What is Ethereum Blockchain – Learn ETH in 5 Min

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Ethereum is a decentralized platform powered by open-source blockchain technology with smart contract functionality. It is most popularly known for its cryptocurrency, ether (ETH) but it also hosts countless decentralised applications.

How Does Ethereum Work?

Ethereum, like other cryptocurrencies, uses blockchain technology. It can be simply explained as a long linked chain of blocks that contain information/data that is shared over a network. Every member of the network has access to this chain and it primarily functions as a distributed ledger to record transactions.

Like any other blockchain network, Ethereum network is secure thanks to its decentralized nature. A huge network of nodes worldwide maintains the blockchain and for any decision to be taken – a majority agreement amongst all the nodes is mandatory. Hence, making it impossible for any individual entity to take control of the network.

The Ethereum platform can support a multitude of applications other than cryptocurrencies. Any user on the network can create, monetize and use a range of applications on the platform. They can also leverage ETH or any other cryptocurrency for payment.

How are new ETH created?

New ETH coins are created using a process called mining. Cryptocurrency mining is a popular method for the generation of new coins however, it is lately being discouraged globally because of its high carbon footprint. Hence, Ethereum mining is planned to be changed in 2022 as the network chooses a new technology called proof of stake instead.

Proof of stake allows network security by maintaining a system of validators who run the Ethereum software while staking some amount of ETH tokens. Hence, once the network adapts the PoS protocol anyone with ETH stake and necessary hardware can become a validator.

Why does the price of Ethereum fluctuate?

As with Bitcoin(and any other commodity in the world), the price of Ethereum is governed by supply and demand on the global market. This can cause volatility in the short term as supply overwhelms demand. However, ETH has undoubtedly outperformed many traditional investments like stocks and bond indices.

History of Ethereum

Vitalik Buterin published a white paper that introduced Ethereum in 2013. The Ethereum platform was launched in 2015 by Buterin and Joe Lubin, who later founded the blockchain software company ConsenSys. The founders of Ethereum are said to be one of the earliest individuals who could decipher the possibilities of blockchain outside the realm of cryptocurrency.

The hard fork

The hard fork or split is quite a notable event in the history of the Ethereum blockchain. In 2016, some participants gained majority control of the blockchain to steal north of $50million USD worth of ETH, raised for the project DAO. The accepted solution by the majority of the Ethereum community was to reverse the theft by invalidating the existing Ethereum blockchain and accepting one with a revised history.

However, a small fraction of the community chose to maintain the original version of the Ethereum blockchain. Thus, the unaltered version of the network permanently split to become the ETC or the Ethereum Classic.
Today, the ether cryptocurrency is the second-largest in the world according to market value, right behind bitcoin in both market share and popularity.

Ethereum vs Bitcoin

Ethereum is often compared to Bitcoin. While the two cryptocurrencies do seem quite similar they are a number of differences between them.

Ethereum can be considered more efficient simply because it hosts an electronic and programmable network with a variety of applications. On the contrary, the bitcoin blockchain was created solely for the bitcoin cryptocurrency. So, basically, the Ethereum blockchain aims to truly capture the possibilities of blockchain but the bitcoin blockchain is only concerned with the cryptocurrency.

Another difference is that bitcoin has a limit. There can be at max 12 million bitcoins in the world, however, ETH has no such limit, although the time invested to mine one block does put a limit to how much ether can be mined in a year.

Talking about similarity, both Ethereum and Bitcoin blockchains consume a lot of energy and use the proof of work protocol. Proof of work is a method that demands a lot of computing prowess to validate transactions and mine new coins. Ethereum however, is trying to operate using proof of stake, which is a validation technique that needs much less energy.

How to Buy Ethereum?

The most common and preferred way to buy any cryptocurrency (not just Ethereum ) is by registering an account at a crypto exchange platform of your choice and then buy & sell ether. Some brokerages too, have lately started the options ot trade/invest in cryptocurrencies and can be a good method to buy Ether.

Is Ethereum Profitable?

Ethereum is not exactly an organisation which would need to make money or profit of any kind. It is more like a network, maintained and updated by miners and validators who earn ETH in exchange for their hard work and contribution.

Is Ethereum a Cryptocurrency?

A common misunderstanding is between Ethereum and Ether(ETH). Ethereum is a blockchain technology platform that has a cryptocurrency of its own, called ether or ETH. Ethereum also hosts many dApps, and cryptocurrencies aside from ether. The misconception arises from the fact that ETH coin is also popularly referred to as ethereum.

Ethereum Use Cases

Ethereum has led the blockchain revolution in the creation of many uncanny and totally new products. Let us look at some of those :

1. Decentralised Finance (De-Fi)

This is a new form of financial system. One that is global and more transparent than the existing financial system. De-Fi allows you to borrow, save, invest, trade and do so much more on a completely open-source and decentralised platform.

2. Non Fungible Tokens (NFTs)

This is a groundbreaking addition to the blockchain universe that have become really popular in way less time. NFTs are a way to represent anything unique in the form of an Ethereum based asset. They empower content creators to gain more control over the sale of their content and are powered by smart contracts running on the Ethereum blockchain.

3. Decentralised Autonomous Organisations (DAOs)

This is a relatively novice concept and refers to member-owned communities which operate in a decentralised manner. Hence, DAOs are communities that function without any leader. It is a secure way to collaborate on the internet with strangers and commit funds to a specific cause.

Future Scope of Ethereum

As mentioned earlier, Etherum is trying to transition to the proof of stake protocol, which validates transactions and mines new ETH coins based on the user’s ether holdings. This along with some other game-changing upgrades are expected to revamp the Ethereum platform which will be called Eth2. It also increases network capacity to encourage the growth of the blockchain.

Today a lot of decentralised applications (called as dapps) and even tokens (like BAT- Basic Attention Token) also run on Ethereum. Microsoft, partnered with ConsenSys in 2015 to develop Ethereum Blockchain as a Service (EBaaS) on the Azure cloud platform.


This was all about ethereum, its history, working, use cases and future.

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