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What is Ethereum (ETH) and how does it work

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Ethereum is one of the leading blockchain projects and the cryptocurrency of the same name. It allows to create smart-contracts and build unstoppable decentralized applications (dApps).

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A cryptocurrency is a digital or virtual asset that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend. Many cryptocurrencies are decentralized networks based on the blockchain technology.

⛓️ Ethereum is the so-called No. 2 cryptocurrency in the world and also a platform for creating decentralized online applications (DApps) that run on smart contracts. One unit of this cryptocurrency is called ether. Members of the network can send ether to each other. Like bitcoin, ether is blockchain-based and fully decentralized and transparent. Its functionality is provided by thousands of peer-to-peer devices (nodes) that continuously update the registry of all transactions in the blockchain. This registry is also freely accessible on the internet, and anyone can see the number of ethers in all accounts and data on any of the transactions at any given time. 

However, Ethereum has some important differences from the Bitcoin network, and we will talk about them now.

How Ethereum was created

Unlike bitcoin, which was created by the mysterious Satoshi Nakamoto, Ethereum has a quite real and publicly known group of developers led by a crypto-enthusiast and programmer of Russian-Canadian descent named Vitalik Buterin. Vitalik published the concept of the future project in 2013, and on July 30, 2015, the blockchain was officially launched with 73 million ethers.

DApps and smart contracts

One of the main differences between ethereum and bitcoin is the ability to use the capabilities of this blockchain to create decentralized online applications (DApps). This is possible because of the open source code. 

Advantages of DApps

▪️ Everyone has access to the code, and programmers from all over the world can create their own applications using the potential of the ethereum blockchain.

▪️ Newly created applications are fully transparent and everyone can see and test the mechanism before installing them or participating in projects based on this DApp.

▪️ Since the blockchain has no single server or centralized governing body, the app cannot be deleted, stopped or hacked without access to most of the nodes. This means that the DApp will always work as long as the internet exists. Even if an app or project website is blocked or hacked, it can still be accessed manually through the blockchain itself.

▪️ DApps are based on so-called smart contracts. We will talk more about them in an article fully devoted to them, but for a general understanding it is enough to mention that they are self-executing programs, which are activated by a certain trigger. A trigger is always a blockchain transaction, that is, the transfer of a certain amount to a certain account.

For example, the FORSAGE Community Smart Contract is triggered when a new or old member buys another slot. The amount of the transaction is immediately distributed to other Community members according to the rules of a particular matrix - x3, x4 or xGold. That is, the funds do not go to some centralized account and are not distributed manually by Community creators. They are instantly credited to the personal wallets of the participants, and no one can change or hack this mechanism, not even the founders of FORSAGE or Vitalik Buterin himself. At the same time, anyone can go and see the FORSAGE smart contract to make sure that it works exactly as the platform creators claim it does. Total transparency and decentralization are now possible thanks to blockchain technology and smart contracts. Isn’t it incredible?

Ethereum — the next generation blockchain

Bitcoin is often called the first generation blockchain. At its launch, the focus was precisely on creating a digital currency with built-in protection against counterfeiting and hacking. The goal was not to create an environment for applications to function; the priority was security and complete protection from external threats. That is why it is impossible to create DApps on the bitcoin blockchain. 

Ethereum combines several roles

1. It is a digital currency that can be used to store, accumulate and exchange funds. 

2. It is an environment for launching and running decentralized open source applications.

Ethereum was the first blockchain with such features, and it remains the number one blockchain for launching decentralized applications and smart contracts until now. 

Thousands of DApps have been launched on it for a variety of purposes:

  • Decentralized Financial Projects (DeFi) — Autofarm, Goose Finance, Alpaca Finance.

  • Games — Upland, Alien Worlds, Splinterlands, Galaxy Blocks.

  • Gambling and betting — Dicether, Serious Dice, WINk, RocketGame.

  • Cryptocurrency exchanges — RamenSwap, Uniswap, SushiSwap.

  • Social networks and other communication applications — Yup, Steemit, Peakd, Hive Blog.

  • Exchanges — Atomic Market, Rarible, OpenSea.

  • Marketing platforms and communities — FORSAGE, BZB Ecology, Shrimp Farm Finance, TRONWIN.

The key advantages of these applications compared to traditional companies, websites, programs and projects are transparency, anonymity, no need to disclose your personal data, no intermediaries.

What else you need to know about Ethereum

For every new transaction to be recorded in the shared ethereum blockchain, it must be validated by members of the network. Transactions are combined into blocks, and the process of writing the blocks to the blockchain is done by participants solving a complex mathematical problem. The computational work they do confirms their right to write the block and be rewarded in ethers. The process is called mining, and its principle or consensus (that is, the algorithm accepted by all participants) is Proof-Of-Work.

For a number of reasons, the developers of ethereum are planning a transition from this consensus to a simpler, greener, and more beneficial consensus Proof-Of-Stake, that is, proof of ownership, for all participants. When the transition takes place, those with a certain amount of ether in their accounts will have the right to validate blocks. There will be no more need for complicated calculations or energy expenditures. It will be enough to buy and store ether. The transition to the new algorithm is expected in the near future, and experts predict that this event will strengthen the position of ether in the crypto market.

Now you know what Etherium is, how it works and what it can be useful for. In other articles, we will tell you how to buy ether, how to use it, how to make transactions correctly, and how to protect yourself and your funds.


1️⃣ Ethereum is a cryptocurrency and a blockchain that allows to store, save, and transfer funds between participants.

2️⃣ Anyone can create and run their own decentralized applications (DApps) on the Ethereum blockchain.

3️⃣ Ether-based smart contracts are self-executing programs that can’t be changed. Their mode of operation is fully transparent and viewable.

4️⃣ DApps are a step into the world of the future, where transparent and reliable applications and projects in finance, insurance, gaming, marketing and other fields become available to everyone anywhere, bypassing intermediaries.

For most of the people, ether and other cryptocurrencies are nothing but a cumbersome trinket that has nothing to do with 'real finance and economy'. But it's a misconception that can lead to great disappointment. Thousands of people worldwide are already reaping benefits from using crypto, and if you're not one of them, you are missing out on some great advantages and profits. To overcome fear and doubt, continue educating yourself by reading our article What Is Cryptocurrency And Why You Should Learn How To Use It Now

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