Table of Contents
Table of Contents

Ether (ETH) Explained

Everything you need to know about Ether’s history and technology

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Ether (ETH) is the native cryptocurrency of the Ethereum blockchain network. You can buy, sell, and hold Ether as a digital currency, and use ETH to pay for purchases and transaction fees on the Ethereum network. After Bitcoin, ETH ranks as the second-largest cryptocurrency, with a total market value of hundreds of billions of dollars.

If you’re new to cryptocurrency, you may be interested in learning more about Ether. We’ll take a look here at what Ether is and how ETH works.

What Is Ether?

Ether is the digital currency native to the Ethereum blockchain. Ether is required to pay fees for processing transactions on the Ethereum network, and Ether owners can use their ETH to make purchases from any merchant that accepts the digital currency. Many non-fungible tokens (NFTs) can only be purchased with ETH.

Ethereum launched in 2015 and is an open-source project, meaning that anyone can view and contribute to the platform’s code. The Ethereum blockchain uses smart contracts, which are electronic contracts that can be programmed to execute automatically.

Special Features of Ether

Ether stands out because it’s the native coin of the Ethereum platform, which supports a large ecosystem of blockchain-based projects.

Many cryptocurrencies, decentralized applications, and decentralized autonomous organizations operate using the Ethereum platform. Each of these projects use Ether to pay transaction processing fees—known as gas—to Ethereum network operators.

Here’s the lowdown on Ether:

Cryptocurrency Name Ether
Inception  2015
Already mined/total supply (as of Feb. 1, 2022)  119.4 million ETH/no maximum supply
Special feature Native currency of Ethereum platform

How To Mine Ether

New Ether is minted using a computational process called mining, which is associated with the proof-of-work operating protocol. Anyone with compatible computer hardware and software can mine Ether, although the process is competitive and resource intensive.

Proof-of-work mining requires vast computing and energy resources. Many miners work together in groups to increase their combined computing power, which increases their competitiveness with other miners. Miners are frequently located where energy is cheap and abundant.

Mining Ether can enable you to earn ETH. Miners who add blocks of Ether transactions to the Ethereum blockchain earn transaction processing fees, plus two new Ether tokens.

A new block of Ether transactions is mined approximately every 12 to 14 seconds.

How To Buy Ether

Anyone with a compatible cryptocurrency wallet or exchange account can buy Ether. Using a centralized exchange such as Coinbase, these are the simple steps to buy Ether:

  1. Establish and fund an exchange account: To get started, you need an account with a cryptocurrency exchange. After submitting the required personal information and proof of identity, you can fund the account with your local currency.
  2. Initiate an Ether transaction: You can initiate a transaction to buy Ether using the exchange’s web or mobile app. Be sure to double-check the transaction details, including any fees, before clicking the “buy” button.
  3. Safely store your Ether: Once the ETH purchase is complete, your Ether is automatically deposited into a digital wallet. That wallet can be hosted by the cryptocurrency exchange, or be a hardware or software wallet that is self-hosted.

Fees and Expenses

You may have heard something about high Ethereum gas fees. If you buy Ether through a centralized exchange such as Coinbase, you are charged a fee based only on the exchange’s fee schedule. However, if you use a decentralized exchange (DEX) such as Uniswap to buy Ether, you are obligated to pay the prevailing Ethereum gas fee.

Gas fees can vary widely based on how busy or congested the Ethereum platform is when you place your ETH order.

Notable Happenings

As a major digital currency, Ether has a colorful past. Here are some major milestones in Ethereum's relatively short history:

  • Ethereum whitepaper released: In 2013, creator Vitalik Buterin published a paper describing Ethereum as a concept.
  • Ethereum launched: After a brief testing period in 2014 and several test versions, the official launch of the Ethereum platform occurred in 2015. Ether’s starting price was $1.24.
  • Ethereum Classic split: After a project on the Ethereum platform was hacked in 2016, Ethereum split into two blockchains: Ethereum and Ethereum Classic. The Ethereum Classic version fully accounts for the losses from the theft.

The Ethereum development team is working on a major upgrade known as Ethereum 2.0, which will use the proof-of-stake consensus mechanism rather than proof of work. Transitioning to proof-of-stake means that Ether transactions will use less energy and not require special computing hardware.

The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.

Article Sources

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  2. CoinMarketCap. “Top 100 Crypto Coins by Market Capitalization.” Accessed Feb. 3, 2022.

  3. OpenSea. “You Need an Ethereum Wallet To Use OpenSea.” Accessed Feb. 3, 2022.

  4. “The History of Ethereum.” Accessed Feb. 3, 2022.

  5. GitHub. “Ethereum.” Accessed Feb. 3, 2022.

  6. “Introduction to Smart Contracts.” Accessed Feb. 3, 2022.

  7. “Ethereum-Powered Tools and Services.” Accessed Feb. 3, 2022.

  8. “Gas and Fees.” Accessed Feb. 3, 2022.

  9. “Ethereum Whitepaper.” Accessed Feb. 3, 2022.

  10. CoinMarketCap. “Ethereum.” Accessed Feb. 3, 2022.

  11. “Mining.” Accessed Feb. 3, 2022.

  12. “Proof-of-Work (PoW).” Accessed Feb. 3, 2022.

  13. “Blocks.” Accessed Feb. 3, 2022.

  14. “What Is “Gas Price” and Why Does It Cost ETH for a Transaction?” Accessed Feb. 3, 2022.

  15. “Proof-of-Stake (PoS).” Accessed Feb. 3, 2022.