What is Ethereum and how does it work?

Ethereum image

You’ve probably heard of Bitcoin, the cryptocurrency that’s been dominating the headlines over the past few years. But how many people actually understand what it is? In fact, how many people even know that there are other cryptocurrencies out there? Ethereum is one of those other cryptocurrencies, and it may well end up being bigger than Bitcoin in the long run – here’s why.

Introduction to Ethereum

Ethereum image

Vitalik Buterin, a Russian computer programmer born in 1994, conceived of Ethereum while studying computer science at the University of Waterloo.

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While many of his peers went on to start tech companies after graduation, Buterin remained at school to continue working on his coding project. He received additional support from a group called Bitcoin Magazine when he released his initial white paper for an anonymous cryptocurrency platform in late 2013. His development team gave their new concept its own name: Ethereum, which was based off of the phrase etherium (or quicksilver) to represent its speed and ease of use.

The Benefits of Ethereum

Ethereum can be used to codify, decentralize, secure and trade just about anything: voting, domain names, financial exchanges, crowdfunding, company governance, contracts and agreements of most kind — you name it. That makes Ethereum one of a handful of technologies with truly world-changing potential.

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How Ethereum Works

As opposed to bitcoin, ether isn’t just a currency. It’s also used to pay for transaction fees and computational services on the Ethereum network.

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Ethereum can be purchased with fiat currencies like dollars or euros—but unlike these traditional forms of payment (cash, credit cards), you can also purchase ether using decentralized digital currencies like bitcoin. These coins are then stored in your digital wallet until you need them to either pay for goods or services or convert back into fiat money.

Where do I store etherium?

While there are many good wallets out there, MyEtherWallet is one of my favorites. Created specifically for ethereum, MyEtherWallet is easy to use and allows you to store your wallet on an encrypted USB drive or a printed piece of paper (called a paper wallet). I like using MEW because it runs entirely on my computer—I don’t have to trust any third parties with my information.

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How can I buy Etherium?

Etherium has recently been gaining a lot of traction. If you want to know how to get started with Etherium, you can read our How to Buy Etherium guide. It’s also a good idea to follow forums and blogs on Etherium, so that you don’t miss out on any news or announcements. This will keep you up-to-date on market trends and will help your investment grow in value.

Is Etherium regulated by any central authority?

It is important to know that Etherium is not regulated by any central authority. Therefore, Etherium users are responsible for securing their own data and funds. For example, if you choose to store your wallet on a computer or mobile device, you would have to ensure that all backups are created using encryption. If you do not encrypt your wallet, then someone who gains access to your device could use it to transfer money out of your account without ever needing a password.

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Does it require professional skills?

No, you only need to know how to install a software on your computer. This can be a tricky process if you are not tech savvy, so if that is true for you, find someone who can help or consider using a cloud-based wallet. A few recommended wallets include MyEtherWallet (no download required), Parity (requires installation) and imToken (iOS + Android). Again, no matter which route you choose, do your due diligence and research before sending money anywhere.

Why should I invest in Etherium?

The best way to answer that question is by looking at how Bitcoin’s been doing in recent years. Since it was introduced in 2009, Bitcoin has increased in value astronomically—from a fraction of a cent per coin to almost $800 apiece.

Can I transfer my money out of etherium?

Whether you’re a currency holder or a trader, you may want to know whether or not it’s possible to transfer your money out of Etherium. The answer is: yes and no. You can’t do it using traditional methods like PayPal or a bank wire, but you can use third-party platforms that offer support for Etherium trades in exchange for fiat currencies like USD, GBP, and EUR.

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