Ether is the second most valuable form of digital money after bitcoin. Ethereum is a rising star in the world of cryptocurrencies, entirely digital forms of currency that grew in popularity after the creation of bitcoin.
A cryptocurrency is a form of digital currency created through encryption. A cryptocurrency has no physical form — like a banknote or coin — and it is not issued by a central bank or governmental authority. Units of cryptocurrency exist as data on the internet, and are created and managed through something called a blockchain.
The reason you’ve been hearing about bitcoin for years, but Ethereum only recently is that the latter was only developed two years ago while bitcoin’s been around for almost eight years. Ethereum was created by Vitalik Buterin, a young programmer who was told about bitcoin by his father and decided to create a platform for smart contracts which bitcoin is not designed to do.
Ethereum takes a grander approach. It functions as a platform through which people can use ether tokens to create and run applications and, more importantly, smart contracts. Any time one of these contracts is executed, every node on the network runs it, uploaded to the blockchain, it is stored in the public ledger, theoretically tamper-proof. Smart contracts are essentially structured as If-then statements when certain conditions are met, the program carries out the terms of the contract.
As the second-biggest cryptocurrency after bitcoin, ethereum has inevitably drawn comparisons to it. Its rapid rise has also led to claims of a bubble. But advocates say ethereum has several advantages over bitcoin that make it more useful.
There are almost 5.3 million cryptocurrency wallets that hold ether. Ethereum, like other cryptocurrencies, is known for being largely anonymous and secure against fraud and theft, as its transactions are logged in a decentralised ledger. Users can transact large sums without having to pay fees because middle men, such as banks, are cut out.
Ethereum would never be possible without bitcoin—both the technology and the currency—and we see ourselves not as a competing currency but as complementary within the digital ecosystem. Ether is to be treated as “crypto-fuel”, a token whose purpose is to pay for computation, and is not intended to be used as or considered a currency, asset, share or anything else.
Ethereum’s price has soared recently and could continue to climb in the coming months. Cryptocurrencies are notoriously volatile and users are warned that the growing bubble could burst any time. But many have become millionaires overnight thanks to ethereum.