What Is Ether?
Like all cryptocurrencies, Ether represents scarce digital money. It is used to facilitate payments between two parties without intermediaries.
But there is more.
Ether can be best described as the lifeblood of the Ethereum network. It fuels and secures the blockchain. Unlike Bitcoin, Ethereum doesn’t limit its scope to processing financial transactions. It powers a wide range of dApps, from decentralized insurance platforms to crypto exchanges and games. The Ethereum network is home to an array of fungible and non-fungible tokens as well. All activities on the blockchain require computing power, which is paid for in Ether.
Summary of Important Points
- There is a difference between Ether and Ethereum.
- Ether (ETH) is the cryptocurrency of the Ethereum blockchain. It is used to facilitate transactions on Ethereum.
- Ether is available for purchase on popular CEXs and DEXs.
- You can convert Ether to USD (and other popular fiat currencies) directly from CEXs or through P2P payments.
- The price of Ether is $3,430 at the time of writing. Ethereum Classic price is $50.22.
- Ethereum price predictions for the coming years look optimistic owing to the proof-of-stake (PoS) integration underway.
Do You Buy Ether or Ethereum?
You buy the cryptocurrency, not the blockchain. Ethereum is not owned by anyone.
You can buy Ether on most cryptocurrency exchanges—centralized and decentralized. Some popular centralized exchanges that sell ETH are Binance, eToro, Coinbase, Kraken, and Crypto.com. Make sure you compare the trading fee, discounts, and bonuses on each platform before choosing an exchange. You can use popular cryptocurrencies and fiat currencies to purchase Ether from centralized exchanges. Some exchanges feature Ethereum derivatives trading in futures and options.
You can also buy ETH from liquidity pools on Ethereum-based decentralized exchanges like Uniswap. Here, you ‘swap’ the cryptocurrency in your wallet to ETH.
What Is the Aim of Ether?
As we discussed, Ethereum facilitates transactions without middlemen. It records and stores data using a decentralized global network of computers.
Here, no single person or entity has control over your data. It brings together participants from around the globe to validate the network transactions. It is less prone to hacks and shutdowns for this reason. Validators put in their time and computing power to keep the network up and running. In exchange, they get mining rewards in Ether. Since Ethereum will soon adopt the proof-of-stake consensus mechanism, it will be called staking rewards in the coming stages.
Ethereum supports dApps, or decentralized apps, which will make use of Ethereum’s network of nodes to track, store, and transfer data and value. So, they need Ether to process transactions too.
Let’s say you want to transfer an NFT on Ethereum. To add this data onto the blockchain, you pay a small fee to network validators. It incentivizes them to verify your transaction. In addition, the network rewards validators with newly issued Ether.
Ether’s role in the ecosystem will further increase once Ethereum shifts to the PoS mechanism. To participate in network validation, you will have to stake Ether. If your verification fails, you lose your locked-up Ether. This is a smart way to discourage attacks on the blockchain.
Utility of Ether
The use cases of Ether have diversified over the years. Let’s take a quick look at some of them:
- ETH is a medium for the exchange of value. You can use it to pay for goods and services.
- You can lend ETH and Ethereum-based tokens on DeFi platforms to generate interest.
- Add ETH to decentralized liquidity pools and earn LP rewards.
- You can hold Ether as a good investment as you would with stocks.
- If you’re looking for a less volatile store of value digitally, you can convert ETH to stablecoins.
Can You Substitute Other Cryptocurrency for Ethereum Transactions?
Ethereum transactions are paid in Ether.
However, as the number of people who use the blockchain increases, it causes congestion and delays. The gas fee skyrockets with that.
There are multiple blockchain solutions in the market that address the scalability issue of Ethereum. For example, Polygon is a layer-2 scaling solution designed to take some strain off Ethereum. Transactions on Polygon are paid in Matic.