Ethereum is being termed by many as the ‘Rising Star’ of the cryptocurrency world, and has rapidly established itself as the second largest cryptocurrency. In a minute span of 2 years, 19 year old Vitalik Buterin’s brainchild has risen up from the pile of over 1,300 cryptocurrencies in existence. Before you rush to get some for yourself, here are some things about Ethereum you should know:

History

In the 2008 white paper published by Satoshi Nakamoto, the blockchain was described as a public ledger to record transactions on a decentralised network. This ledger would verify and record every transaction on the network. Ethereum, 7 years later, became the brain-child of this very concept.

In 2013, 19- year-old Vitalik Buterin laid out his plan that indicated that blockchains had a wider applicability, and were not limited to just financial transactions. In his white paper, he stated that a blockchain system could facilitate all sorts of ‘decentralised applications.’

Vitalk programmed Ethereum to be a customisable blockchain according to the needs of its users. This was based on Smart Contracts — computer programs that execute transactions on their own, on conditions agreed upon by users.

Buterin wanted to establish Ethereum as an evolved cryptocurrency, which would not only facilitate transactions for currencies, but also other specific actions. For example, tracking medical data.

How does Ethereum work?

Ethereum’s native cryptocurrency — the fuel needed to run processes on its blockchain — is called Ether. Since ETH is a cryptocurrency, it is decentralised and not controlled by any single governing entity, exactly like Bitcoin. This is in contrast to other online business systems, which have centralised control and are regulated by governing bodies of their countries.

The network is dependent on ‘nodes’ — individual volunteers all over the globe, who download the entire Ethereum blockchain and fully enforce the consensus rules of the system, vital to its functioning. These ‘Consensus Rules’ and other aspects of this network are dictated by Smart Contracts, which are designed to perform transactions automatically. These transactions take place between two parties who don’t necessarily trust each other on the network but the terms of fulfilment are pre-specified in the contract.

A transaction or any other specific action is generated when these terms of agreement are fulfilled. Running these transactions costs resources — in Ethereum’s case, Ether (ETH) — which is traded on cryptocurrency exchanges. Smart Contracts are used because they provide security superior to traditional contract laws, are comparatively cheap, and establish a better trust between the two parties.

Uses and applications

Ethereum is a platform to build and run all sorts of decentralised services, or DApps (decentralised applications). One of the major advantages of this system is its wide applicability. Apart from facilitating currency transactions, it also enables users to create decentralised applications on its blockchain. Here are some uses and applications of Ethereum:

Security from hackers

Ethereum, having no centralised server, is very hard for hackers to manipulate. It is secured using cryptography, and since there is no point of central failure, applications are well protected against fraudulent practices and hacking attacks. You can’t gain access to one node and make any changes you want to the blockchain.

Transactions

Ethereum uses ‘Smart Contracts,’ which make it possible to exchange anything of value, in an an absolutely risk-free manner as it is recorded in computer code, and eliminates reliance on third parties. For example, instead of buying photographs from websites, you buy them from the photographer directly and initiate a contract for the same.

Storing data

Server farms are digital storehouses with hundreds of servers used to store information. Corporations like Dropbox and Microsoft store huge quantities of data in these farms, and the problem with this is that they concentrate a large amount of their storage on a single location. These locations can be destroyed entirely, if attacked by external factors such as natural disasters or hackers. While redundant systems are created, it involves extra cost.

This is where Ethereum’s decentralised system saves the day. In a decentralised storing system, data is not concentrated to one single farm in one country, but is distributed to hundreds of computers all over the world. It’s blockchain technology can be used to quickly encrypt and transfer data all over the world.

Building DAOs

Ether can also be used to build and run Decentralised Autonomous Organisations (DAOs) which are completely autonomous and decentralised, and have no single leader, and have features such as voting rights. They run on a programming code that replaces the rules of a traditional structured organisation, eliminating the need for centralised control.

Types of Wallets

Ether or ETH, cannot be stored on Bitcoin wallets — instead, it requires its own wallet. Here are some popular wallets that can be used to store Ethereum:

Hardware Wallets

These provide the best security, but come at a hefty price, between $50-$100. Some of the leading Hardware Wallets which provide maximum security are

These hardware support both Bitcoin and Ethereum protocols, allowing you to store both currencies in a single device.

Zebpay’s Ethereum Exchange

Like its Bitcoin exchange service, Zebpay now also provides an Ethereum exchange, and is one of the simplest and easiest ones to buy, sell and trade ETH. Of course this means that Zebpay is storing your private key with them. Which is why Zebpay recommends you move your holdings to a private wallet of your choice.

MyEtherWallet

MyEtherWallet.com is an online interface that helps you create, access and operate ETH wallets right from its blockchain. It’s fairly simply designed, while maintaining high security standards to prevent any theft. You can also run this site offline for extra security.

Ethereum’s Market History

Launched in 2015, the price of Ethereum has risen rapidly. While it was priced at $10 within 18 months after its launch in 2015, it climbed to $395 in March 2017, before plummeting from $395 in June to $155 a month later. In December 2017, it peaked beyond $1300 for a short while.

These rapid rises and dips are of course, not new to cryptocurrencies, are due to multiple market factors and the the interest it has garnered in online currencies. Ether has had a steady growth, despite the highly volatile nature of cryptocurrencies.