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Frequent questions and answers What is Ethereum (ETH)?

After Bitcoin, Ethereum (ETH) is the best-known cryptocurrency and combines the benefits of blockchain with automatically executable and programmable action chains, so-called smart contracts.

Ethereum is the second-largest crypto-currency after Bitcoin.
Ethereum is the second-largest crypto-currency after Bitcoin.

Ethereum is, after Bitcoin, the cryptocurrency with the second-largest market capitalization. Ethereum started operations in 2015, after it had already been invented in 2013 by Vitalik Buterin, a Canadian Bitcoin programmer of Russian heritage. After internal conflicts of the developers, Ethereum separated from Ethereum Classic (ETC) in 2016 and thus has to be distinguished. In the last years, Ethereum has received a great influx of main trainers and users.

This success story is clearly reflected in the length of the current blockchain. Its blockchain has grown to ca. 60 GB and is thus the longest after Bitcoin. Ethereum is on the way of becoming the foundation for entire blockchain ecologies by extending the concept of Bitcoin with dynamic elements. Today, the majority of current blockchain projects use Ethereum as a basis, since they rarely have their own blockchain. Ethereum also has the benefit that it has its own cryptocurrency named Ether (ETH).

How does Ethereum work?

The countless possible applications make the concept of Ethereum especially versatile and it is still not completely understood in its depth. Different from traditional cryptocurrencies, whose blockchains only consist of a cryptographically linked list of transactions, the Ethereum blockchain has additional dynamic elements, so-called smart contracts.

These smart contracts are algorithms and protocols that are executed by the Ethereum virtual machine. The EVM is a virtual run-time environment. This means that the blockchain is not just a list of transactions, but already contains the authenticity and correctness of entire automatic transaction cycles and chains. The algorithms and protocols, the so-called "DApps", together with the smart contracts work like automata, which are triggered to execute previously defined actions by a certain query. Such a query can be, e.g. a money order in Ether.

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