A quick introduction to Ethereum

You may have seen it mentioned alongside talk of crypto and Bitcoin, but what is Ethereum and why is it important?

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By

James Edwards

Updated

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade.

What is Ethereum?

Ethereum is both a cryptocurrency and network that hosts a wide range of applications, from online banking to gaming and finance.

Think of it a bit like an operating system, but it runs on the Internet instead of a computer.

At the centre of it all is the cryptocurrency ETH, which is used to pay for services on Ethereum. In fact, you can't use Ethereum without owning some ETH, which is one of the reasons it has become so valuable. ETH is what people are talking about when they mention the "price of Ethereum".

What makes Ethereum notable is that it keeps data – and money – secure. It does this by using blockchain technology, cryptography and decentralisation – the same things that also keep Bitcoin safe.

Most of the Internet uses centralised servers to store information, which makes it vulnerable to hacking and other other malicious activities. This is how passwords, account details and even credit card numbers are frequently stolen.

In contrast, Ethereum uses a vast decentralised network of computers, located all around the world, to secure data. This means that a hacker would need to access more than 50% of the network at once to even try and break in.

Given that most of the network is anonymous, this is pretty hard to do.

Web 3.0

Thanks to this new way of doing things, Ethereum is giving rise to a new generation of the Internet – one that is more secure and private, filled with applications, technologies and websites that will allow you to do all sorts of things you couldn't before. This new generation is called Web 3.0.

One of the major ways people are using Ethereum is for what's called decentralised finance. It's complex, but essentially it allows people to earn passive income by lending money to others and receiving interest for doing so. Because everything is automated with smart contracts, interest rates can be quite lucrative, thanks to there being no banks or middle people taking a cut.

Another feature of Ethereum is tokens. Tokens are additional cryptocurrencies that run on the Ethereum network and can be created by anyone. As a result, tokens are an enormous part of the crypto-economy and one of the major things that has helped elevate Ethereum to the second most valuable cryptocurrency. You can learn more about tokens here.

Something else you might have heard of is NFTs, which stands for non-fungible tokens. These are essentially receipts for digital goods, like artwork, collectibles, video game items and even real-world items like club memberships. NFTs are a big deal because they provide a verifiable trail of ownership for digital goods, which was previously impossible.

You can easily trade Ethereum (and Bitcoin) in the Finder app, and even set up recurring buys too. Head to the Crypto tab to get started.

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.
James Edwards's headshot
Written by

Cryptocurrency editor

James Edwards was the cryptocurrency editor at Finder. He led the editorial strategy and reported on the latest industry news to further Finder's mission of helping people make better financial decisions. A relatively early adopter, James has been using Bitcoin since 2013 and began working in the industry in 2017. He takes pride in his ability to boil down complex topics into language his parents can understand. His expertise has seen him called on to report at events such as TechCrunch Disrupt, CoinDesk Consensus and IBM Think, and he has coordinated a vast number of high-profile interviews with the industry's brightest minds. He is a regular contributor to Nasdaq and is frequently called upon for market commentary in Australia and abroad. See full bio

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