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What is Ethereum and How does it Work?

What is Ethereum ETH

Ethereum is one of the hottest blockchains in the cryptocurrency world. When it comes to Market cap, It’s the second-largest cryptocurrency coin, only behind Bitcoin. But, what is Ethereum and how does it work?

Debuted in 2015, Ethereum has a bigger role to play in the emerging marketplace which is opening up for cryptocurrency adoption by integrating crypto projects into their businesses.

In this post, I will deep dive into Ethereum blockchain, explore its work, and highlight the use case with possible future predictions.

Table of Contents

  1. What is Ethereum?
  2. How does Ethereum Work?
  3. 2.1 Ethereum DAPPS
    2.2 Ethereum Smart Contracts
  4. ETH and Ethereum
  5. Bitcoin vs Ethereum
  6. Ethereum Benefits
  7. 5.1 Peer to Peer transfer
    5.2 Store of value
    5.3 Open source blockchain platform
    5.4 Smart contract and DAPPS support
    5.5 Decentralized network
  8. Ethereum Price
  9. Ethereum 2.0
  10. How to buy Ethereum in India?
  11. Top Ethereum Projects
  12. Ethereum Price Prediction
  13. Should you invest in Ethereum?

What is Ethereum?

Founded by Vitalik Buterin, Ethereum is an open-source, decentralized blockchain network that works on similar grounds as Bitcoin. However, it is not limited to be a peer-to-peer currency for exchange or a store of value. It is intended to be a platform for decentralized computing networks that has the capability to support and create decentralized apps (DAPPS) and execute smart contracts using its own computing language.

Solidity is the primary language of Ethereum

How does Ethereum Work?

Blockchain is the heart of cryptocurrencies and Ethereum is no different. Ethereum is built on its own blockchain that operates on distributed ledger technology (DLT).

Distributed means that everyone on the network has similar copies of the ledger and can see past transactions on the network. This also means that no one in the network can control or manage the blockchain which makes it decentralized. Unlike the banking system which is centralized.

The transactions on the blockchain are accompanied by cryptography which secures it from potential cyber-attacks. It also hides the details of the parties involved in a transaction. A block is created and added to the blockchain, whenever a computer solves a complex equation on the network. The user is thus rewarded with Ethereum currency i.e ETH (Ether).

Ethereum DAPPS:

The single most feature that separates Ethereum from its competitors especially from Bitcoin, is its ability to create decentralized apps and smart contracts. DAPPS can be created on the platform using the software language of Ethereum. It’s like creating an app on Android or iOS but much safer and decentralized.

DAPPS can create its own set of tokens on the network, independent of ETH. The token created by any app on the network is called ERC20 tokens. BAT coin and UNI are the two famous tokens build on the Ethereum blockchain network.

A data storage app created on Ethereum has the power to replace Google Drive

Ethereum Smart Contracts:

Smart contracts on the Ethereum network can be defined as an agreement between the parties that can be executed automatically once the conditions are met. In layman’s terms, it’s like an IF- Else statement.

Ethereum blockchain has the capability to create complex smart contracts online. Once created, the system will monitor the status and if the conditions are met, it will execute automatically without any manual intervention. That’s what makes it smart.

In my post on Bitcoin vs Ethereum, I have explained smart contracts by citing an example of an agreement between a tenant and a landlord.

ETH and Ethereum: What’s the Difference?

ETH or Ether is the currency of the network and Ethereum refers to the complete blockchain. Just like you need fuel to run the car, Ether is the fuel used to run the Ethereum blockchain.

Most of the investors buy Ether as a peer-to-peer digital currency or keep it as a store of value. However, that is just one way to look at it. Ether can also play a pivotal role in smart contract management. It can be issued as collateral against the smart contract agreement.

The second most interesting use case of both Ethereum and Ether can be an app that can store data on the blockchain. Ether can be used as a mode of payment to access the storage and the Ethereum network will then secure the data from unauthorized access without owning it. Unlike Google drive which owns the complete data in its network since it’s built on a centralized network.

Remember, Ethereum is different from Ethereum Classic

Bitcoin vs Ethereum:

Bitcoin was primarily created to be the digital currency of the future. It’s a peer-to-peer network that supports digital transactions on the internet without the need for approval from any third party i.e Banks. Thus leapfrogging banks that control the currency circulation across the globe.

Bitcoin was built on a theme of financial decentralization where no party can control or has the right to collect financial data of the other party. Most believed it to be a revolt against the fraudulent financial system that caused the financial crisis of 2008 which left many on the roads without any income or savings to support their livelihood.

Bitcoin supply is limited to 21 million only

Ethereum on the other hand was created to exploit the full potential of blockchain technology. It is created by developers for developers. Since Ethereum is an open-source platform, anyone can learn the code and create his own App or build software on the platform.

Since the system is decentralized, no one has control over the network and hence the app creators can work independently without being dependent on the rules and regulations created by the centralized party. Just opposite to YouTube, where you have to follow the guidelines.

If you’re looking for a quick comparison between the two, you can watch the web story on Bitcoin vs Ethereum

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Ethereum Benefits:

The benefits of Ethereum includes but are not limited to the following:

Peer to Peer transfer:

Ether (ETH) token is used to perform peer-to-peer transactions in the network. However, one has the capacity to create his own ERC20 token within the network to support peer-to-peer transactions in his own ecosystem built on the Ethereum blockchain.

Store of value:

The rise in the cryptocurrency awareness and adoption of Ethereum based crypto projects has led to the rise of Ether that can ultimately be counted as a part of an investment portfolio. Hence investors are piling up ETH as a store of value to reap potential gains in the future.

Open source blockchain platform:

Ethereum is created by developers for developers that make it an open-source platform which in layman terms can be tweaked or played around with as per needs. Hence making it flexible for everyone’s use.

Smart contract and DAPPS support:

The ability to create smart contracts is one of the in-demand real-world requirements. No other blockchain is efficient enough to create a complex algorithm of smart agreement. This, powered by DAPPS sparks the interest of coders wanting to explore the blockchain space.

Decentralized network:

The fact that Ethereum is a completely decentralized network. No one has control over it. This makes it secure and user-friendly. There’s no entity that can control your data or flush you out of the system if the guidelines change.

Ethereum Price:

Check the latest Ethereum Price –

What is Ethereum 2.0?

Ethereum 2.0 is the upgrade version of Ethereum. The current Ethereum network is inundated with scalability issues and rising transaction costs. High volume of transactions often clogs the system and slows down the network.

In order to counter these issues, Ethereum team is upgrading the blockchain with the EIP1559 proposal which is likely to be deployed in the months of July- August 2021.

Ethereum will be using a process called Sharding that will divide the process into parallel sub-processes to counter the scalability issues and improve network speed. Learn more crypto jargons by understanding the cryptocurrency terminology.

Ethereum 2.0 will support 1000+ transactions per second

How to buy Ethereum in India?

Thanks to WazirX, despite the unclear guidelines of taxation on cryptocurrencies, buying your favourite cryptocurrency is easier in India. WazirX is an Indian cryptocurrency exchange that is now a subsidiary of Binance.

Buying from WazirX India is just like buying stock from a stock market. All you need to do is to create an account on the platform and submit your KYC with bank details. Once done you’re all set to buy Ethereum or any other cryptocurrency in India.

To understand the complete steps, please read my detailed post on How to buy Bitcoin in India.

Top Ethereum Projects:

Ethereum blockchain has come a long way. Increased popularity has led to the rise of top Ethereum projects and DAPPS that are built on the network. Here’re my favourite ones:

I will be covering each of these projects in separate posts. Make sure to subscribe to the newsletter to receive updates.

Ethereum Price Prediction:

Ethereum price has hit an all-time high of $4600 in early 2021. However, during the previous market crash of 2018, the price has slumped below $100 per token. Given the highly volatile nature and strong project growth. It is likely that Ethereum has the potential to hit $10,000 in the next bull run. Having said that, you have to be mindful of your investment.

As a rule of thumb, invest what you can afford to lose.

Should you invest in Ethereum?

Short answer Yes! The long-term success depends on a lot of factors that include the successful rollout of ETH 2.0, addressing the scalability issues, and pumping up the transaction speed. Apart from internal factors, the external factors that can majorly influence the growth of Ethereum are the rise of competition.

At the moment, Solana crypto (SOL) is one of the hottest blockchain babies in town which has gained a lot of attention from the developer’s community, followed by Polygon MATIC which is created to solve similar issues concerned with Ethereum blockchain. Upcoming ambitious projects like Polkadot Crypto (DOT) and Cardano (ADA) can also hamper the growth of the Ethereum ecosystem.

Watch the complete video description on Ethereum blockchain –

Indeed Ethereum is one of the best cryptocurrency projects that have proven it’s mettle and stood the test of time. Ethereum 2.0 will be a game changer. Coupled with the rise in demand of Ether (ETH), it can really blew up to the moon. I am quite positive on this one. Let’s take a look on Ripple XRP cryptocurrency now. If you like the post, please share it in your social handles and checkout related posts shared below.


Cryptocurrency is a highly volatile market. All the information shared in the post is for knowledge purpose only. By no means, it’s financial or investment advice. Readers are responsible for their own investment decisions and should only invest in cryptocurrency after proper research.

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