Tech UPTechnologyWhat is Ethereum and how does this cryptocurrency work?

What is Ethereum and how does this cryptocurrency work?

The Ethereum cryptocurrency was one of the cryptocurrencies that suffered the most during the “crypto winter”, going from 3,500 to 930 dollars at its worst, however it is now trading above 1,900 dollars.

Here we tell you everything we know about this platform.

What is Ethereum and how did it come about?

Ethereum is a digital platform that adopts blockchain technology and expands its use to a wide variety of applications. Ether is its native cryptocurrency, the second largest in the market.

The Ethereum platform was created in 2015 by the programmer Vitalik Buterin, with the main idea of creating an instrument for decentralized and collaborative applications. Its native cryptocurrency is Ether (ETH), a token that can be used in transactions using this software. Like bitcoin, ether exists as part of an autonomous peer-to-peer financial system, free from government intervention.

In January 2016, ether was trading around $1, and in January 2018, the cryptocurrency hit its all-time high trading at $1,391. However, in October 2020 ether is trading far from its all-time high below $390, currently trading at $1,911. It has proven to be volatile, with frequent intraday fluctuations. Although this is only one among hundreds of cryptocurrencies, it is also one of the few that have a significant market capitalization, along with its rivals, bitcoin and bitcoin cash.

How does it work

Ether uses a shared digital ledger where all transactions are recorded. It is publicly accessible, completely transparent and very difficult to modify.

This digital book is known as a ‘blockchain’ or ‘chain of blocks’, and is generated through data mining.

The miners are in charge of verifying groups of ether transactions to form ‘blocks’ and code them by solving complex algorithms. These algorithms can be more or less difficult, as a way to maintain a certain consistency in the processing time of the blocks.

The new blocks are linked to the previous block chain and in this way the miner receives a reward, that is, a fixed number of ether tokens. It is usually 5 units of ether, although this figure may be reduced if the cryptocurrency continues to rise.

Is it worth investing in Ethereum?

Bitcoin has always been the biggest name in the sector, and Ethereum has been second only to the crypto giant.

Ethereum has been gaining ground in terms of market share, quickly catching up with Bitcoin. While Bitcoin’s market capitalization still looms well above Ethereum, the gap has narrowed considerably over the past year.

Ethereum’s infrastructure could also help set it up for long-term growth. It is the leading network for decentralized applications such as non-fungible token (NFT) markets and decentralized finance (DeFi) projects. The potential is high, and the more developers build on the blockchain, the more chance Ethereum has of sticking around in the long run.

Your upgrade could make it a stronger investment

Ethereum’s next upgrade, “The Merge”, is tentatively scheduled for September. This upgrade will move Ethereum from a Proof-of-Work (PoW) to Proof-of-Stake (PoS) mining protocol, making the network significantly faster, cheaper for users, and much more energy efficient. In turn, this should make it easier for Ethereum to scale, setting it up for long-term growth.

Ethereum is already one of the strongest players in the crypto space, and if this upgrade goes as planned, the future looks even brighter for the network. That could make right now a fantastic time to invest.

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