Ethereum: What is it and how does it work? Explained for beginners

In order to understand what Ethereum is and all the potential it has in front of society, it is essential to learn what its main properties are, as well as how they differ from standard approaches.



To begin, it must be understood that Ethereum constitutes a digital platform that represents one of the three main cryptocurrencies in the world, which positions it among the preferences of those who use these platforms to send and receive money. Read to the end!

What is Ethereum?

These applications include, among others, security programs, voting systems, and payment methods that are part of the cryptocurrency market.

As with other large cryptocurrencies, such as Bitcoin, Ethereum does not have regulation by central authorities, including banks and governments.

Who created Ethereum?

It was at the end of 2013 when Vitalik Buterin wrote down his idea in a blank book that he later sent to some of his friends who replicated the message to much farther places.

The consequence? About 30 people got in touch with him, in order to discuss such an interesting concept.

Vitalik was waiting for the worst criticism and accusations in relation to some mistakes he considered he had made, but that is not precisely what happened.

A few months later, the team decided to undertake a wholesale sale of Ether, which is the native token of the network to finance its development.

How does Ethereum work?

Ethereum’s operation is similar to that of an open-source code platform that is based on blockchain technology.

This blockchain is hosted on a multitude of computers around the world, which means that it is completely decentralized.

Each of the computers has a copy of blockchain, so there must be a generalized agreement prior to any change in the network.

What is Ethereum for?

In principle, it should be noted that Ethereum provides the possibility for developers to create and implement decentralized applications.

Experts claim that the potential of this digital platform for application creation is only limited by the creators’ creativity. Let’s see other aspects as tips:

  • The Ethereum blockchain provides customers with the ability to track the product’s origin that they are acquiring.
  • The implementation of smart contracts thanks to this platform allows for a safe and fast trade for both parties, without any intermediary.
  • The blockchain platform has the particularity of empowering and revolutionizing web-based services, as well as industries with established contractual practices for a long time.
  • The Ethereum blockchain has the ability to take its fundamental principles, including trust, security, efficiency and transparency, to any service, industry or business.
  • It can also be used to create decentralized autonomous organizations.
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What is gas in Ethereum?

The Ethereum gas is a unit of measure used to measure the work done by this digital platform in order to execute transactions or other type of interaction within the network.

However, do not be fooled by the simplicity of the concept, since it hides much more than that, since gas is essential for everything within Ethereum. In view of this, its impact is immense.

Advantages and disadvantages of Ethereum

Ethereum has a multitude of advantages and disadvantages that we will mention below! Let’s go!


  • The Ethereum platform benefits from all the properties of blockchain technology.
  • Therefore, it is completely immune to the smallest intervention of a stranger or third party, which means that all decentralized applications within the network cannot be controlled by anyone.
  • Any blockchain network is based on a consensus principle, which implies that all nodes within the system require agreement on the modifications they make within it.
  • Thus, the possibility of fraud is reduced to its maximum expression, since it makes the network tamper-proof.
  • This platform is decentralized, which implies that there is no single point of failure possible.
  • In view of this, all applications will always be online, that is, they will never go offline.


  • Although smart contracts are designed so that the network is fault-tolerant, they can only be as good as the people who write the code for them.
  • There will always be a possibility for human error, which means that any error in the code can be exploited.
  • If that happens, there is no way to prevent an attack by a hacker.
  • The only way would be to reach a consensus and establish underlying code. However, this goes completely against the very essence of blockchain, which is supposed to be an immutable and unalterable accounting book.

Is Ethereum a cryptocurrency?

Ethereum is not a cryptocurrency, as this word refers to the digital platform. That is, the coins themselves, which are used for payments on the network, are called ether.

This means that the aforementioned ether are the cryptocurrencies that belong to the Ethereum network.

When you are operating, the quotes that will be in view are those of ether. Even so, it is common to refer to the cryptocurrency as Ethereum.

Differences between Bitcoin and Ethereum

The differences between Bitcoin and Ethereum are based on several aspects that we will mention as tips for you to understand them better. Take note!

  1. Developers have the power to raise funds for their own applications with Ethereum. In this way, they can establish contracts and request guarantees from their members.
  2. Unlike bitcoins, whose available number is finite (it is calculated at around 21 million), the emission of ethereum is limited to 18 million units per year, which implies 25% of the initial supply.
  3. Unlike mining bitcoins, miners of the ethereum blockchain focus their efforts on finding ether.
  4. The cost of transactions can be measured in various ways, which is called gas. This cost depends fundamentally on the use of bandwidth, complexity and storage requirements.
  5. In the case of bitcoins, the aforementioned transactions compete with each other on an equal footing, and are limited by the size of the blocks.
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What influences the price of Ethereum?

The price of Ethereum is determined by very different factors than those affecting a traditional currency.

Here we show you the most important ones:


At this point it should be reaffirmed that at present Ethereum is not regulated by any government or any central bank. That is, if this were to change in the future, the value of the cryptocurrency could vary.


The information that may not be so positive disclosed through traditional media or social networks, especially in relation to security, can generate some effect on reputation.


Unlike Bitcoin, the supply of Ethereum is not limited to a finite number, but annually.

Technological advances

At this point it should be clarified that the future of blockchain technology is uncertain. However, its integration into areas such as crowdfunding platforms and payment systems makes it possible to have greater appeal.

How to invest in Ethereum?

When a user buys Ethereum coins on the market, the price is usually shown in common currency, called fiduciary currency. This means that the interested party has to sell certain amount of currency to buy ether.

If the price of ether rises, you will have the opportunity to sell and make profits. While, in the event that the cost falls and you decide to sell, then you materialize your loss.

It is also necessary to have access to a portfolio or market to deposit the ether you have bought. At this point they are already aware of what Ethereum is and what importance it has in the cryptocurrency market.

The fundamental thing is that they use it with absolute knowledge and seek the advice they need.

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