In a world of innovative digitalization, cryptocurrency has opened new windows of opportunity. One of its most extensive blockchain networks is Ethereum. In recent years, Ethereum has evolved into a massive network of decentralized applications that operate smart contracts. While less well known than Bitcoin, the native cryptocurrency of Ethereum, the Ether (ETH), is an excellent investment. You can buy ETH online, sell it, or withdraw funds by converting ETH to USD. Continue reading this article to learn everything you need to know about your next digital investment as ETH.
What Are Smart Contracts?
Smart contracts are programs on the Ethereum blockchain that act as Ethereum accounts and can be used for transactions. Users do not control them and execute user account transactions according to their programmed functions. These functions are called codes, and smart contracts automatically enforce them as maintained by a data set called its state.
You can write your smart contract and deploy it to a network using Ethereum’s developer-friendly smart contract languages like Solidity and Vyper. However, you can not delete smart contracts, and your interactions with them can not be reversed. A smart contract can only have a maximum size of 24KB.
Ether Use-Cases
Ether is the native cryptocurrency of Ethereum with extensive uses, including:
- Payment method in an Ethereum network
- Collateral in Defi lending markets
- An account unit in the NFT market
- Payment for goods and services in the real world
- For developing DApps
The Minting Process for Ether
Minting entails creating a new Ether on the Ethereum ledger. You can not create ETH by yourself and can only acquire it by two primary means: mining and staking.
- Mining refers to proving your work, and Ether is the reward for miners who process transactions and contribute computational power to the network.
- Staking refers to providing proof of your stake; in this consensus mechanism, you are chosen as a validator to make new blocks and secure the network based on the ether amount you lock as collateral or stake. The total ETH staked depends upon the number of validators and the amount they lock up as collateral.
Ether Burning
Alongside minting, Ethereum can also destroy Ether through the process of burning. In fact, this happens with every ETH transaction, and the amount burned is permanently removed from circulation. When network demands increase, more Ether is burned than minted to balance the tokens issued on the network. This prevents malicious use of base fees by blockchain producers, making it a crucial Ethereum feature.
Value Benefits of Ether
ETH can be utilized as digital money on the internet, but it offers additional value benefits to users that make it unique to other cryptocurrencies, including:
- Versatility: Unlike the ever-so-popular Bitcoin, which only serves as a currency, smart contracts allow Ethereum to fulfill various transactions, including creating and building apps for gaming and trading currencies.
- Eco Friendly: Ethereum’s latest transition from a proof-of-work system to proof-of-stake consensus has reduced its electricity consumption, reducing its carbon footprint by up to 99% (from 11,016,000 to 870 tonnes C02e).
- Fast transactions: Ethereum can process up to 30 transactions per second, significantly higher than Bitcoin’s 7 TPS. Ethereum’s latest update to Ethereum 2.0 is expected to reach a transaction speed of 10,000 TPS.
Challenges of Ether
As a complex blockchain ecosystem, Ethereum also faces several challenges, including:
- Scalability: The network often becomes congested when high in demand and has difficulty handling high-volume transactions, leading to slow transactions and high fees
- Gas fees: The amount users pay for transactions to process is the gas fee, which becomes very expensive during peak usage.
Endnote
Ethereum has become an extensively used and popular ecosystem in the world of blockchains, and the Ether is its native token. If you are looking for the best way to digitize your assets, it is worthwhile to understand how Ethereum works. Make sure to thoroughly analyze the pros and cons of your chosen cryptocurrency to make the most out of your investment.
