Super Beginner’s Guide to Ethereum

A simple guide for new comers, novice users, and traders.

Ethereum is a major advancement for humankind. It empowers humans to form safe and secure digital agreements with each other, truly own and control their own money, and better harness the elegant and incredible nature of cryptography. Ethereum will change everything: the way we build things, create, communicate, and control our own futures. Don’t be afraid of it, embrace it. My journey with Ethereum has been filled with amazing people, talent, ideas and projects. I hope that in writing this guide you will learn more about the technology, protect your internet money a little bit better, and have great success as a user of this new form of technology.

This simple beginner’s guide is to help those just coming to Ethereum for the first time. In this guide I will try to keep complex concepts to a minimum. To start, Ethereum is a transaction system that anyone can use to send and receive internet money called Ether, among other things. Ethereum is built with some of the same kinds of technology as Bitcoin, but is not Bitcoin.

You can think of Ethereum as having two kinds of entities: smart-contracts and accounts. Smart-contracts are computer code while accounts are just addresses and keys (like your house address and keys). Both contracts and accounts can send and receive Ether to other accounts and contracts, we call this sending transactions. In order to send any transaction on Ethereum, you are required to pay a small fee to the Ethereum network. We call the amount used to pay these fees “gas” (like money for gas to make your car run). The network sets the “gas price” (the amount required to transact on the system). Generally, the more gas you include in your transactions, the faster it will be processed.

Ethereum is also good at things called Tokens (i.e. like Arcade Tokens, but worth more that anything you could win at an arcade). Properly constructed contracts or accounts can hold and send these Tokens. A Token on Ethereum is simply some computer code (a smart-contract) that allows token holders to hold and transfer their Tokens to other accounts and contracts. Tokens are generally created and issued during a crowdsale (where people trade Ether for some amount of the Token), but are also available on internet exchanges.

First off, if you’re thinking about acquiring, holding or using Ether or Tokens, here are some basic tips:

a) Use a hardware wallet like Ledger S Nano or Trezor, remember to properly backup all keys and seeds like your life depends on it (if you lose those, you will loose all your funds)
b) Don’t keep large amount of Ether or Tokens on Exchanges or third-party services
c) Don’t send or store Ether or tokens in anything you don’t fully understand (most ICO’s are BS)
d) Remember: you are your own bank, accountant, security team and analyst. This means it’s all up to you to make the right choices and secure your money. Only use Ethereum on safe/fresh/clean and up-to-date secured computers. Preferably use iOS/Linux, preferably use an iPhone over Android, preferably don’t browse on your safe devices you use for Ethereum related things. HTTPS or nothing. Use an Ad Blocker. Public Wifi is unsafe. Use a popular VPN. Read everything, read it slowly and read it carefully. Try to learn and understand as much as you can
e) Join the community, ask questions, stay very skeptical of everything, and don’t rush any purchases or transactions ever
f) There are thousands of spam, spoofing, hacking and unsafe services and contracts trying to steal your precious Ether. Ask community leaders and experts for opinions, and trusted options or about services/websites you’re unsure about, don’t ever be shy, in most cases try to use what everyone else is using and what the community is comfortable with
g) Once you send Ether or Tokens, think of it as a final sale transaction, you will never get it back if a thief or poorly constructed contract has it, this also goes for poorly backed up accounts
h) Follow the law. Remember to consult with tax professionals (i.e. CPAs) and consult with proper legal counsel before acquiring or transferring any Ethereum tokens or assets

For more great tips, please follow the MyEtherWallet.com tips and keep reading this guide.

Also know that things are bound to change and change often in the space. Don’t get comfortable, keep probing the space for new ideas, practices and ways to keep your Ether and digital assets safe.

To get you familiar with some basic concepts fast, here are some basics.

Blockchain and Miners:

When transactions are sent, they get bunched up into blocks one after the other, we call this bunching of transactions into blocks the “Blockchain”. Each block contains a set of processed and valid transactions. Blocks are created one after the other by transaction verifiers called Miners (like Gold Miners). Miners can get rewards for processing transactions. Both Ethereum and Bitcoin have their own blockchains (note: they are very different technically, but conceptually alike in some ways).

Accounts and Keys:
If you want to send or receive Ether or Tokens on Ethereum, you will need an account. Ethereum accounts and contracts have what is called a public address that looks like this (a string of characters A-F, 0–9 in what is called “Hexadecimal” or “HEX” format):

0x88d221E36A68B19dd8aD1a5d4c21bE41a6d47b57

You will use these addresses to send, receive Ether and Tokens or use services (like ENS) on Ethereum.

Accounts, not smart-contracts, have something called a private key, this is the key that allows anyone who has it to send Ether, Tokens and services to and from its public address. This is the private key to the public address above (also in hexadecimal format):

0xa1f731db77f4ec6eb71c134ae545449a2d5a1d76458458b6d8d5751c10aac306

Think of your private keys as the keys to the castle. Anyone who has the private key can access to all of the funds, Ether, tokens and assets stored at it’s public address. Never expose or give your private key(s) to anyone ever. Keep it safe: think fire, flood, loss, or burglary, assume every virus and website will try to steal these keys off your phone or computing device. Remember: your private key = your money.

There are also phrases called “seed phrases” or “seeds”. These special phrases can be used in combination with a passphrase to produce private keys like the one above. Seeds are easier to write down and record which is why some software/hardware prefers them. Seed phrases range from three (3) words to twenty four (24) words. If any software asks you to write one down, write it down like your last will and testament. If you lose the seed or passphrase or record either incorrectly, you will lose all your funds forever. If someone steals or copies your seed, they have all your money. Remember: your seed and passphrase = your private key(s) = your money.

When sending Ether or Tokens, always check the first and last 5–7 characters of the public address and the transaction amounts to make sure it is correct and the one you want to send to. Always compare and check all details twice or even three times.

Units:
The base unit of Ether is called a Wei (named after Wei Dai). A single Ether is denominated by 18 decimal places of Wei:

1 Ether = 1000000000000000000 Wei

Some other denominations of Ether are Finney, Shannon and Gwei

Tokens can be denominated in all different kinds of units. Some tokens have no decimal places (i.e. 1 token is always 1 token), while others can have denominations and decimal places similar to Ether (e.g. 1 token = 18 decimal places of tokens).

When sending Tokens, you will generally not need to send any “value” of Ether, however, you will be required to pay a small amount of Ether for gas (to send the transaction, this goes for all transactions on Ethereum).

Smart-Contracts:
This is what a smart-contract looks like written in an Ethereum smart-contract language called Solidity, this one has a single function that says “Hello World!” to anyone who calls it:

pragma solidity 0.4.13;
contract HelloWorld { 
 function saySomething() returns (string message) { return “Hello World!”; }
}

This is what the contract above looks like in Ethereum computer code (EVM code):

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

The code above can be stored and used on the Ethereum blockchain by other contracts and accounts.

Test Nets and Networks:
Ethereum has multiple sub-networks, we call these “test networks”. Developers use these networks to test and build live contracts and services on the internet before going to the main network. The main Ethereum network is called the “Mainnet”, while the most common test networks are called: “Ropsten”, “Rinkeby”, and “Kovan”. The Ether and tokens on test networks are generally worthless and are used for testing purposes only. Many test networks have something called a “faucet”, this is where developers and users can get free test ether for that network. When using Ethereum wallets like MetaMask, remember to be on the right network (usually the Mainnet Ethereum Network).

A great way to view all block, transaction, and account information of each network is to use a blockchain explorer, such as: https://etherscan.io/

dApps:

A “dApp” or “decentralized application” is an application that is made in part with Ethereum smart-contracts. Many dApps are very lightweight browser based apps made with HTML/CSS/Javascript (fancy webpages for contracts) which interact with specific smart-contracts on one or many of the Ethereum networks. You can think of dApps as being pretty faces to smart-contracts, among other things.

How do I get Ether?
You can acquire Ether by: a) using an online exchange, b) a person or service sending it to you, c) mining it with very expensive and powerful computers.

Get Started:

To start fooling around, try using MyEtherWallet to create, backup and use your first Ethereum wallet (huzza!):
https://www.myetherwallet.com

Then install MetaMask in your Chrome browser (to enable your browser with Ethereum and the new internet, it is also an Ethereum wallet =D)
https://metamask.io

Note, Ledger S Nano and Trezor both have their own softwares for managing Ether and Assets and can also be used with MyEtherWallet, among other options.

Remember, this article could be hacked, so don’t trust the links above with any real Ether or Tokens, always double check links with other sources (see what i did there ;-)

Get involved with the Ethereum community:

Troll Zone: https://reddit.com/r/Ethereum
Troll Zone for Traders: https://reddit.com/r/EthTrader
Troll Zone for Developers: https://reddit.com/r/EthDev
Ethereum Forum: https://forum.ethereum.org

Some people to follow:

Vitalik (Ethereum Creator): https://twitter.com/VitalikButerin
Ethereum Foundation: https://twitter.com/ethereumproject
Mr. Technical: https://twitter.com/LefterisJP
Also Mr. Technical: https://twitter.com/peter_szilagyi
Ethereum News: https://twitter.com/ETHNews_
More News: https://twitter.com/ethereumreport
And More News: https://twitter.com/EthereumNetw
Mr. Token: https://twitter.com/simondlr
MyEtherWallet: https://twitter.com/myetherwallet
MetaMask: https://twitter.com/metamask_io
Myself: https://mobile.twitter.com/IAmNickDodson

This beginners guide is the start of a larger wallet handling git book that will be coming out sometime after this article. The book will outline detailed wallet setup instructions, options, tips and tricks to handling Ether and digital assets. It will get complex, which is why beginners guides and primers like this are so important.

A special thanks to all those who provided feedback and helped out with this and other articles.

Disclaimer:
None of what is stated, mentioned or described in this article is in any way investment advice and should not be treated as such. The information provided in this article is provided as is and without any warranty.