Ethereum 101
Since everyone reading this is a beginner to crypto, I will again break this down so it is easy to understand. I believe after this issue will be a good time to begin expanding and covering more about cryptocurrencies. I am writing this solely for helping everyone understand how it all works and intend to make it easy. Using these assets in other ways will be easier as you will have a decent foundation to build on. This is all going to be important o know in the future, you will be happy you took the time.
Ethereum
The Whitepaper
Just like Bitcoin was created by the anonymous Satoshi Nakamoto, Vitalik Buterin is the creator of Ethereum. BTC is the cryptocurrency/crypto-asset used on the Bitcoin blockchain, and ETH is a cryptocurrency/crypto-asset used on the Ethereum Blockchain. It is more of an “Ethereum network” and understood as the “world’s programmable blockchain”.
You use ETH via Ethereum.
“It is the world’s programmable blockchain, the foundation for our digital future, all you need is a wallet to take part. It build’s on Bitcoin’s innovation with some big differences.” - Vitalik Buterin
What is Ethereum?
Ethereum is a technology. It is a smart contract platform that enables the development of Dapps (Decentralized Applications) and other tokens. It let’s you send cryptocurrency to anyone with an added “fee”. That “fee” is called gas.
Think of gas as virtual fuel. The gas fees are determined simply through the supply and demand across the blockchain -> the network.
ETH is the main digital asset on Ethereum. It is the power, and gives life to the Ethereum network. When you use Ethereum you use ETH to send and use the services built on it.
The gas fee is what incentivizes the miners to secure the network and work within the consensus. Miners basically keep the record of all the transactions and activity on the network, they make sure everything happening is within the consensus of the decided protocol. This helps maintain the network is secure.
So…ETH powers the entire Ethereum network, a programmable blockchain.
It enables developments and scalability through its programmable applications, called “Decentralized Applications” (dapps). Each dapp serves a different purpose and function. Think about Ethereum as an entire system. Where all the dapps play their own role in the “community”.
What You Need
Ethereum is a 100% “open and free community” to anyone who has an Ethereum wallet. An Ethereum wallet gives you complete and total access to Ethereum by having an address that you can send and receive from. These are either software or hardware devices that allow you to use your digital assets (cryptocurrency, NFTs, etc.) by securing them through storing your private key.
You can use your Ethereum address with a Trezor or Ledger hardware wallet, or a software wallet like MetaMask. For beginners I recommend using hardware devices as they are safer, more secure, and are still easy to use. Primarily secured by your possession of your private keys.
(Remember: your private keys are what give you access to your crypto assets. Your assets are sent to and stored on your public address on the blockchain. Your private keys are what secure your assets, as they can not move without the use of these private keys. This is why I would recommend the hardware wallet over the online wallet, and why I recommend taking your assets off the exchanges.)
***Take your crypto assets OFF the exchanges***
***Be the sole owner of your digital assets***
Ethereum is built on the following:
1. You Are Your Own Bank
Saving, Lending, Borrowing, Staking. All secured by decentralization and cryptography. Thereby securing your wallet, your transactions, and your digital assets. Your Ethereum wallet is your proof of ownership, no middle-men are required to do anything.
2. A Privacy Centric Internet
You can send assets across the network. You don’t need to provide any unnecessary details to anyone receiving your money. This is a *value* based ecosystem, no surveillance of you is required.
3. Peer-to-Peer Network
Between both of our Ethereum addresses (starting with: 0x) we can form our own agreements. This can replace MANY headaches and friction in the legacy financial system. Goodbye unnecessary appointments and paperwork.
4. Censorship Resistant
It is DECENTRALIZED. Nobody can tell you what to do. Nobody can debase ETH or change the consensus protocol of the network on their own.
5. Guarantees through Smart Contracts.
These “smart contracts” are simply agreements (contracts) written in code. A "smart contract" is simply a program that runs on the Ethereum blockchain. It's a collection of code (its functions) and data that resides at a specific address on the Ethereum blockchain.
Smart contracts are a type of Ethereum account. This means they have a balance and they can send transactions over the network. However they're not controlled by a user, instead they are deployed to the network and run as programmed. The language for these smart contracts is Solidity. It is Ethereum’s high level language used for programming the code for the smart contracts.
You and another party in the contract put up agreed upon assets and determine the conditions. Once the agreements are settled it is logged into the system. When this is over and the “pre-defined” conditions are met, the code executes the exchange. All logged into the blockchain forever since the code is publicly auditable and verifiable.
6. An Advanced Scaling Network
Dapps (Decentralized Applications) DeFi, NFTs, DAOs. Dapps, like Uniswap, are disrupting existing business models and inventing new ones. Uniswap allows you to swap other cryptocurrencies with the cryptocurrency you currently own. If you wanted to swap for another one, this gives you that ability.
I will be briefly covering DeFi, NFTs, DAOs later in this issue. Each one will also be receiving it’s own substack in the near future.
7. Ethereum is more than just for payments.
Think of it as a marketplace. Containing services, games, apps, and none of it can be withheld from YOU. You are completely free to do whatever you want within the ecosystem.
8. Ability to multiple cryptocurrencies/Tokens with it’s many services.
BTC, ETH, Chainlink - LINK, all those other cryptocurrencies like Cardano, Dogecoin, etc. You can also use Stablecoins, NFTs, and Governance tokens on it.
9. Divisible, Scarce, and Valuable
ETH (ether) is a cryptocurrency, it is the main digital asset used on the Ethereum blockchain.
The scarce supply. There are currently only 117.3 Million ETH in existence. The supply is being burned day by day. You do use ETH for transactions and minting NFTs on the blockchain.
It is valuable because of its scarce supply, use for transactions, store of value and investment qualities, declining supply issuance, use for applications on Ethereum, lending and borrowing abilities, and the power it gives to the Ethereum network (the most used blockchain).
BTC is divisible, each ETH is also divisible. BTC = 9 digits ; ETH = 18 digits.
10. Secure
No government, company, or agency has complete and total control over Ethereum. Decentralization makes it impossible for anyone or any entity to stop you from receiving payments or using services on Ethereum. That reason is why it is private and secure.
Cryptography, like how cryptography is used in Bitcoin, secures the Ethereum network through your *private key signatures*. All on Ethereum sending cryptocurrencies via a peer-to-peer network.
Customers have a secure, built-in guarantee that funds will only change hands if you provide what was agreed upon (smart contracts).
Thought Process
You are currently at a moment in time where massive revolutionary changes are taking place. This is not a time to sit on the sidelines.
There are plenty of people in this world that have no access to the traditional financial system (See - El Salvador and why they adopted bitcoin). Fortunately, to use Ethereum, all you need is an internet connection. You can then access all its abilities. Ethereum is building a brand new and better financial ecosystem, an economy of *value*.
Ethereum allows you to move your money wherever you want. You can make agreements (smart contracts) directly with anyone else whoever has an Ethereum wallet. You don't need to go through intermediaries anymore. The reason why this is a big threat to the existing financial system.
This is removing unnecessary friction in the current legacy financial system. You don’t have to adhere to the endless and prehistoric ways of the current financial system. This can mostly all be replaced by *code*.
Consider the long term implications when all this runs 24/7/365 with no barrier to entry as all you need is an internet connection to participate.
Ethereum’s big developments and threats come in the form of:
Dapps (Decentralized Applications)
Decentralized application. At a minimum, it is a smart contract and a web user interface. More broadly, a Dapp is a web application that is built on top of open, decentralized, peer-to-peer infrastructure services. In addition, many Dapps include decentralized storage and/or a message protocol and platform.
DeFi (Decentralized Finance)
Short for "decentralized finance," a broad category of dapps aiming to provide financial services backed by the blockchain, without any intermediaries, so anyone with an internet connection can participate.
NFTs (Non-Fungible Tokens)
Cannot be replicated. NFTs can be tracked and traded, but each token is unique and distinct; they are not interchangeable like ETH and other Ethereum tokens. NFTs can represent ownership of digital or physical assets. (*Major use case for these going forward in the future*.)
DAOs (Decentralized Autonomous Organizations)
A company or other organization that operates without hierarchical management.
Simple Review
I, again, want everyone reading this to understand that and wrap your head around this from this point forward. Think long and hard about this….
These are both scarce assets.
You are taking part and getting involved in revolutionary changes in finance and technology. This is much bigger than trading for fiat diluted dollars that are being printed away.
The USD “price action” -> the day-to-day price movement, isn’t something to focus on.
1 ETH = 1 ETH
1 BTC = 1 BTC.
I know this one may have been a lot. Please let me know if you have *any* questions. I will be going over all of this in future posts. Share in the comments below, or with anyone you think can benefit from this post!
Disclosure: Not deemed to be legal or financial advice.
Sources: ethereum.org
I believe someone asked this question, but about converting ETH -> WETH: Wrapped ETH, or WETH, is a token that represents Ether on a 1:1 ratio, and conforms to the ERC20 token standard. By conforming to ERC20, it allows for increased functionality including but not limited to atomic swaps. Often, dApps will require users to convert from ETH to WETH because WETH offers additional functionality.