WHAT IS ETHEREUM?
The foundation for our digital future
A complete beginner's guide to how Ethereum works, the benefits it brings and how it's being used by millions of people around the world.
Summary
Ethereum is a network of computers all over the world that follow a set of rules called the Ethereum protocol. The Ethereum network acts as the foundation for communities, applications, organizations and digital assets that anyone can build and use.
You can create an Ethereum account from anywhere, at any time, and explore a world of apps or build your own. The core innovation is that you can do all this without trusting a central authority that could change the rules or restrict your access.
Keep reading to learn more…
What can Ethereum do?
Banking for everyone
Not everyone has access to financial services. But all you need to access Ethereum and the lending, borrowing and savings products built on it is an internet connection.
An open internet
Anyone can interact with Ethereum network or build applications on it. This allows you to control your own assets and identity, instead of them being controlled by a few mega-corporations.
A peer-to-peer network
Ethereum allows you to coordinate, make agreements or transfer digital assets directly with other people. You don't need to rely on intermediaries.
Censorship-resistant
No government or company has control over Ethereum. Decentralization makes it nearly impossible for anyone to stop you from receiving payments or using services on Ethereum.
Commerce guarantees
Customers have a secure, built-in guarantee that funds will only change hands if you provide what was agreed. Likewise, developers can have certainty that the rules won't change on them.
Composable products
All apps share the same blockchain, enabling them to integrate like Lego bricks, leading to improved products and experiences while ensuring essential tools remain accessible.
Why would I use Ethereum?
If you're interested in more resilient, open, and trustworthy ways to coordinate globally, create organizations, build apps and share value, Ethereum is for you. Ethereum is a story that is written by all of us, so come and discover what incredible worlds we can build with it together.
Ethereum has also been invaluable for people who have had to handle uncertainty around the security or soundness or mobility of their assets due to external forces outside of their control.
Cheaper and Faster Crossborder Payments
Stablecoins are a novel type of cryptocurrency that relies on a more stable asset as the basis for its value. Most of them are linked to the United States dollar and therefore maintain the value of that currency. These allow for a very cheap and stable global payment system. Many current stablecoins are built on the Ethereum network.
Ethereum and stablecoins simplify the process of sending money overseas. It often takes only few minutes to move funds across the globe, as opposed to the several business days or even weeks that it may take your average bank, and for a fraction of the price. Additionally, there is no extra fee for making a high value transaction, and there are zero restrictions on where or why you are sending your money.
What about Ethereum's energy consumption?
On September 15, 2022, Ethereum went through The Merge upgrade which transitioned Ethereum from proof-of-work to proof-of-stake. The Merge was Ethereum's biggest upgrade and reduced the energy consumption required to secure Ethereum by 99.95%, creating a more secure network for a much smaller carbon cost. Ethereum is now a low-carbon blockchain while boosting its security and scalability.
I heard crypto is being used as a tool for criminal activity. Is this true?
Like any technology, it will sometimes be misused. However, because all Ethereum transactions happen on an open blockchain, it’s often easier for authorities to track illicit activity than it would be in the traditional financial system, arguably making Ethereum a less appealing choice for those who would rather go undetected.
Crypto is used much less than fiat currencies for criminal purposes according to the key findings of a recent report by Europol, the European Union Agency for Law Enforcement Cooperation:
“The use of cryptocurrencies for illicit activities seems to comprise only a small part of the overall cryptocurrency economy, and it appears to be comparatively smaller than the amount of illicit funds involved in traditional finance.”
What is the difference between Ethereum and Bitcoin?
Launched in 2015, Ethereum builds on Bitcoin's innovation, with some big differences.
Both let you use digital money without payment providers or banks. But Ethereum is programmable, so you can also build and deploy decentralized applications on its network.
Bitcoin enables us to send basic messages to one another about what we think is valuable. Establishing value without authority is already powerful. Ethereum extends this: rather than just messages, you can write any general program, or contract. There is no limit to the kind of contracts which can be created and agreed upon, hence great innovation happens on the Ethereum network.
While Bitcoin is only a payment network, Ethereum is more like a marketplace of financial services, games, social networks and other apps.