September 29 2024

What Is Ethereum and What Can You Do With It?

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With its current features and transactional methods, Ethereum has gained lots of trust and power in the cryptocurrency market, compared with Bitcoin, a digital token used since 2009. Besides these currencies, many more are on the market fighting for fame. But it’s not easy to get to the top when the prices are affected by the relationship between supply and demand and overbought/oversold coins.

But Ethereum climbed to the top and brought new things to the market by expanding its usage, the blockchain becoming a place for smart contracts, NFTs, and many other transactional services. The evolution of technology means little to no transaction costs, 24/7 access to money, no limits on purchases and withdrawals, and freedom for anyone to use cryptocurrencies. Ethereum offers all these and much more, so let’s find out what you can do with it!  

Defining Ethereum

Ethereum is a decentralized computing network that works through blockchain technology. Simply put, it’s a cryptocurrency value that offers more than a medium of exchange or a store. Since 2014, it has constantly gained popularity and has become the second most used cryptocurrency worldwide. This virtual currency acts as:

  • A bank for everyone who wants to lend, borrow and save products through an internet connection
  • A peer-to-peer network, by cutting intermediary companies from the process of moving money or making agreements with someone else.
  • Censorship-resistant space, where no one but you has control over your money and transactions
  • Private network, because you don’t need to provide personal details to use Ethereum, being an economy based on value rather than control.

Ethereum was initially based on Bitcoin’s innovative technology but with more added features. Both currencies let you use your digital money however you want, but Ethereum is programmable; therefore, it also works as a marketplace for financial services, games, and apps. You need to download a wallet and get a Dapp to send or receive ETH (Ethereum’s digital currency) to start using it. The current Ethereum price can fluctuate due to the booming NFTs, high demand, and supply.

A wallet is an application that facilitates the interaction with your Ethereum account, the equivalent of an internet banking app. It’s necessary for sending funds and managing your ETH, but you don’t need an account before downloading a wallet, as most of them can generate new accounts. There are more wallets, each for different purposes, depending on whether you’re a beginner or want to invest some serious value. The second step is to have a Dapp, an app using the Ethereum blockchain for data storage and smart contracts. These contracts are codes written to make the apps run as programmed.

What can you do with Ethereum?

Just like Bitcoin, Ethereum can be used as a digital currency in financial transactions. But there are other uses of this cryptocurrency: 

  • Decentralized finance (DeFi). This term refers to financial services and products available to anyone using Ethereum. As a user, in this system, you’re holding and controlling your own money. You can send money everywhere in the world, access stable currencies, trade tokens, or buy insurance. This solution came to fix the problems with traditional finance, such as the limitation of trading hours to specific time zones or the risk of centralized institutions shutting down the markets.
  • Non-Fungible Tokens (NFTs). These tokens are attached to unique items, like art or music, in terms of digital currencies, giving them value. On the Ethereum blockchain, NFTs are secured and compatible with anything built on the platform. There is no similar token anywhere, and each one is unique. Therefore one NFT can be held by only one owner at a time.
  • Decentralized autonomous organizations (DAOs). These codes operate based on smart contracts; therefore, they’re owned and governed collectively by members. DAOs can be anything from organizations, ventures, or freelancing networks. They were made to eliminate human errors by creating an automated system to conduct the decision-making process.

How to buy and sell Ethereum

Even if there are many usages of Ethereum, you can begin with the basics of buying and selling. Buying Ether can be done following these five steps:

  • Start by determining your risk level. Check your portfolio’s stability and decide if you can invest when you can afford to lose
  • Choose a crypto exchange that offers a wallet to store your investments
  • Fund your account by depositing money from a bank account
  • Start purchasing Ether tokens
  • Store them in a digital wallet

On the other hand, if you want to sell Ethereum, consider that crypto is taxable. Even if it’s a decentralized system, selling a substantial amount of Ether will be affected by the capital gain taxes. If you want to cash out Ethereum, you can simply transfer the tokens to an existing bank account. Know that sometimes it might take a while to get your money, depending on your method of order completion and the time it takes to transfer tokens from your wallet (if the network is too congested). 

What’s better, Ethereum or Bitcoin?

When coming up with the Ethereum concept, the founder, Vitalik Buterin, found inspiration from Bitcoin but wanted to add new features to his idea. Therefore, both cryptocurrencies have similarities; they’re used as virtual money. But Ethereum offers more than that by being a store of value where transactions are processed faster than Bitcoin, and you have limitless released Ether tokens. Other functions of Ethereum include:

  • An extensive system in the blockchain and cryptocurrency markets
  • Processing financial transactions, executing smart contracts and storing data for third-party applications
  • Constant improvements with the help of Ethereum developers

Both cryptocurrencies use a proof-of-work protocol to keep the network running, but Ethereum will be changing its model to proof-of-stake to allow more transactions per minute and make the network more scalable.  

To conclude, Ethereum is a flexible and continuously developing network of innovation. The future of this cryptocurrency is highly expected, as Ethereum 2.0 will introduce new features and upgrade its existing processes.


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