What is Ethereum (ETH)?
How does Ethereum work? ⚙️
From a technical perspective, this AI-powered digital currency differs significantly from any other type of token in the cryptocurrency market. Like Bitcoin (BTC) and other cryptocurrencies, it relies on a user-defined blockchain ledger and a decentralized user network to operate.
The Ethereum network has several key components.
What is Ether (ETH) Cryptocurrency? 🤷♂️
The primary cryptocurrency powering Ethereum is called Ether, or ETH.
ETH is used to support smart contracts and transactions on the decentralized network. Currently, Ether is the world's second-largest cryptocurrency by market capitalization.
Similar to Bitcoin, Ether can be bought and sold on cryptocurrency exchanges and is used by many as a store of value.
Ethereum blockchain users must pay network fees, or gas fees, to complete their operations and verify transactions. Ethereum prices these fees in ETH.
The supply of Ether fluctuates based on the total amount of ETH staked. Furthermore, each transaction consumes ETH, resulting in an elastic supply. The more Ethereum is used, the more ETH is consumed.
This elastic supply of ETH was introduced through EIP-1559. At launch, the initial supply of ETH was 72 million. Of the initial supply, 80% was sold to the public, and 12 million were reserved as reserves for the Ethereum Foundation. Ethereum has no maximum supply; as of April 2023, the circulating supply was approximately 120.5 million.
Why does ETH cryptocurrency have value? 🏆
First, ETH is the native token of Ethereum, powering all activities within the blockchain. To trade or interact with decentralized applications built on Ethereum, users must pay transaction fees denominated in ETH. This fee covers the computational costs of nodes that process different transactions.
The more complex the functionality and the greater the network usage, the higher the gas fees can be. These fees are transaction fees paid by blockchain users to network validators. Users need to pay these fees to interact with various decentralized applications, such as decentralized exchanges like Uniswap, Curve, and Balancer.
Finally, the forces of market supply and demand determine the value of Ether. Across dozens of cryptocurrency investment trading platforms, investors continuously assess Ethereum's potential as a next-generation cloud computing and smart contract platform.
