What is Ethereum? The Ultimate Guide to Ethereum

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Ethereum has long been established as the number two to Bitcoin. However, this is a misleading comparison in many ways, as it is very different from Bitcoin. We’re going to take a look at those key differences and learn what Ethereum is. In addition, how can it be used and what its main benefits and drawbacks are. Inevitably, the majority of comparisons and considerations occur with Bitcoin in mind. As it is the closest competitor regarding media, ongoing value and market capitalization on the currency side.

Ethereum Price


The history of Ethereum

Rather than being a cryptocurrency, Ethereum is, in fact, an open-source platform that runs on a blockchain. The coin’s blockchain generates its currency – Ether – which is often referred to as Ethereum for convenience. The concept for the coin was originally proposed in a white paper written by Vitalik Buterin in 2013. When the whitepaper grabbed the attention of the Peter Thiel foundation, Buterin dropped out of university and developed Ethereum with the help of a crowded sale.

In July 2015, Ethereum was officially launched. However, it took until 2017 for the blockchain and its cryptocurrency to take off. During the crypto explosion of late 2017, 1 Ether was worth well over $1000. It has since stabilized though and is now valued at just over $200, with a market capitalization of around $21 billion.

What is the difference between Ethereum and Bitcoin?

There are some differences between Ethereum and Bitcoin. This is because Vitalik Buterin designed it as a way to overcome the flaws that he perceived in the original cryptocurrency. However, Ethereum is not intended to be about a cryptocurrency. It is much more than that.


The main difference between Ethereum and Bitcoin comes down to limitation. As the Bitcoin blockchain was built to serve a singular cryptocurrency, there is no option to build anything else on it. Ethereum, however, was created as a platform using peer-to-peer contracts, known as smart contracts. Developers can build decentralized applications – dApps – that sit on the Ethereum blockchain. There is no limitation to the number of applications that can be created and run. This is one of the contributing factors to Bitcoin being more valuable than Ether – it has a more singular focus.


Many people have raised concerns about Bitcoin not being scalable. This is not the case with Ethereum, though. While Bitcoin has a 1mb block limit, Ethereum doesn’t have a limit. With the miners on the blockchain instead of being in control of how big a block can be. This means that Ethereum is much faster than Bitcoin for transacting – and it can get faster.

Transaction Fees

As well as being faster, transaction fees are also cheaper on Ethereum than Bitcoin. As transactions are automatic on the coin’s blockchain. Where bitcoin transactions are manual. This results in much lower power demand for Ethereum blockchain. This which also means that miners don’t have the same overheads. At one stage in 2017, transactions were over 50 times cheaper on Ethereum than on Bitcoin. This raised concerns that Bitcoin would not be sustainable if demand increased significantly. Ethereum has no such concerns.

Going back to the concept of limitation. Ethereum is not a limited currency. While production of new Ether will slow over time, it is not a limited supply currency. Bitcoin, however, is limited to 21 million coins. Because of this, it is seen as a store of value or a commodity, very much like digital gold. The main purpose of Bitcoin is to store value and transact. However, the main purpose of Ethereum is to run smart contracts and decentralized applications.

How can I buy and store Ethereum?

To buy Ethereum, you need to get hold of an Ether wallet. In this case, there is no difference in mechanism to how you buy Bitcoin. The below simple steps will guide you:

Step 1: Find a wallet, choosing from mobile, desktop, hardware or paper options.

Step 2: Buy Ethereum (ETHUSD) through an exchange like Coinbase. You can do this using your credit or debit card. There are also several exchanges out there that let you freely exchange between the biggest cryptocurrencies.

Step 3: However, if you already have Ripple XRP, Bitcoin, Litecoin or Bitcoin Cash. Several places will let you simply trade these in for Ether. This aspect of cryptocurrency is growing all the time as well. So you can expect that the options for exchange only increase over time.

What is Ethereum mining?

Mining is the mechanism that is essential to keep Ethereum running. Just like with Bitcoin, transactions rely on verification by nodes. Individual computers or pools of computers working together, based all around the world. Using your computer’s Graphics Processing Unit, you can join a mining pool. Then you work to solve complex algorithms that result in transactions being confirmed and blocks being added to the blockchain. For doing this, you get a reward – a part of the transaction fee.

The typical blockchain concept is called proof of work. This is a mechanism by which mining has to be done and verified before a transaction can be confirmed. However, Vitalik Buterin is more interested in an alternative mechanism, known as proof of stake. This is where miners are replaced with validators, and the need for immense amounts of computational power disappears. This would make the need for mining pools disappear. Something that Buterin is keen to do because he believes that restricting mining to powerful companies is a threat to the notion of decentralization.

How can I use Ethereum?

Once you have a supply of Ether, you can send it and exchange it with any cryptocurrency. Of course, the difference is that you will send Ether through an automatic smart contract rather than a manual transaction. To you, though, this won’t feel any different.

Ethereum isn’t about money though. So if you want to use digital currency like regular currency, you’re going to get much closer to that kind of experience with Bitcoin. Of course, many places still accept it – but that number is far lower.

The main reason non-investors get into Ethereum is to set up dAPPs that live on the coin’s blockchain. If you’re a developer and you want to benefit from the added security and transparency that comes with operating a decentralized system, then this coin is king – at least for now.

What are the advantages and disadvantages of Ethereum?

Ethereum was developed several years after Bitcoin, however, it is more advanced than Bitcoin regarding its ecosystem and network. Transactions are fast, and the blockchain is scalable, so there is room for improvement. Therefore, if you’re looking to use a cryptocurrency specifically for its transaction speed, then Ethereum isn’t one of the fastest. It’s just fast compared to Bitcoin.


Smart contracts are a big plus for Ethereum. The ability to execute an automatic contract is an excellent addition to a blockchain. In addition, the Ethereum model works very well. The real beauty behind the smart contract system is that it can be used for anything at all. They work on an “If” programme. This means you get your money and complete the contract IF something happens – and that something can be almost anything.

The main advantage of using Ethereum blockchain is the amount of energy it uses is way lower compared to Bitcoin. The problem with Bitcoin is that it requires massive amounts of energy, which is seen as unsustainable and unethical. Ethereum, however, has much lower demands and its move to proof of stake over proof of work is another step in the right direction.


This is not to say that Ethereum is perfect. These blockchain systems are still very new. Because of that, developers are updating Ethereum almost constantly. It will certainly be better when a stable, constant version has been established. This will then free developers up to do more maintenance and micro-improvement work.

The secondary issue here is that everyone is so busy that the documentation is often out-of-date. This makes it more difficult for other developers to join, despite the fact that Ethereum is meant to be completely open-source.

However, these disadvantages are all improvable with time, and that is a great strength of Ethereum. It isn’t limited in the same way that Bitcoin is. And because the adjoining currency, Ether, is so valuable and commands such a large market share. There is going to be sustained interest to improve and work on Ethereum in the future.