What is Ethereum?

Ethereum is an important network in the world of cryptocurrency, but to understand why Fundstrat Head of Research Tom Lee is bullish on it, you need to know the basics.  

Ethereum and ETH are not the same thing (even though many may accidentally use it interchangeably). Ethereum is a network and a system, while ether is the money used to pay for things on the network. 

How does Ethereum work? 

Each time someone does anything on the blockchain network, whether it is sending money, or buying an asset, it is recorded and verified by thousands of independent computers (nodes). Additionally, because there is no central authority controlling the system, changes to the blockchain must be agreed upon by the network (the nodes) through its consensus mechanism. This makes it extremely difficult to alter or fake transactions.  

That structure is what allows Ethereum to operate without a central company. And these participants each have a role.  

• Developers create new applications on the software 

• Validators secure the network 

• Users interact with applications 

The successful relationship of these groups has made Ethereum one of the most secure and widely used blockchains in the world.   

Why Ethereum? 

What separates Ethereum from earlier blockchain networks is its programmability. Ethereum was instead created to allow developers the ability to create their own software that runs directly on the blockchain. In contrast, bitcoin was built primarily to transfer and store value digitally. 

This distinction between the two is important because it allows developers to build new applications and services on top of Ethereum rather than building their own blockchain infrastructure from scratch.  

In this way, Ethereum is like the internet where developers can build websites on them. These applications can allow payments, trading, lending, gaming, digital ownership, and more to happen. But unlike the internet, the emergent properties of Ethereum’s architecture is credibly enforced by code rather than any company or authority. As more developers build on Ethereum, the ecosystem gains more applications and users and is expected to grow it even further.