What is Ether (ETH) and How Can I Use It?
Ethereum is a decentralised network that nobody owns. However, Ethereum’s currency, Ether (ETH) is owned by people and needed by people who want to send a transaction on the Ethereum blockchain. This transaction uses Ethereum Gas.
Like Bitcoin, ETH is a currency that can be transacted without the need for third party involvement. Unlike Bitcoin, however, instead of operating only as a currency, ETH is needed by programmers building on Ethereum as for fuel for their Ethereum decentralised application (dApp).
How Many ETH Are There?
Unlike Bitcoin, which has a set limit of 21 million BTC, Ethereum has an inflationary system with no set cap of ETH.
At time of writing, there are 110,564,856 ETH in circulation. 60 million ETH were purchased during the crowdfunding campaign back in 2014. And 12 million went to the Ethereum Foundation, which is a group of developers working on the Ethereum blockchain.
Every 12 seconds, 2 ETH are minted and are allotted to miners for the block reward, and it’s believed that the block reward will fall to 1 ETH in 2021.
It’s a little confusing because Gas is essentially ETH, but you pay an amount of Gas for your transaction (it comes off your ETH amount). Why not just use ETH to pay for transactions? I hear you say.
Well there is good logic behind it, because your transaction fee is a set amount of Gas and whatever the price of ETH is it will take the fraction of ETH to pay for the Gas fee, whereas if you paid for the transaction in ETH, especially when the price was at an all-time high, you’d be paying a lot more.
ETH is Programmable and Spendable Money
As well as being gas to fuel the network, ETH is programmable money. Programmers and developers wanting to build something on Ethereum need ETH to allow their smart contracts to function and to build their decentralized applications (dApps).
dApps on Ethereum are web applications backed by Ethereum smart contracts. Each dApp is decentralized and relies on the Ethereum protocol for logic and storage. Each dApp can use ETH in its economy or create its own token to generate the system.
Ethereum is the web 3.0. It is quickly becoming the backbone for the DeFi movement, for hundreds of dApps being created and I believe the financial industry will choose to use it as the settlements layer, when it adopts blockchain.
All of this is happening, but it’s being slowed down by Ethereum’s scalability issues. Once this is sorted, Ether (ETH) could quite well become the most sought after currency.