contracts. ICO The DAO has become one of the most successful in history.

During crowdfunding, we managed to collect $150,000,000 in investments. However, due to an error in the source code, part of the funds (60 million) was stolen.

To return the stolen funds, it was proposed to roll back the network through a hard fork. This would make it possible to backup the blockchain to its initial state - even before the theft from The DAO. It was not possible to achieve complete consensus in the network, so in parallel with Ethereum, Ethereum Classic appeared - the “before rollback” version. Despite the fact that the hard fork made it possible to return stolen investments, it was criticized because one of the main principles of blockchain operation was violated - the irreversibility of operations.

The launch of Ethereum seriously revitalized the entire cryptocurrency world, showing the versatility and flexibility of the blockchain. The authors of the platform have implemented an environment with convenient tools in which a person without serious technical training can create a startup or a decentralized application. For example, the source code of the Namecoin cryptocurrency takes only 5 lines. Therefore, Ethereum can be called an adapted framework in which all developments are based on smart contracts.

Bitcoin price movement

Bitcoin fell to the 61% Fibonacci retracement around $11,200. In Tuesday's trading session, Bitcoin price formed a bullish pattern reaching the 23% Fibonacci retracement at $16,427.

In the 4th chart, BTC/USD headed below the Ichimoku cloud. The Kijun line also crossed the Tenkan line below. The next cloud looks to be bearish.

How does Ethereum work?

Earlier we mentioned the concept of a smart contract as one of the foundations of Ethereum. It is a computer algorithm that ensures contracts are carried out within the blockchain. Smart contracts are built in such a way that a certain action occurs only when certain conditions are met.

The operation of a smart contract can be explained using a simple example of renting an apartment. A mandatory condition for using housing is payment. If the tenant pays, then he can safely use the housing. If not, then in theory a smart contract could be programmed to lock door locks. And a person simply will not be able to get into the apartment until he pays the rent. The example is conditional, but it explains in an understandable format the purpose and principle of smart contracts. It guarantees decentralization, because the tenant and the landlord cooperate directly. No bank checks, bills, etc.

To summarize, we can highlight the main objects of smart contracts:

• Interacting parties or signatories;
• Subject of the agreement (rent, service, money transfer);
• Condition for fulfillment (described mathematically and programmatically).

It is smart contracts that underlie all ICOs, guaranteeing the automatic crediting of tokens to investors after the transfer of ether to the specified wallets.

The Ethereum blockchain is supported by miners (read our material about mining). The platform uses the Proof-of-Work algorithm - proof of work, which requires the computing power of participants for the secure operation of the network. Miners receive a reward for finding a block signature - all this is very similar to Bitcoin.

Is it possible to mine Ether?

It is possible, but if you do not have the appropriate equipment and are not willing to invest a lot of money in this process, then it is unlikely that you will be able to earn much. Mining is done by using the computing power of your computer. To do this, it is enough to understand what type of devices you need to use.

You need to run a hashing algorithm and for this you have to take a large amount of information, which will be compressed to a certain size. In the case of Ethereum, the algorithm is called Ethash - it operates on a nonce code. It creates a binary number if the last block of the chain is found, the hash function creates a unique value. The main task of the equipment is to guess nonce values.

Read also: Dash cryptocurrency: overview of main features

This can only be done by selecting values ​​and it is impossible to guess it by chance according to the principle of cryptography. The reward for the guessed value will be given to the most powerful computer that can decrypt the block. As a reward, he receives 5 units of ether. The computing speed of your hardware determines the amount of cryptocurrency you will receive.

You can mine in three ways

• Video card. An outdated method that is unlikely to allow you to earn a lot;
• Many video cards or processors . Mining farms increase computing power;
• ASIC. It requires a lot of electricity and is expensive, but it has very high computing power.

If you do not have a powerful video card, then you can use mining pools. The most popular are DwarfPool, Nanopool and CoinMine.

Opportunities and areas of use of Ethereum

Ethereum or, as it is also called, ether is one of the most flexible and popular cryptocurrencies. It is capable of performing all the same functions as Bitcoin, Litecoin, Dash, Ripple:

• Payment instrument;
• Asset storage form;
• Investment asset.

In terms of support and prevalence, ETH is among the TOP 5 existing digital currencies on the market. At the same time, the functions of ether also affect internal settlements and registration of transactions in the platform.

However, the main value of Ethereum is not its “cryptocurrency” properties. This platform allows the creation of decentralized projects on the blockchain, ranging from charitable foundations to sports betting applications or poker rooms. Moreover, the platform is open, so everyone can access it. To do this, just download the Mist browser or a special extension for Google Chrome MetaMask.

Interesting applications/projects implemented on the Ethereum blockchain:

• Platforms for banks and investment funds;
• BackFeed is a socio-economic platform that contains various types of ratings;
• FreeMyVunk – a program for monetizing ratings in video games;
• The Rudimental is a crowdfunding environment for writers, journalists and other creative people;
• First Blood is a platform for gamers and fans of betting on eSports.

Conclusion

We looked at what has happened to the coin since its inception, and a chart of the Ethereum cryptocurrency for all time was also presented. This information will help traders make predictions for the future, which will allow them to make only profitable transactions.

The cryptocurrency market is very diverse. Bitcoin remains the main one in this market and does an excellent job of storing value. Ethereum, in turn, solves applied problems: over time, Ethereum has become a global platform that allows solving many different problems, so now the growth of ETH seems quite justified and understandable.

ETHUSD chart from TradingView

Ethereum Virtual Machine

It is characteristic that the Ethereum platform accepts any programming language, including visual programming languages. This is what makes it so versatile and flexible.

How did you manage to create such an environment? Thanks to the Ethereum Virtual Machine (EVM). It is a Turing machine and compiles smart contracts into bytecode before sending them to the blockchain. It also uses loops, which guarantees the execution of almost any operation on smart contracts. Potentially "infinite" loops are eliminated by the platform through a mechanism called gas. However, you will not pay for using this powerful computing machine. All expenses are covered by the network.

It turns out that Ethereum is a kind of blockchain Pandora with almost unlimited possibilities for use, thanks to its flexibility, power and versatility. This is true. Otherwise, companies like Microsoft, IBM, and JPMorgan would not have shown interest in it. The ICO wave 2016-2017 is the result of the emergence of Ethereum with its smart contracts. Most of these crowdfunding projects issue ERC-20 (Ethereum Classic) tokens and use the Ethereum blockchain.

Bitcoin and Ethereum are somewhat similar, as both are blockchain platforms. But the scope and functionality of Bitcoin is much more limited. This platform is designed for conducting pseudo-anonymous transactions. While Ethereum is a full-fledged environment for implementing decentralized applications (Dapps) using smart contracts.

The features of the platform’s internal currency also differ. In Bitcoin it is called Bitcoin and primarily performs the function of an electronic payment method. That is, this is a cryptocurrency in the full sense of the word. Ethereum uses ether, which in concept is a token used for conducting smart contracts.

Here's how to describe Bitcoin:

• A global digital currency that can be stored and for which goods and services can be purchased;
• Decentralized financial environment without intermediaries with minimal commissions;
• “Digital gold” with anonymous transactions and mechanisms to protect people’s money in unstable economies.

That is, Bitcoin is primarily a functional financial instrument with elements of anonymity and decentralization. But Ethereum is a platform for creating decentralized programs and applications on the blockchain. The smart contracts underlying the network are universal. In Bitcoin, a smart contract only guarantees payment transactions. And in Ethereum they can be used in a variety of areas.

Both networks use the same Proof-of-Work protocol. This means that mining uses the computing power of computers, guaranteeing protection against double spending and hacker attacks. And if Bitcoin has an established emission ceiling (21,000,000), then Ethereum does not.

It is for this reason that the Ethereum team is considering options with the transition to the Proof-of-Stake algorithm (proof of stake) and the possible “burning” of part of the mined coins. Such conversations show another difference between Ethereum and Bitcoin - flexibility. The platform is easier to change, update and modernize.

How to buy ether and where is it stored?

You can buy ether through exchangers and exchanges. Let's look at the example of the site BestChange.ru

1. You must have a currency that you are exchanging Ether for;
2. On the left side of the site you select a direction, for example, RUR/ETH;
3. On the right side of the site, options where you can make an exchange are highlighted.
4. Click on the link and go to the exchange site;
5. Follow all the steps and receive ether to your wallet.

Now let's look at how to enter or withdraw cryptocurrency on the Binance exchange

1. You need to register;

2. Go through verification;

3.To top up your account on the exchange with cash, you need to go to the “Asset” tab;

4. A list with the possibility of replenishment will be displayed - 44 types of cryptocurrencies are available.

Ether should be stored in a wallet or inside an account on an exchange. One of the best examples is Exmo.

Bitcoin VS Ethereum

To better demonstrate the difference between Ethereum and Bitcoin, we have created a comparison table:

More sites accept it, and its status as digital gold speaks for itself. Ethereum should be considered not so much as a cryptocurrency, but as a universal platform for creating decentralized programs based on smart contracts. That is, Ethereum has broader “powers,” so to speak.

ETH rate for all time: how the price changed in 2020

Experts had very optimistic forecasts for this year. In 2020, Ethereum rose in price by 460%. On January 1, the main altcoin was worth $130. In February, the price of Ethereum rose to $290, but then began to decline along with BTC. In March, the coin rate fell below $90. After this, a new upward trend began, which led to the cryptocurrency ending the year above the $1,200 mark.

In 2022, the key and most anticipated event for Ethereum holders was the launch of the zero phase of the second version of the altcoin network. In December, users were able to deposit their ETH into the Ethereum 2.0 deposit contract. Storing coins in this contract allows investors to receive passive rewards for staking a coin.

Advantages and Disadvantages of Ethereum

When studying a virtual coin, it is important to pay attention to many components - how the Ethereum cryptocurrency works, what it is, what are the pros and cons of ETH. If we have dealt with the first two questions, it is important to dwell on the last point in more detail.

Here it is important to think from two positions – cryptocurrency (a means of payment) and “smart” contracts. The second component of the platform has virtually no weaknesses and is only gaining momentum. As for the virtual coin ETH, we summarize its positive and negative qualities in the table below:

Experts agree that one of the key factors in the development of cryptocurrency was the appearance of the full version of Homestead. From now on, using the platform, you can create applications and projects that are decentralized and use smart contracts. As a result, avenues for investment have opened up.

The Ethereum platform allows blockchain to be used for solving many problems, not just for recording transaction history. The next leap may occur with the transition to PoS, which has been postponed for a year. Investors are eagerly awaiting the appearance of Ethereum futures, which will boost the exchange rate and open up access to an interesting asset.

The flexibility of Ethereum, as well as the presence of “smart” contracts, make the cryptocurrency a truly interesting investment instrument. Already today, the platform is used by many market giants, such as Sberbank, Intel, Microsoft and other companies. Practice shows that if such large market “players” are interested in a product, this means that it is well studied and worthy of investors’ attention.

Ethereum: all-time rate. 2022 - a huge bull run

The ether exchange rate in 2022 has undergone many changes. This year for Ethereum starts at $8. Throughout January and February 2/3, there is a smooth growth, as a result of which the price of Ethereum comes to the level of $13. From this point, more rapid growth begins against the backdrop of the fact that on February 23, Ethereum was added to the social platform for traders eToro. On the same day, the number of unconfirmed transactions on the Bitcoin network reaches 100 thousand - more and more crypto investors, who consider Bitcoin slow and outdated, are looking for alternative options for investing their funds. A considerable part of them turn their attention to the airwaves.

In the first ten days of March, the rate makes several unsuccessful attempts to break through the $20 mark and, having returned to the $16.5 level for the last time, makes a breakthrough that within a week brings Ethereum to the $45 mark (on some exchanges $55). Daily ether trading volumes reach $450 million.

In the twentieth of March, Ethereum rises in price to $53-59 and then during the month it consolidates in the range of $40-50.

On April 26, a new price push occurs, which in 10 days leads to an almost twofold increase in the price of ether - on May 5, 1 ETH costs $95. Around the same days, the number of unconfirmed Bitcoin transactions exceeded 200 thousand - the network of the main cryptocurrency became even slower. One of the reasons is that many miners switched to ether mining.

However, Bitcoin is also in the preparatory stage of growth, setting the direction for the market. Many coins are responding to this direction with stunning growth. Ether, which was added to the AVATRADE trading platform on May 18, also rushes to new heights - in less than a month its price increases 4 times (June 12, 1 ETH = $400). Investors who bought ether six months ago have the opportunity to sell it for 50 times more! Ethereum's dominance in the market reaches its ATH - 31.5% (at the beginning of the year it was 4%).

In addition to the above-mentioned reasons, such successes are explained by the widespread popularization of Ethereum in the crypto community and among dApps developers. ICO hype also contributes to the increased demand for ether - thousands of projects choose ETH as the main currency for accepting payments during their token sales.

After such rapid growth, a natural correction follows, which begins after a failure in the Ethereum network due to the increased excitement around ICO Status. The local downtrend lasts about a month and ends on July 16 at $150. From here begins a new wave of growth, which by September 1 again brings the price of Ethereum to the $400 mark. The subsequent two-week correction coincides with the general decline of the market against the backdrop of news from China about the ban on ICOs and cryptocurrency trading, and ends at $200.

Until mid-October, against the backdrop of news about the upcoming update of the Byzantium network, the rate was gradually recovering. On October 15, immediately after activating this update, the same smooth correction begins.

Until mid-November, the price of Ethereum consolidates in the $275-350 corridor, and on the 23rd it breaks through the $400 level, which becomes support for 2.5 weeks.

All this time, the ICO bubble continues to inflate, in which ether is still the main means of payment. In addition, Bitcoin’s movement towards “that very ATH” ($20,000) is accelerating, continuing to drag the entire crypto market up with it.

On December 11, the price of Ethereum enters the last phase of growth in 2016, during which it reaches the level of $800. Further, like most cryptocurrencies on the market, Ether is adjusted in parallel with the 80% decline in the Bitcoin rate and temporarily drops to $500-600.

That's how many events Ethereum has experienced in just a year. The 2017 rate was marked by the fact that in December the cryptocurrency was desperately trying to break through the $750 mark.

How to get Ethereum

The ETH cryptocurrency made a significant leap in its value in 2022, simultaneously taking second place in terms of capitalization among other crypto coins.

This alone was enough for Ether to appear on almost all major exchanges, and also appear in various online exchangers.

To get Ethereum, you have several options:

1. Buy it on a cryptocurrency exchange
2. Buy from an online exchange service
3. Receive at a crypto machine
4. Mine yourself

The first two options are the simplest and most accessible. Go to the “Cryptocurrency Rates” section to see the current Ether rate, then you can purchase it in a way convenient for you. If we talk about cryptomats, they are not very widespread yet and not all of them support ether.

The mining option requires an initial investment, be it self-mining ETH, or using cloud services. Ether is one of the main options for miners who work with pools. Mining takes place on farms made from powerful video cards from Radeon and GeForce. But already in the fall of 2022, the first ASIC for Ethereum mining appeared. After which active conversations began about switching to the PoS protocol. Once the network makes this transition, Ether mining will become economically unviable. Therefore, ETH is difficult to consider as a long-term mining option.