What is ETH? It’s more than just the second-biggest crypto
Read our simple guide to the world’s second-biggest cryptocurrency
In this guide
- Ether definition
- Who created Ethereum?
- The five EIPs and Ethereum 2.0
- ETH price history
- Who accepts Ethereum coin?
- Trade Ethereum to US Dollar – ETH/USD chart
Every main character needs a rival. In Bitcoin’s case, it’s Ethereum. Both are the blockchains on which the two rival cryptocurrencies run – ether (ETH) and bitcoin (BTC).
The ETH cryptocurrency has outperformed BTC at various stages in the market cycles, most notably in the bull runs in November 2022. However, in terms of market capitalisation, BTC remains far ahead of its competitor. There are many people who believe ETH is more flexible and has far more uses. But what is ether – or ETH – exactly?
Let’s cut through the noise with a straightforward guide.
Any guide worth its salt starts with a definition. The dictionary describes ether as “clear skies” (as in “aether”, the greek spelling) from which we also get the word “ethereal”.
Commenting on the origin of the name of the crypto, the co-founder of Ethereum Vitalik Buterin (more on him later) said: “I immediately realised that I liked it better than all of the other alternatives that I had seen; I suppose it was the fact that [it] sounded nice and it had the word ‘ether’, referring to the hypothetical invisible medium that permeates the universe and allows light to travel.” As such, Buterin wanted the platform to be the imperceptible and underlying code for the applications running on top of it.
So what is ETH in the crypto world? Well, it’s a form of digital money that is used primarily on the Ethereum platform. The Ethereum coin, as it is sometimes referred to, can be transferred immediately to anyone you know over the internet – usually, for a far lower fee than that for any more-established, mainstream rivals.
You could compare ether to cash. When Emma gives Jack a $5 note, no third party needs to verify that the transaction has taken place. The same would happen if she sent him ETH1 (except for the fact that Jack would be much happier, as ETH1 is worth more than $3,000).
Ether’s main purpose arguably extends beyond offering a form of digital money. It helps to keep the Ethereum blockchain running. This is because the Ethereum network is actually home to an array of decentralised apps. Known as DApps for short, these open-source applications are beginning to deliver more efficient, blockchain-based alternatives to tools we use every day, such as bank transactions.
Whenever transactions are made and operations are completed on the network, it costs a tiny fraction of ether (ETH) – also known as a gas fee. Gas fees measure exactly how much computational power any given transaction requires before it can be recorded on a blockchain network. ETH is used to pay for the gas fees when transacting on the Ethereum blockchain.
Who created Ethereum?
The Ethereum blockchain was the brainchild of a teenage Canadian-Russian programmer named Vitalik Buterin.
Buterin had become involved in cryptocurrencies and blockchains when he became interested in Bitcoin in 2011 as a 17-year-old programmer about two years after Bitcoin was launched. He later co-founded Bitcoin Magazine.
However, Buterin soon became convinced that Bitcoin was simply too limited in scope. As reported in Forbes, he said: “I thought [those in the Bitcoin community] weren’t approaching the problem in the right way. I thought they were going after individual applications; they were trying to kind of explicitly support each [use case] in a sort of Swiss Army knife protocol.”
Buterin then enlisted seven others as co-founders. A crowdsourcing campaign for ETH tokens was held in the summer of 2014, which succeeded in raising about $18m.
The five EIPs and Ethereum 2.0
On 5 August 2021, Ethereum launched the much-anticipated update at the London Hard Fork (EIP-1559). Since then, developers at Ethereum have been launching a multi-phased upgrade, consisting of five Ethereum Improvement Proposals (EIPs), generally known as Ethereum 2.0.
Speaking at Camp Ethereal in March 2022, Joseph Lubin, founder of ConsenSys, said the protocol developments would “lay to rest proof-of-work [and] Ethereum’s carbon or energy footprint problem”, and that the cryptocurrency will be “orders of magnitude less expensive, energetically.”
The initial update, EIP-1559, allowed crypto miners to mine or validate block transactions based on the number of coins a miner holds. The upgrade meant some of the ETH paid to miners will now be “burned”, and thus miners will receive a loss of revenue. Before the EIP-1559 update, those who created transfers or transactions on the ETH blockchain would pay a “gas fee” in ETH for miners to process their transactions, yet without knowing the exact price to pay beforehand. To assist with the transaction getting processed, users may overpay to ensure the transfer goes through.
The idea is that this will enable clear pricing on a base-transaction fee paid to miners in ETH. Still, an amount of the ETH tokens will be burnt and taken out of the system permanently. EIP-1559 will reduce the supply of ETH to the miners, and has increased the burn rate.
Another major proposal that has gained plenty of press attention recently is EIP-3675, which will see the world’s second-largest cryptocurrency officially move from the energy-hungry proof-of-work (PoW) consensus to the leaner, greener proof-of-stake (PoS) mechanism.
The ETH 2.0 launch date, also known as Serenity, was originally planned for a 2019 release, However, the launch has been pushed back to June 2022 as a security measure to consolidate code and protect the network from malicious attacks.
What is your sentiment on ETH/USD?
Aleksandr Pacha, the CEO of CryptoWallet (a finance solution that allows users to spend crypto from a debit card), told Currency.com: “Ethereum has actually made huge progress towards ETH 2.0, the upgrade that will make Ethereum scalable and environmentally friendly. The major uptick in price we saw [last] year was largely due to EIP-1559, an upgrade that burns more ETH to make it a deflationary asset. The more the network burns, the scarcer it becomes.”
The Ethereum organisation says the upgrade will make the crypto “more scalable, more secure, and more sustainable”. The changes are being built by teams “from across the Ethereum ecosystem”.
ETH price history
Let’s take a look now at how the value of the Ethereum has appreciated since its network went live in July 2015, about a year after the crowdsourcing campaign.
After the excitement surrounding ETH began to cool slightly, the coin mostly traded under a dollar for the rest of the year. Things started to get interesting for early ETH adopters in 2016. Prices ballooned from about $0.95 on 1 January to $20.59 on 16 June, before trading at about $7 or $8 until the year’s end. Little did investors know, a crypto boom was just around the corner.
ETH grew over the next year or so, reaching $1,432.88 on 13 January 2018, according to Yahoo Finance, before dropping back to around $100 at the end of the year. In 2019, it repeatedly broke $200, largely fuelled by the excitement that some major companies had chosen to build their projects on Ethereum’s network – Microsoft, Amazon and JPMorgan among them.
However, in 2020, the value of ETH took a hit as the Covid-19 pandemic started, dropping to a little over $113 on 17 March, but it recovered and ended the year at $737.80.
The start of 2021 was a boom time for crypto, and ETH broke its January 2018 record when it hit an intraday high of $1,542.99 on 2 February. Remarkably, the price kept going up, and it briefly broke through $2,000 on 20 February before dipping to just over $1,416 as the month ended. It then grew steadily, and on 12 May reached what was then an all-time high of $4,362.35.
The crypto crashes of late May, sparked by Chinese rulings against crypto, hit Ethereum hard. As of 23 May 2021, the crypto stood at an intra day low of $1,737.47 – less than half of what it had been just 11 days earlier. However, it managed to rally a little, recovering to just over $2,160.77 on 29 June.
A massive boom in the crypto markets followed in the middle of the final quarter of 2021, and Ethereum hit its all-time high of $4,891.70 on 16 November 2021, as reported by CoinMarketCap. The crypto sector’s total market cap grew by 187.5% as more investors flocked to the digital asset space, and speculators considered new innovations in the blockchain – including non-fungible token (NFT) applications and the exploration of the multiverse.
Fears of a crypto winter dominated the market in the following weeks, and many coins lost a substantial proportion of their value from their previous highs. Bitcoin was hovering at $35,000 a coin and ether met a new six-month low in January 2022. Bitcoin, the largest digital asset by market value had lost more than 40% since reaching its peak in November 2021.
However, there are some fleeting signs of a recovery as we move into the second quarter of 2022, and ether is currently trading at $3,287.35.
ETH/USD price history
|Feb 1, 2023||1584.68||-0.54||-0.03%||1585.22||1593.00||1576.60|
|Jan 31, 2023||1585.09||19.10||1.22%||1565.99||1605.16||1561.38|
|Jan 30, 2023||1565.98||-78.29||-4.76%||1644.27||1647.67||1534.92|
|Jan 29, 2023||1644.22||71.91||4.57%||1572.31||1660.38||1566.60|
|Jan 28, 2023||1572.40||-25.59||-1.60%||1597.99||1606.81||1556.69|
|Jan 27, 2023||1598.06||-3.05||-0.19%||1601.11||1622.00||1552.80|
|Jan 26, 2023||1601.10||-10.62||-0.66%||1611.72||1633.12||1577.13|
|Jan 25, 2023||1611.88||55.81||3.59%||1556.07||1641.37||1515.79|
|Jan 24, 2023||1556.06||-70.50||-4.33%||1626.56||1641.57||1529.94|
|Jan 23, 2023||1626.54||-1.42||-0.09%||1627.96||1649.13||1587.06|
|Jan 22, 2023||1627.92||0.60||0.04%||1627.32||1664.07||1604.31|
|Jan 21, 2023||1627.29||-31.54||-1.90%||1658.83||1680.10||1619.82|
|Jan 20, 2023||1658.55||107.42||6.93%||1551.13||1662.90||1541.73|
|Jan 19, 2023||1551.10||39.92||2.64%||1511.18||1564.79||1509.06|
|Jan 18, 2023||1511.24||-53.88||-3.44%||1565.12||1609.11||1501.08|
|Jan 17, 2023||1565.01||-11.81||-0.75%||1576.82||1609.21||1541.01|
|Jan 16, 2023||1576.76||23.91||1.54%||1552.85||1604.67||1520.57|
|Jan 15, 2023||1552.89||3.22||0.21%||1549.67||1567.45||1516.24|
|Jan 14, 2023||1549.82||99.29||6.85%||1450.53||1629.59||1449.25|
|Jan 13, 2023||1455.22||39.39||2.78%||1415.83||1462.29||1400.71|
Who accepts Ethereum coin?
You will find ETH currency on all major exchanges, given its established reputation as the world’s second-largest cryptocurrency. Like BTC, ETH has somewhat struggled to gain widespread acceptance across mainstream retailers – however, if you’re determined, it is possible to find electronics stores, pet shops and travel companies that embrace using ETH as a form of payment.
One particular boost for the Ethereum coin lies in how fintech companies are beginning to release cards that can be topped up with crypto and used as normal in brick-and-mortar businesses. Here’s how it works: Polly loads ETH10 onto her card, and whenever she makes a purchase – perhaps a snazzy new laptop – ETH2 is instantly converted into dollars.
In the coming months, keep a watchful eye on decentralised finance because Ethereum is an established player in this industry. We are increasingly seeing platforms pop up where users may be able to earn interest on the ETH they save, lend it to others and even get a loan on the basis of their holding.
What is ETH going to be worth by the end of this year? Will it be able to snatch market share away from BTC? Are new uses going to continue popping up? We may have to wait for answers to these burning questions, but given how actively development is continuing on the network, with the system-wide Ethereum 2.0 upgrade set to be completed in 2022, some analysts are optimistic.
Enhanced infrastructure could pave the way for more imaginative projects that break into the mainstream. It is also hoped that Ethereum 2.0 will solve long-standing capacity issues, promising 100,000 transactions per second (TPS). Currently, the blockchain can only handle around 30TPS at present.
While the entire cryptocurrency market has taken a hit in recent weeks, we will have to see how well ETH, with its market cap of more than $400bn as of 1 April 2022, can respond.
Trade Ethereum to US Dollar – ETH/USD chart
Who created Ethereum?
Teenage programmer Vitalik Buterin, who had been inspired by Bitcoin. After a crowd sale of tokens in summer 2014, $18m was raised.
What is ETH used for?
ETH is a form of digital money that can be transferred immediately over the internet, for a lower fee than more-established rivals.
What is the difference between ETH and Ethereum?
ETH is the abbreviation for the cryptocurrency, primarily used on the Ethereum platform. The blockchain can handle 30 ETH transactions a second at present.