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What is Ethereum?

Ethereum is the blockchain network that supports smart contracts, and other decentralized applications.

13 May 2021by Corey Barchat

You may have heard the analogy that if Bitcoin is crypto gold, then Ethereum is crypto silver. But there’s more to it than that. Ethereum has become the second largest cryptocurrency by volume and market capitalization due to its use cases and ability to solve real-world problems.

This article will explore the history of the Ethereum blockchain, the smart contract token that powers it, and where you can buy and spend ETH.

Why was Ethereum created?

Vitalik Buterin, a Canadian-Russian programmer, wanted to capitalize on the potential that Bitcoin’s peer-to-peer decentralized exchange delivered to the world. Since Bitcoin already allowed two users to exchange their crypto without the need of a middleman, Vitalik wanted to extend blockchain technology to include peer-to-peer payment agreements or contracts. If people could now decide to exchange items of value anywhere and any time in the world without a middleman, why couldn’t they then write their own conditional value to their agreements? This is where the idea for the Ethereum network was born, complimenting decentralized finance to include digital, enforceable agreements, also known as smart contracts.

What is Ethereum?

The Ethereum blockchain allows developers to write and run decentralized applications, also known as DApps. Decentralized applications have use cases that include finance, cloud computing, messaging and distributed governance. But the  primary function of Ethereum is for smart contracts.

Using the Ethereum network, you can write smart contracts, and the network will automatically execute the transaction if all the conditions are met. For example, you could use the Ethereum network to pay your monthly rent or pay an employee their wages. In this scenario, you'd set the conditions so that a recurring amount would be transferred from one party to another when a certain date is reached. As long as the conditions  are met, then the funds would be automatically sent on the agreed date in accordance with the contract. The entire process is verified on the Ethereum blockchain.

A cell phone representing digital, smart contracts with Ethereum.
Ether is the fuel that powers smart contracts on the Ethereum blockchain ( image source)

What token powers the Ethereum blockchain?

Ether (ETH) is the token used as fuel (or gas) for the Ethereum blockchain, and powers smart contracts that occur. Unlike Bitcoin, which has a limited and controlled supply, Ether tokens do not currently have a supply cap, meaning a potentially unlimited supply can be mined.

Illustration of Beeple's digital art NFT which sold for $69 million.
Ether can be used to buy NFTs, like Beeple's digital art that sold for $69 million ( image source)

What is Ethereum used for?

In traditional contracts that require a third party, the use of a middle man can be expensive and time-consuming. Ethereum significantly reduces the cost and time of such contracts by eliminating the middleman. With ETH, smart contracts can be coded directly into the Ethereum network. This means that the middleman associated with smart contracts is the code itself, which will either be executed or not.

The Ethereum blockchain handles all aspects of any contract written on the platform, including enforcement and payment. If all conditions are met, then the contract will be executed and the exchange will occur. If all conditions are not met, then the contract will not be validated, and thus not occur.

In addition, Ethereum blockchain technology allows for greater protection of personal data, which is not stored on a central server, as it is with traditional marketplaces.

How can you spend Ether?

Ether tokens can be held as a store of value, traded, or used to interact with decentralized applications, such as smart contracts.

Ether can also be used to buy NFTs (non-fungible tokens) since most exchanges largely accept ETH as the primary token for purchase. The purchasing process for NFTs is in itself a contract: when you buy an NFT with ETH, you are depositing your crypto, and if the agreed-upon conditions are met, you will receive your desired digital collectible.  One of the most popular all-time collectible tokens are none other than digital cats.

The full power of the Ethereum blockchain can be harnessed through parallel projects using LINK, the token that connects smart contracts with the real world data conditions that power them.

Where to buy Ether

You can buy ETH directly on MoonPay or one of our many partner wallets using a credit card or bank transfer. MoonPay's simple widget allows you to purchase Ether quickly and securely, using your preferred payment method.

Screenshot of MoonPay's widget to buy ETH with a credit card.
Buy Ethereum with a credit card on MoonPay