The open-source, blockchain-based platform known as Ethereum is a decentralised network that uses smart contracts to enable the creation and deployment of various projects. This is an accurate description of the world’s second-largest cryptocurrency. However, to the average person, it explains nearly nothing about Ethereum and its purpose.
A useful way to understand Ethereum as a beginner is to compare it to Bitcoin. You’re probably aware that Bitcoin is digital money that can be transferred online from one person to another. Ethereum is different, as it comprises a highly programmable digital currency known as smart contracts. Read on to learn more.
So, what exactly are these smart contracts? Think about buying a house. Traditionally, this transaction would involve several third parties, such as escrow agents and lawyers. As a result, the process is a lot more expensive and tedious than it has to be. Now let’s imagine using Ethereum to facilitate that transaction.
In this case, some code can automatically handle the transferring of the funds to the seller and the home ownership to the new owner, without the need for third parties to oversee anything. This has immense potential elsewhere.
With Ethereum, we can decentralise and streamline many of the systems we use today. In doing so, elements of control and failure are eliminated as internal corruption and external intrusions become impractical. Since the middleman is eliminated from the picture, costs can be lower for end-users, so everyone wins.
Before we continue, remember that there are two elements here – Ethereum and Ether (ETH). The latter is known as the native token of the system, fuelling all transactions that take place over the Ethereum network. It’s also a currency that you can use to make and receive payments between other people and service providers who accept crypto.
Now, in order to make any ETH transaction or execute smart contracts, sufficient computational power is required. So, to carry out a smart contract over Ethereum, you need to pay a gas fee. What you pay can vary depending on factors like the time of the transaction, its complexity, and higher volume transfers naturally cost more.
You can learn more about how to get the lowest Ethereum gas price on the Paxful blog. There’s a wealth of additional information on ETH and other cryptocurrencies on the site, and Paxful itself is a platform where you can buy crypto with just about any payment method.
The potential to decentralise finance is generally considered to be Ethereum’s main achievement. However, it has done many other things in various realms of science and technology. For example, you’ve probably heard of nonfungible tokens or NFTs, which are allowing artists to make millions of dollars by putting their work onto the blockchain.
Ethereum has also facilitated the development of un-censorable social media sites, as well as freelance platforms that don’t take large cuts of workers’ payments.