Before you start reading this post, please make sure that you have read our other post regarding the difference between ether and ethereum. It is an important concept you need to be familiar with in order to fully understand this post
What is ether?
Keeping it brief and simple, Ether is the “fuel” the ethereum network needs to function. This fuel is known as crypto-fuel in the cryptocurrency market. Crypto-fuel is a form of payment made by users/clients of ethereum to the machines executing requested operations. Ethers are incentives to make sure that developers provide quality apps to the network and maintain the ethereum network healthy.
For example, when you make transactions, you are actually sending ether, NOT ethereum. The term “transaction” is used in ethereum to refer to the signed data package that stores a message to be sent from an externally owned account to another account on the blockchain.
Who needs ether?
Now that we know what ether is, we need to understand if you are the person who needs it. This crypto-fuel is only needed for developers who intend to build apps which will make use of the ethereum special blockchain. Other users might also be interested in it as they want to have interactions with smart contracts on the blockchain.
Ether can be used as a payment, but it is also a great opportunity for a long-term investment. Just like in the stock market, cryptocurrencies can be bought and sold depending on the perceived value of the currencies. It happens to be that ethereum’s demand is rapidly increasing, while there is a supply of it. The consequence? Prices soar!
If you are not a developer trying to build dapps (decentralized apps) on the ethereum network and you don’t plan to interact with contracts (yet), then you don’t really need to know much more about ether. If you considering to invest in it though, then we encourage you to keep reading.
Is ether infinite?
This is a common question. The quick answer is no. It is not as the money we are used to at the moment, in fact, it is not meant to be used as currency. The banks state that the paper bills are valued at 20 dollars (if it’s a 20 dollar note). But really, do you think that piece of paper is worth that much? Of course not, but it is backed up by reserves of gold, therefore it is said to have a value. However, ether is not backed up by anything. If it was a printed currency it would just be a “piece of paper”.
What would happen if ether was infinite? It would come out to be just as current money, it would lose value. Ether only increases in value because its supply is limited.
What is the relationship between ether and bitcoin?
Ethereum would not exist without bitcoin’s technology and currency, it is just a complementation for the ecosystem in the cryptocurrency and digital world. As we have previously stated, this crypto-fuel is to be used as a pay for computation and not as a currency or asset.
Ether in Numbers
When you invest in something, it’s usually good to know what exactly you are buying. Numbers can be very helpful in understanding that:
- At the moment, there are around 92 million ETH circulating around. Compared to the famous bitcoin, it’s five times more.
- The market capital of ethereum is 20 billion dollars. This is huge considering that the total market cap of all cryptocurrencies is 90 billion dollars at the time I’m writing this post. Basically, ETH makes up 22.2% of the market.
- 5 ethers are created every block (roughly 15-17 seconds) to the miner of the block.
- 2-3 ethers are sometimes sent to another miner if they were also able to find a solution but his block wasn’t included.
And that’s it for today!
Feel free to share your thoughts in the comment section below!
And as always…
Cryptocurrencies are the near future and I believe it will change the world as we know it. Start learning with me and the rest of the CoinNoob community!