How Does Ethereum (ETH) Work and What is it?

How Does Ethereum Work
How Does Ethereum Work

Ethereum is an open-source programmable blockchain launched on July 30, 2015 with its own native cryptocurrencyEther (ETH). It is a decentralized digital currency. Like Bitcoin, Ether is not controlled by any organization or government and can be used to store value, make payments, and provide collateral. 

When people generally refer to Ethereum, they are actually talking about Ether (ETH). In fact, the Ethereum blockchain has become synonymous with its own token.

Ether (ETH), launched in mid-2015 by a Russian-Canadian coder named Vitalik Buterin, became the second most popular cryptocurrency in terms of market capitalization in just two years and still ranks right now where we write these lines. . 

The Ethereum blockchain is much more powerful due to its built-in programmability, which means that developers can use the platform to create decentralized applications (dApps).


These days, most of people’s data is kept with companies like Google, Microsoft, Amazon, and Facebook. This unprecedented centralization of data storage gives organizations and governments extraordinary power over citizens.

Ethereum aims to replace online banking, also to be third-party service providers with private servers that use blockchain technology.

It is fundamentally the foundation for a new kind of Internet where everything is integrated, from data storage and payments to financial systems and service applications. Currently, thousands of developers are creating digital assets and applications using Ethereum, some of the most popular include:

  • Financial applications that allow you to invest, lend or borrow your digital assets and currencies
  • Decentralized markets where you can trade digital goods
  • Games in which all the assets of the game are in your possession and can even win you real money
  • Cryptocurrency wallets that allow you to make instant and affordable payments with Ether or other currencies


  • Cryptocurrency Name: Ethereum
  • Acronym: ETH
  • Where to buy Ether? eToro, Coinbase, Binance, others 
  • Creation date: 2015
  • Ethereum White Paper


Ethereum is inspired by the Bitcoin blockchain, but provides additional ability for developers to create agreements and dApps with different ownership criteria, additional steps, new transaction formats, or many state transfer procedures. 

It uses the Turing-complete programming language that allows developers to create applications in which transactions made on the blockchain can dictate and automate certain results. This is why these applications are often referred to as “smart contracts”.

Like the Bitcoin blockchain, Ethereum is also a shared database that constitutes a complete transaction history, and each node connected to the network owns a copy.

The network tracks the status of each Ethereum smart contract or application, including the balance each user has. When a transaction is made on the Ethereum blockchain, the platform follows the bank account model. They appear in one wallet and can be easily transferred to another. 

Ethereum’s cryptocurrency, Ether (ETH), is based on a token called ERC-20, which is one of the most widely used in the cryptocurrency sphere. Currently, the chip is mined using the same protocol as proof of work that Bitcoin uses. However, due to the protocol’s drawbacks, such as excessive power consumption, the Ethereum blockchain will soon update and implement ETH 2.0, moving the Ethereum transaction validation protocol to an evidence-based consensus, proof of stake. 


Ethereum offers all the advantages of a traditional blockchain, as well as some unique advantages of its own:

Immutability – Every transaction that takes place on the Ethereum blockchain is immutable, meaning that once data is processed, confirmed, and written to the blockchain, it cannot be changed. Hence, this makes the Ethereum network almost inviolable.

Decentralized: Ethereum currently uses a consensus mechanism to verify transactions, eliminating the need for a central authority or middleman. Smart contracts based on the Ethereum blockchain can even run automatically on their own.

Fast transactions: Instead of going through manual checks and verification procedures, blockchain uses automated processes to ensure the validity of a transaction. This not only greatly speeds up transactions, but also makes them more affordable.

High Reliability – Ethereum has been around for over 5 years and new applications are created and run on the blockchain without having to face obstacles such as fraud, third-party interference, censorship, and downtime. stop.

Programmable : One of the main advantages of the Ethereum network is that it is programmable and developers can use it to create decentralized applications. These can be financial services, games, smart contracts, etc.


This is a tricky question, because what is often mentioned on the internet as one of the main advantages of blockchain is the anonymity of the users. While there is some truth to all this, it has become increasingly difficult to maintain complete anonymity when using Ethereum or any other cryptocurrency that is not focused on respecting the privacy of its users such as Monero or Zcash. 

Most of the well-established and trusted crypto trading platforms require you to go through an intensive process of verifying your personal identity to reduce money laundering and other illegal activities.

On the other hand, despite all the anonymity protocols in place, it can still be traced thanks to the fingerprint you leave behind, in particular because it is impossible to modify or replace the data that has been written to the blockchain. Even if you have not disclosed your name or other personal information, the metadata and other contextual information can lead to your personal identity. This is why cash remains the most anonymous form of payment, even today.


Very sure. Every transaction that takes place on the Ethereum blockchain is protected by encryption and Ethereum has three times as many nodes to verify each of its transactions than the Bitcoin network, for example. Most of the hacking attempts and cyberattacks associated with Ethereum target poorly crafted smart contracts by developers, rather than the blockchain itself. Now that the platform is moving towards proof-of-stake protocol, the blockchain will become even more secure.


Ethereum’s mining procedure is quite similar to that of Bitcoin. There are blocks of transactions that require computing power to find the right solution. In technical terms, miners extract the unique metadata from the block using a hash function that returns a fixed-length encoded string that appears random. 

When a miner finds a hash that matches the target, they receive the Ether token and each node commits the transaction and updates the database. Once one miner finds the correct hash, all the other miners start mining other blocks and so on.


An Ethereum wallet is software that is used to store Ether tokens. You can choose several according to your needs:

  • MetaMask – Internet and mobile browser-based wallet
  • TrustWallet – Mobile Wallet
  • MyCrypto – Online Wallet
  • MyEtherWallet – Client Side Wallet
  • Gnosis Safe – Security-Focused Multi-Signature Portfolio
  • Coinbase Wallet – Mobile Wallet