A Beginner's Guide to Ethereum

Introduction to Ethereum

What is Ethereum?

Ethereum is an open-source software platform that enables the creation of cryptocurrencies and digital applications. This blockchain-based technology came into existence in 2015, with Vitalik Buterin and Gavin Wood listed among its primary founders (source). The term "Ethereum" refers to both the platform itself and its native cryptocurrency, Ether.

Photo by: Choong Deng Xiang on Unsplash

Ethereum Explained: The Basics

Ethereum utilizes blockchain technology similar to Bitcoin. However, Ethereum expands on Bitcoin’s capabilities by serving as a foundation for developers to build their own decentralized applications (DApps) with smart contracts. A smart contract is a self-executing contract with the terms of an agreement being directly written into lines of code.

It functions as a decentralized computer that eliminates any need for an intermediary in transactions. It becomes very useful for industries where trust is essential but not always present, such as in finance or law. More on this later!

The Ethereum network leverages cryptography to ensure that transactions are secure and data records unchanged, validating its use case as a platform for peer-to-peer exchanges of value.

Understanding the Ethereum Blockchain

Understanding how Ethereum operates requires an understanding of blockchain technology since it forms the backbone on which the platform was built. Blockchain essentially operates as a database storing information in "blocks" linked in a "chain". Once data is added to this chain, it cannot be altered, ensuring transparent and verifiable transactions.

How Does the Ethereum Blockchain Work?

As mentioned earlier, Ethereum makes use of its open-source software platform for developers to build and deploy decentralized applications (DApps) through smart contracts. These smart contracts are pieces of code stored on each computer participating in the network's operation (each node), making it decentralized.

In simpler terms, just as web developers create apps that run on web browsers like Google Chrome or Firefox, DApp developers create applications running on the Ethereum blockchain.

The Role of Ethereum Smart Contracts

What Are Smart Contracts?

Ethereum's smart contracts are self-executing contracts where the terms of the agreement are written into code. They can be as simple or complex as needed, depending on the specific requirements of a given transaction. A smart contract could define the rules and penalties related to an agreement in the same way a traditional contract does but also execute these obligations automatically.

How to Use Ethereum Smart Contracts

The use case for Ethereum’s smart contracts is vast and varied. From creating your own cryptocurrency token to developing an entire DeFi (Decentralized Finance) protocol, these smart contracts have transformative potential across industries. Developers can write smart contracts using Solidity, Ethereum's native programming language designed specifically for creating smart contracts on the Ethereum blockchain.

How Smart Contract Works, Source: GeeksForGeeks

A key thing to remember about smart contracts on Ethereum is that they're immutable, meaning they cannot be changed once deployed. That's why testing and auditing before deployment is so crucial. The permanence of these contracts requires a high degree of precision in development to avoid potential vulnerabilities or logical errors. While there are some new smart contract types including upgradeable smart contracts, most big changes require a smart contract to be redeployed to be enacted.

Getting Started with Ethereum

What is an Ethereum Wallet?

An Ethereum wallet functions as a digital interface for storing Ether and interacting with applications on the Ethereum platform. Think of it like an internet banking app but without a bank. These wallets allow users to manage their Ethereum addresses, providing a user interface for managing Ether and other tokens on the Ethereum network.

How to Set Up an Ethereum Wallet

To set up an Ethereum Wallet, you need to follow these steps:

  1. Download a wallet of your choice (e.g., Metamask, Trust Wallet, etc.)

  2. Generate your private keys for the Ethereum wallet

  3. Secure your private keys responsibly

There are different types of Ethereum wallets available, including:

  • Browser wallets: These are browser-based extensions.

  • Mobile wallets: These are wallet apps that you can install on your mobile device.

  • Desktop wallets: These are software that you download and install on your PC.

  • Hardware wallets: These are physical devices that you can purchase.

  • Paper wallets: These are printed QR codes.

Feel free to choose the type of Ethereum wallet that suits your needs and preferences.

Remember, your private keys are your access passphrase to your wallet - it's essential that you keep it secret and safe. If you lose your private keys, you lose access to your Ethereum wallet and in turn your funds! And if someone else gets hold of them, they gain direct access to them.

Growth In Ether's Price

The journey of Ether's price has been nothing short of extraordinary, defying all expectations and surpassing even the wildest projections. It commenced in 2014, with an unassuming value of a mere $0.31 (source). However, as time passed, Ether steadily gained momentum and garnered the attention of investors and enthusiasts alike. Its ascent was fueled by a combination of technological advancements, increased adoption, and a growing recognition of its potential to revolutionize industries.

ETH Price Over The Years, Source: CMC

Year after year, the price surged, reaching new heights that were previously unimaginable. In 2021, Ether's price reached its peak at $4900 (source), and as of today, its market cap has skyrocketed to over 270 Billion USD.

Conclusion: The Future of Ethereum

The inception of Bitcoin brought about the first-ever solution to digital trust, through an innovative mix of game theory, cryptography, and computer science. Ethereum took this idea a step further by building a platform that allows decentralized applications to be built on top of its blockchain.

The future holds a lot for Ethereum. In September 2022, Ethereum completed a historic upgrade known as "The Merge" where it transitioned from a Proof-of-Work to Proof-of-Stake consensus algorithm (source). This transition has been speculated to offer faster transaction speeds and lower energy consumption compared to the previous system.

With Ethereum's adaptation of shard chains set for implementation in the future, the network's scalability will see further improvement. Shards are smaller chains that run concurrent to the main Ethereum chain (the Beacon Chain), allowing for more transactions and smart contracts to be processed at once.

In what has become an ever-increasing digitized world economy, platforms like Ethereum are transforming our concept of what online value exchange can look like: decentralized finances (DeFi), property contracts without middlemen, and identity verification systems ensuring privacy and security - the possibilities seem endless.


1. How do you explain Ethereum to a beginner?

Simply put, Ethereum is a decentralized platform that allows developers to build applications straight onto its blockchain. It uses smart contracts - self-executing contracts with terms directly written into code - enabling peer-to-peer exchanges of value without intermediaries.

2. Is Ethereum a good investment for beginners?

As with any investment, conducting thorough research before investing is crucial. Cryptocurrency markets can be highly volatile; hence potential investors should understand their risk tolerance levels.

3. How do I start working with Ethereum?

To start working with Ethereum, you would first need to create an Ethereum wallet to hold your tokens. From there, you can acquire Ether through cryptocurrency exchanges.

4. Can you buy Ethereum with $1?

Yes, most exchanges allow for partial purchases of cryptocurrencies, meaning that you can invest as little as $1 into Ethereum.

5. How do you convert Ethereum to cash?

One can switch Ethereum back to cash through cryptocurrency exchanges that offer fiat pairings. This typically involves selling the Ether for fiat currency such as USD or EUR and then withdrawing this to a bank account.

6. What is Ethereum in layman's terms?

You can think of Ethereum as an online public computer without a central unit controlling it. This online computer runs on its own digital currency called Ether.

7. Can you buy $100 worth of Ethereum?

Yes, it is possible to buy $100 worth of Ethereum through any exchange that supports fractional purchases.

8. Is it worth buying 1 Ethereum coin?

The value proposition of investing in 1 ETH depends on various factors such as market conditions at the time, the individual’s risk tolerance and investment portfolio balance. It would be advisable to conduct ample market research or consult a financial advisor before making such decisions.