Ethereum (ETH) definition: Ethereum is a popular smart contract-capable blockchain network and Ether (ETH) is the native cryptocurrency of the Ethereum network.

Ethereum is the second most popular cryptocurrency - but what exactly is Ethereum, and how does it differ from Bitcoin and other cryptocurrencies?

Ethereum is a decentralized blockchain platform that enables the creation and execution of smart contracts and decentralized applications (dApps). Unlike traditional cryptocurrencies that primarily function as digital currencies, Ethereum's design serves as a versatile foundation for a wide range of applications beyond simple transactions.

Ethereum was conceptualized by Vitalik Buterin, a Canadian programmer, in late 2013. The Ethereum whitepaper, published in 2013, outlined a vision for a blockchain platform with the ability to run complex applications and execute smart contracts. Ethereum's development was a collaborative effort involving a global community of developers, resulting in its launch on July 30, 2015.

At the heart of the Ethereum ecosystem lies its native cryptocurrency, Ether (ETH). Similar to how Bitcoin is the native currency of the Bitcoin network, Ether serves as the lifeblood of the Ethereum platform. While Ethereum's primary focus extends beyond currency, Ether plays a critical role within the network's operations.

It serves as a means of value transfer, incentivizes network participants, and is utilized for transaction fees and computational tasks on the Ethereum blockchain. Ether's importance extends beyond its monetary value; it's an essential element that ensures the functionality and security of the Ethereum network while also acting as a unit of account for various activities conducted within the ecosystem.

Ethereum introduced the concept of smart contracts, which are self-executing contracts with terms directly written into code. These contracts enable automated and tamper-resistant agreements without intermediaries. It also facilitates the creation and deployment of dApps, which run on the Ethereum blockchain and offer a wide range of functionalities, including financial services, gaming, social networking, and more.

Ethereum's impact on blockchain technology is profound. It revolutionized the way blockchain networks are designed and used. The introduction of smart contracts opened doors to self-executing agreements, automation, and transparency, with implications beyond the financial sector. Ethereum's extensibility through dApps enables developers to create innovative solutions that transcend traditional boundaries.

Furthermore, Ethereum's support for token creation and crowdfunding has driven the growth of thousands of new tokens and NFTs, as well as decentralized finance (DeFi) ecosystems, contributing to the evolution of the broader cryptocurrency space.

Ethereum is more than a digital currency; it is a pioneering platform that transformed blockchain technology. By enabling the execution of smart contracts and fostering the development of decentralized applications, Ethereum has catalyzed a paradigm shift towards programmable and versatile blockchain ecosystems. Its impact on finance, technology, and various industries is an enduring testament to the transformative power of blockchain innovation.

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Michelle Legge
By Michelle LeggeHead of Crypto Tax Education
Updated Nov 9, 2023
This article has been fact checked and reviewed as per our editorial policy.