Ethereum FAQ

What is Ethereum?

Ethereum is a decentralized, open-source blockchain platform that enables developers to build and deploy smart contracts and decentralized applications (dApps). It was proposed in late 2013 by programmer Vitalik Buterin and development began in early 2014, with the network going live on July 30, 2015.

How does Ethereum work?

Ethereum operates on a blockchain, similar to Bitcoin, but with added functionality for executing smart contracts. These are self-executing contracts with the terms directly written into code. Ethereum uses a proof-of-stake (PoS) consensus mechanism, where validators are chosen to create new blocks and confirm transactions based on the amount of ETH they hold and are willing to "stake" as collateral.

What are the technical aspects of Ethereum?

Ethereum uses its own cryptocurrency called ETH to power the network. Smart contracts on Ethereum are written in a programming language called Solidity. The network transitioned from a proof-of-work (PoW) to a proof-of-stake (PoS) consensus mechanism with the Ethereum 2.0 upgrade, which aims to improve scalability, security, and sustainability.

What are the advantages of Ethereum?

Ethereum offers several advantages, including the ability to create and deploy smart contracts and dApps, which can operate without downtime, fraud, control, or interference from a third party. The platform is highly flexible and supports a wide range of applications, from financial services to supply chain management. Ethereum's transition to PoS also significantly reduces its energy consumption compared to PoW.

What are the disadvantages of Ethereum?

Ethereum faces challenges such as scalability issues, which can lead to slower transaction times and higher fees during periods of high demand. The complexity of smart contracts can also introduce security vulnerabilities if not properly coded. Additionally, the regulatory environment for cryptocurrencies and blockchain technology is still evolving, which can create uncertainty.

How can I buy and store Ethereum (ETH)?

You can buy Ethereum on our buy Ethereum app. Ethereum can be stored in various types of wallets, including hot wallets (online wallets connected to the internet) and cold wallets (offline wallets not connected to the internet, such as hardware wallets and paper wallets).

What are common uses of Ethereum?

Ethereum is used for a variety of purposes, including the creation and deployment of smart contracts and dApps. It is also used in decentralized finance (DeFi) applications, which aim to recreate traditional financial systems such as lending and borrowing, but in a decentralized manner. Additionally, Ethereum is used for creating and trading non-fungible tokens (NFTs), which represent ownership of unique digital assets.

What are the risks associated with Ethereum?

The price of Ethereum can be highly volatile, leading to potential market losses. While the Ethereum network itself is secure, users must take precautions to protect their wallets and private keys from theft and hacking. Regulatory changes can impact the legality and use of Ethereum in different regions. Additionally, poorly coded smart contracts can introduce security risks.

How is Ethereum different from Bitcoin?

While both Ethereum and Bitcoin are decentralized blockchain platforms, Ethereum is designed to be more than just a digital currency. It provides a platform for developers to build and deploy smart contracts and dApps. Ethereum's consensus mechanism has also transitioned from PoW to PoS, which is different from Bitcoin's PoW mechanism. Furthermore, Ethereum has a broader range of applications beyond just being a store of value or medium of exchange.