What is Ethereum?

Ethereum (ETH) is a decentralized, open-source blockchain that aims to become a global platform for decentralized applications and strives to enable users worldwide to write and run software resistant to censorship, downtime, and fraud. As the nonprofit Ethereum Foundation puts it, it "Is for more than payments. It's a marketplace of financial services, games, and apps that can't steal your data or censor you." Ethereum is the second-biggest cryptocurrency by market cap after Bitcoin as of 2023 and a decentralized computing platform that can run a wide variety of applications — including a universe of decentralized finance (or DeFi) apps and services. This platform is powered by its native cryptocurrency, Ether, which is used within the Ethereum network for various operations, making it an integral part of the system.

How does Ethereum work?

Ethereum operates through a network of computers that aim to work together as a supercomputer. The network, in its capacity, validates and processes transactions through a system known as mining. Miners, participants in the network, solve complex mathematical problems to confirm transactions, which are then added to the Ethereum blockchain. Ethereum's core innovation, the Ethereum Virtual Machine (EVM), allows for the execution of smart contracts. These are self-executing contracts with the terms of the agreement directly written into lines of code, eliminating the need for a third party. Ethereum also hosts other cryptocurrencies using its ERC-20 compatibility standard, making it a vital player in the blockchain ecosystem.

What are the potential use cases for Ethereum?

Ethereum's potential use cases extend beyond the simple transfer of value. Its platform enables the development of a wide range of decentralized applications (dApps) that operate on its blockchain. These dApps can offer services ranging from games to digital identity systems and from supply chain tracking to complex financial instruments. Ethereum also enables the creation and exchange of non-fungible tokens (NFTs), unique digital assets that can represent ownership of a variety of items and content.

What is the history of Ethereum?

In 2013, a 19-year-old computer programmer (and Bitcoin Magazine co-founder) named Vitalik Buterin released a whitepaper proposing a highly flexible blockchain that could support virtually any kind of transaction. Buterin, along with other co-founders, including Gavin Wood, secured funding for the project with the sale of $18 million in pre-launch tokens in 2014. In July 2015, the first public version of the Ethereum blockchain was launched, and smart contract functionality began to roll out on the Ethereum blockchain. Since its launch, Ethereum has undergone several planned protocol upgrades, known as milestones, which improve the system's functionality, performance, and security. These upgrades are decided by consensus within the community and aim to represent the ongoing development and forward-thinking nature of the Ethereum project. In 2022, Ethereum went through a major upgrade, switching from proof-of-work to proof-of-stake to become a more secure and energy-efficient blockchain.

What is the difference between Bitcoin and Ethereum?

Ethereum, like Bitcoin, is an open-source project that is not owned or operated by a single individual. Anyone with an internet connection can run an Ethereum node or interact with the network. However, Ethereum differs from Bitcoin in its ability to build and execute smart contracts. Smart contracts enable a vast ecosystem of applications on Ethereum, such as stablecoins (which are pegged to the dollar by smart contract), decentralized finance apps (collectively known as DeFi), and other decentralized apps (or dApps). Until recently, Ethereum and Bitcoin were both secured by "miners" running specialized hardware to solve difficult math problems. In September 2022, Ethereum mining was phased out, and Ethereum transitioned to Proof-of-Stake. Ethereum is now secured by a global network of validators running Ethereum's software while staking (understand "locking") a certain amount of ETH tokens. Validators earn rewards generated in Ether (ETH) for participating in the process and can have their stake slashed if they violate the rules of the protocol. Anyone with an ETH stake and computer meeting the requirements can become a validator.

How can I stake Ethereum?

Coinbase makes it easy and secure to stake your ETH. Through Coinbase's built-in staking feature, anyone can stake their ETH (as much or as little as you'd like) in just a few taps. In your Coinbase app, navigate to the ETH asset page. You'll see a prompt to stake your ETH. If you want to sell or send your ETH staked on Coinbase, you can do so by converting it to cbETH, Coinbase's Wrapped Staked ETH token. The price of cbETH is determined by the market and may lose value. cbETH is available in select regions.

Why does the price of Ethereum fluctuate?

Like Bitcoin, Ethereum's price is based on a global marketplace of supply and demand. Its price can be volatile in the short term as demand overwhelms supply and vice versa.

How can I buy Ethereum?

By creating an account on Coinbase or an increasing number of other reputable financial technology companies, you can buy, send, and receive Ethereum.