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Ethereum's currency is known as Ether, or ETH for short. It's the second biggest and most well-known cryptocurrency, right after Bitcoin.
Ethereum is famous for its technology that allows for smart contracts, supports thousands of decentralized apps (dApps), and their cryptocurrencies.
Vitalik Buterin, a programmer, thought up Ethereum in 2013. Alongside him were co-founders Gavin Wood, Charles Hoskinson, Anthony Di Iorio, and Joseph Lubin. T
The development of this blockchain technology began in 2014, and it officially launched on July 30, 2015.
Ethereum is more than just a digital currency to buy and store value. It supports a whole ecosystem of applications and their transactions. You can also ETH to buy and sell unique NFTs.
What makes Ethereum special are smart contracts. These are like digital agreements that power all the dApps and NFTs on Ethereum, and many people see them as the future of financial contracts.
No dApps built on Ethereum are controlled by a single organization. Since all the information about these dApps is openly stored on the Ethereum blockchain, the data is secure and cannot be altered or tampered with.
In July and August of 2014, Ethereum sold 60 million of its first 72 million ETH tokens to the public to raise money. This money was used for development, research, legal fees, and communication costs.
Of the 12 million ETH that were not sold, half was given to early supporters of Ethereum, and the other half went to the Ethereum Foundation.
This meant that initially, only a few people owned most of the ETH. Over time, this has changed. Early owners have sold some of their ETH, and new ETH has been created through mining, making ownership more widespread.
Ethereum aims to be a versatile platform that supports growth and the complete development of decentralized apps (dApps). Its goal is to create an interconnected Web3 that can transform how we do everyday tasks and handle transactions.
Initially, like Bitcoin and many other cryptocurrencies, Ethereum used the Proof-of-Work (PoW) consensus mechanism. Ethereum has transitioned from a Proof of Work (PoW) to a Proof of Stake (PoS) consensus mechanism.
In a PoS system, validators are chosen to confirm transactions and create new blocks based on the amount of cryptocurrency they hold and are willing to "stake" as collateral, rather than using computational power to solve puzzles as in PoW.
This switch not only aims to make the network more secure but also more energy efficient.
“The Merge” or the launch of Ethereum 2.0 was a change to the Ethereum network that took place on September 15,2022 with the aim to improve security and efficiency. This marked the end of the Proof-of-Work network and Ethereum switched to the Proof-of-Stake (PoS). Since “The Merge”, Ethereum now has node validators rather than miners allowing for staking rewards to be generated through the process of validation network transactions.
Coinsquare has introduced a secure and regulated way for Canadians to stake Ethereum. By simply holding ETH in your account, you can earn up to 2.89% in rewards. These rewards are automatically deposited back into your account and paid out every 12 hours. Calculate your staking rewards with Coinsquare's Rewards Calculator.
Ethereum's status as inflationary or deflationary is not static but varies based on network conditions and the interplay between ETH creation and burning mechanisms.
Originally, Ethereum was designed with an inflationary supply model, meaning that the total amount of ETH in circulation was expected to increase over time. This was primarily due to the rewards given to miners (and later validators, post-Merge) for processing transactions and securing the network.
However, a pivotal change occurred with the introduction of the Ethereum Improvement Proposal (EIP) 1559 in August 2021 and the subsequent transition from Proof of Work (PoW) to Proof of Stake (PoS) via the Merge in September 2022. EIP-1559 introduced a mechanism whereby a portion of the transaction fees, instead of being awarded to miners (and now validators), is "burned" or permanently removed from circulation. This burning mechanism has the potential to reduce the overall supply of ETH, particularly during periods of high network activity when more transactions are processed and, consequently, more ETH is burned.
Whether Ethereum is inflationary or deflationary at any given moment depends on the balance between the new ETH created through block rewards and the amount of ETH being burned. There have been periods where Ethereum has experienced a net decrease in supply, making it deflationary, especially during times of high transaction volume. Conversely, during quieter periods with less network activity, the rate of ETH creation through block rewards may exceed the rate of burning, rendering Ethereum inflationary.
Recent data and analyses suggest that Ethereum has fluctuated between being inflationary and deflationary since the implementation of EIP-1559 and the Merge. Factors such as network activity, demand for transaction processing, and changes in the Ethereum protocol continue to influence the supply dynamics of ETH.
Whenever a transaction occurs on the blockchain, a certain amount of ETH is permanently removed from circulation through a process known as "burning."
Ethereum co-founder Vitalik Buterin has been actively sharing updates and previews of what's to come, emphasizing the network's commitment to continuous progress. On December 30, 2023, Buterin detailed the 2024 roadmap for Ethereum, highlighting upcoming Ethereum Improvement Proposals (EIPs) that are expected to address various aspects of the network's performance and capabilities.
The overarching vision for Ethereum, as outlined by Vitalik Buterin, includes a series of upgrades essential for the protocol's future development. These upgrades aim to enhance Ethereum's capacity, reduce transaction costs through mechanisms like rollups, and improve the overall user experience.
Furthermore, the roadmap is not just about technical upgrades; it also focuses on scaling solutions. For instance, rollups, which batch transactions together off-chain before finalizing them on the Ethereum blockchain, are part of Ethereum's strategy to manage network congestion and lower transaction fees for users.
Like other crypto assets, there are some general risks associated with investing in ETH.
We describe many of these general risks in Ethereum’s Crypto Asset Statement including risks relating to: volatility; access, loss or theft; control of processing power; settlement of transactions on crypto asset networks; momentum pricing; private keys; internet disruptions; faulty code; network development and support; regulatory risk; network forks; air drops; voting rights; cybersecurity incidents and other systems and technology problems; unforeseeable risks.
While we tried to describe the key risks associated with ETH here and in our risk statement, these aren’t all the risks associated with trading in ETH. You should also always do your own research on ETH to make sure you are comfortable investing in it.
Get live ETH price data and learn how to buy ETH in Canada through Coinsquare's Comprehensive Guide.
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