What is Ethereum?

Ok, so let’s get the most confusing thing about Ethereum out of the way right off the bat: Ethereum is the computing platform on which the technology that runs the coin is built. Ether (ETH) is the actual cryptocurrency that is awarded by the platform to computers performing blockchain transactions. So, when you invest in this option, what you’re buying is Ether. I just like saying that. Ether. Sounds cosmic and cool.

Ethereum runs on Smart contracts, or a specific set of instructions that automate basic tasks without a human actually having to push a button to make it happen. Smart contracts are like wills, in that they are carefully written and meticulously reviewed and re-reviewed to make sure that they will work as intended when the orders are carried out. Then, long after they are created and launched, they continue to do what they were intended to do without fail. Because they’re on the blockchain, there are tens of thousands of the same smart contract running, one on each node. Smart contracts can’t be hacked, altered or falsified. Because transactions are completed by smart contracts instead of having to be verified by a certain number of human miners, transactions take seconds rather than minutes. Because they are stored on the blockchain, they are public. The dark side to this is that holes and vulnerabilities can be identified and exploited, however, on the bright side, those same bugs and whatnot can also be more readily found by people who can fix them.

So what are smart contracts being used for? The answer is creating decentralized apps, or “dApps.” Developers can use the Ethereum blockchain to create programs for financial things (think insurance or micro-finance) or things that have nothing to do with money (think voting or governance). The sky’s the limit — maybe that’s why it’s called Ether.

Like Bitcoin, Ethereum is gaining ground as a payment option in retail stores and is compatible on most cryptocurrency exchanges and wallets, making it easy to use.