Ether (ETH)

Ethereum is a decentralized open-source blockchain that uses a software platform called the Ethereum Virtual Machine (EVM) to help build smart contracts and decentralized applications (dApps).

Besides being the oldest smart contract platform out there, crypto projects gravitate towards the Ethereum network because the EVM is Turing-complete (read: can theoretically execute any conceivable computation), the Ethereum network has one of the largest distributed systems of nodes (decentralized), and its token ETH is widely recognized and available on many exchanges.

With Ethereum’s EVM, users can build decentralized applications that remove the need for intermediaries in both financial (ex: sub-currencies, financial derivatives, and contracts, wallets) and non-financial (ex: voting, ownership, file storage) activities.

Ethereum also allows other projects’ tokens to run within the network provided that they follow the ERC-20 standard for smart contracts. Like ETH, these ERC-20 tokens are fungible, stored, and sent using Ethereum addresses and transactions, and use gas to cover transaction fees.

Ethereum uses a Proof-of-Stake (PoS) consensus algorithm to validate transactions and establish new blocks on the chain. 

For a more in-depth look at the Ethereum network, please visit our Beginner’s Guide to Ethereum in the School of Crypto.

What is the ETH token?

Ethereum’s native cryptocurrency ether (ETH) is mainly used as a utility token to reward validators to confirm transactions/produce blocks, as well as to pay the fee to initiate smart contract execution.

Users store their ETHs in wallets which are then used to connect to the dApps made on Ethereum’s blockchain system.

In the Decentralized Finance (DeFi) sector, ETH can be also used as collateral for borrowing other crypto assets.

Team Background

Vitalik Buterin, computer programmer and co-founder of Bitcoin Magazine, wrote Ethereum’s introductory paper in 2013.

He recruited the rest of the “first five” co-founders Mihai Alisie, Charles Hoskinson, Anthony Di Iorio, and Amir Chetrit, and eventually added Joseph Lubin, Jeffrey Wilcke, and Ethereum’s yellow paper writer Gavin Wood.

Di Ioro has since moved on co-found Jaxx wallet maker Decentral; Hoskinson has founded Cardano (ADA); Lubin has founded Metamask’s parent company ConsenSys, while Wood founded Polkadot (DOT), Kusama (KSM), Parity, and the Web3 Foundation.

Token Metrics:

  • 1 ETH can be divisible by up to 18 decimals
  • ETH addresses have a max length of 42 hexadecimal characters
  • Circulating supply: 22M ETH
  • Max supply: No max supply, but with a growing number of Ether staked and the upgrade to EIP-1559 (this proposal introduced a fee-burning mechanism), the circulating supply will eventually begin to transition into deflationary conditions.

Notable projects:

  • CurveDAO: DEX protocol
  • MakerDAO: Stablecoin
  • Convex Finance: Curve-booster protocol
  • AAVE: lending & borrowing protocol
  • HEX: blockchain Certificate of Deposit
  • Compound: algorithmic, autonomous interest rate protocol built for developers
  • Uniswap: A fully decentralized protocol for an automated market maker

Notable points in project history:

  • Whitepaper released in November 2013
  • Yellowpaper was released in April 2014
  • ETH officially went on sale in September 2014
  • An attacker drained more than 3.6M ETH from a DAO in June 2016
  • A hard fork split Ethereum’s blockchain into Ethereum (ETH) and Ethereum Classic (ETC) in July 2016
  • Byzantium hard fork in October 2017
  • Staking contracts introduced in October 2020
  • Beacon Chain – the first step to Eth2 – started producing blocks in December 2020
  • The Merge – The Ethereum network moved to a proof-of-stake consensus mechanism from proof-of-work in September 2022, reducing the network’s energy demands, and increasing network security while vastly reducing the costs at the same time.

Notable Investors:

  • Delphi Digital
  • CMT Digital
  • Blocktree Capital
  • Alameda Research
  • Jump Capital
  • M31 Capital
  • Pantera Capital
  • Paradigm
  • Winklevoss Capital Management, LLC
  • A16z Crypto

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