Beginner’s Guide: What Is Ether?

• Ayushi Abrol
• February 24, 2022

Among the plethora of cryptocurrencies already existing in the market, there are various other tokens existing on the blockchain. One such crypto is Ether.

 

In this guide, we will understand the conceptual meaning of ether and what it implies for Ethereum. As we move ahead with our discussion, we will explore other aspects of ether and how it adds value with its features and usability.

 

But before we start with our discussion, it is important to understand what Ethereum essentially means. To explain in simple words, it is a decentralized platform that operates on blockchain technology through a peer-to-peer network. It can also be seen in the technology that enables a user to send cryptocurrencies to anyone in exchange for a small fee. Users can also use various applications on this platform and use their digital money without the intervention of any third-party intermediary.

 

Now that we are familiar with the concept of Ethereum, let us start with our main discussion.

 

What Is Ether? 

 

Ether can be referred to as the cryptocurrency that powers the Ethereum network. Represented by the symbol ETH, it acts as a fuel that facilitates operations on Ethereum.  One can also consider it as a token by which a user can make payments on the decentralized Ethereum network. 

 

Given its applications and usability, you may wonder how it fuels the entire network and contributes towards its main function?

 

Coming to its functionality, there is a certain way ether works. Let us take an example to understand this. Suppose there is a space on the theory of network where you can create, store and remove your saved data. To perform this task on the platform, the space needs fuel to power the entire processing through its network. To cover the expenses resulting from this power processing, users are often required to pay a fee every time they wish to visit their data or modify it according to their requirements. In such a situation, you can use Ether to pay this fee and continue with the changes you wish to make. To summarise everything, in a nutshell, we can say that there is a digital oil that facilitates you to process any required change on the network.

 

To use it, a user first needs to select the ether wallet they would wish to store their assets in. You can either purchase them with Fiat currencies such as rupee or US dollar, or another cryptocurrency in base pairs on various currency exchanges.

 

Does it have a definite or infinite supply?

 

Since ether is a digital currency, one may easily assume that there is an infinite ether supply. However, it is not true. Usually, any given digital currency is always available in a limited quantity. It is also necessary from the perspective of controlling currency flow in the market. Since it is also helpful in controlling the currency price, keeping the supply limited is an ideal measure. 

 

Ever since it has originated, there have been numerous speculations regarding its flow in the market and whether there will be a limited supply. However, as its demand went up in the market, it has become difficult to estimate the number of ether that is existing and in circulation in the market. Nevertheless, irrespective of whether it is possible to make the estimate or not, the current rate at which this particular currency is depleting is likely to stay the same. 

 

Is Ether the Same as Ethereum?

 

While the two terms sound synonymous and are often used interchangeably, Ether and Ethereum are not the same. Ether is considered the fuel that powers Ethereum. Just like oil is used as a fuel to power vehicles, ether also plays the same role. It can be traded which implies that its value keeps fluctuating based on the forces of demand and supply. 

 

In other words, it can be seen as a form of reward that is given to miners and developers to maintain the efficiency and safety of the Ethereum network. The major difference between the two is that ether works as the fuel that powers the Ethereum network. Although one may not exactly refer to it as a fuel due to the differentiating factors, it serves the same purpose. Since there is a network that cannot be brought or sold, an individual can easily trade ether. 

 

Another difference between the two is that Ethereum is a network that can be built while ether is the crypto asset making it possible to run the Ethereum network. Moreover, Ethereum finds its applications in multiple domains while ether has only one purpose which is to facilitate these operations on the Ethereum blockchain.

 

What are Ether fees?

 

A lesser-known concept related to Ether is the fees users (miners) are required to pay. Every time you send funds to and from your wallet, or simply transfer the coins between wallets, you must pay a fee to perform the transaction. It happens because the atrium network currently uses this data to validate transactions on its network. If you are a miner, you would probably use a specific category of hardware to facilitate new transactions on the blockchain. 

 

Before the existing systems came into place, there were various auctions to identify the nature of transactions that will be processed on a priority basis. Hence, the rank of a miner’s list directly depended on the fees attached to a transaction. However, it was not easy to predict the nature of ether fees, which occasionally went up during intense congestion in the market. To curb this problem, a base fee was introduced in the year 2021 to provide a more reliable and predictable fee structure to the user. 

 

The biggest benefit of this initiative is that users can process their transactions faster. Instead of the traditional options system, the fees are now based on a specific algorithm depending on the number of users active on the Ethereum network at a given time. 

 

How is Ether different from traditional money? 

 

Similar to other cryptocurrencies, ether also offers you a wide array of advantages over traditional money. From decentralized access to easy transaction methods, various things make it different from traditional money. Here are a few grounds:

• Full control –

As a user, you get full control over your funds for which you can use your wallet as proof of ownership. Apart from this, you also don’t have to depend on any third party to facilitate the transactions.

• Cryptographic security –

Another differentiating factor is that ether is entirely secured by cryptographic security. It means that you get full protection for your wallet, cryptocurrencies and transactions.

• Direct peer to peer payments –

With ether, you get all the benefits of digital money as you can send it without using any intermediary service. It is similar to holding cash in the real world but also being able to do it securely with any party and at any time.

• Fully decentralized –

The biggest advantage with digital money is that there is no central control that takes the charge of the entire ecosystem. You get the same benefit with ether as it is entirely decentralized and global. While dealing with your transaction, you don’t have to deal with any company or bank to regulate the operation. It also eliminates the role of changes in terms of use and controlling the flow of currency.

• Easy access –

Ether, just like any other cryptocurrency is open to anyone. All you need is an Internet connection and a digital wallet to accept it on your end. The best part is that you don’t even need a bank account to accept the payments. Overall, the process is quick and easy.

• Availability in fragmented amounts –

Another intriguing feature of ether is that you don’t necessarily have to buy a whole denomination at one time. Depending upon your preference and requirement, you can also choose to buy a fractional amount of ether at once. 

Why is it so valuable? 

 

Simply put, ether is the digital form of money that is unique to everyone in different ways. For anyone who holds Ethereum, it is valuable because it lets them pay the transaction fees. For people who do not prefer to use it for the same purpose, it works as a digital store of value due to the reducing creation of ETH with time.

 

However, it has recently become more popular among people who prefer to use financial applications on Ethereum. Due to the advantages it offers over other forms of digital money, investors are now looking forward to the growing opportunities in the market. For instance, you can use it as collateral to apply for crypto loans or use it as an independent payment system as well. You can also use it to pay charges to an Ethereum developer for their services.

 

How to obtain it?

 

If you are an investor or a regular user with even the slightest interest in ether, you might wonder how to obtain it. Well, there are multiple ways for a user to get its access. Here are a few methods:

 

• The first and the most common way is to purchase it through an exchange with a fiat currency. The symbol for ether would be ETH. 

 

• Alternatively, you can also exchange it for Bitcoin on exchanges. However, you must ensure that it offers the respective pair i.e, BTC-ETH. 

 

• You can also obtain it if any other individual or organization agrees to transfer it to you. 

 

• You can also earn it through mining. Using this method, you can earn ether as a miner for which you will have to join a mining pool. However, you will need to buy a cloud mining contract to join any mining pool of your choice.

 

Ether and other cryptocurrencies

 

Similar to other cryptocurrencies that exist on the Ethereum blockchain, ether also allows a user to make payments on the network. However, it is still different from other categories of cryptocurrencies in many ways. 

 

As we know, every task on the Ethereum network requires different power and time frame. It is directly proportional to the fees required for the tasks to be completed. This is a featured user may not find applicable for other cryptocurrencies except ether. Another distinct feature is that either does not have a limit on the number of tokens a user can mine at a given time. For instance, users mine around 17 million ether annually, which is a huge number in itself. Even for a professional Ethereum blockchain developer, these numbers play an important role on various levels.

 

Apart from this, the frequency of verified transactions on the network keeps on increasing every couple of seconds which makes it far superior crypto in terms of processing time. However, one major setback of this feature is that it makes it almost next to impossible to estimate the number of tokens that exist at any given point in time. Hence, ether shows significant similarities as well as differences in terms of its features with other cryptocurrencies that exist on the blockchain. 

 

What is the existing market scenario? 

 

As per the latest reports and data, ether has grown substantially in its value since its evolution. Launched in the year 2015, ether has witnessed a significant increase in its price from $0.311 during its launch year to around $4800, which is also its highest benchmark to date. The crypto also has plenty of volatility in its nature, which substantially reflects its performance over time. However, investors have recently witnessed a decent dropdown in its value to as low as $2,200 with a substantially good rate of return on investment. 

 

Final words

In conclusion, ether is one-of-a-kind crypto that has a fundamentally important role in enabling every single operation on Ethereum. Despite its existing market scenario and how it is expected to perform in the future, one can conclude that it is definitely here to stay. After all, it is the fuel that powers an entire generation of blockchain technology!