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What is Ether (ETH)?


 What is Ether, ETH?

ether, ETH, ethereum

Ether is the second most popular cryptocurrency, with a higher transaction volume than any other cryptocurrency. However, what is the purpose of ether on the Ethereum network?

 In today's article, we will tell you exactly what is  What is Ether (ETH)?

Ether (ETH) is the main token of the Ethereum blockchain and the second-largest cryptocurrency in the world by market cap. Like bitcoin, the largest cryptocurrency, ether can be used to send payments directly to another person without the need for an intermediary such as a bank.

Ethereum's long-term vision is to power more than just financial transactions. Software developers can build applications on Ethereum, from decentralized platforms to social media networks for lending money.

For any Ethereum-based application, ether acts as the main "fuel". All activities on the blockchain require some amount of ether, also known as "gas", to fuel it.

In Ethereum, ether can be used for the following things:

  • Payments: Like Bitcoin, ether can be used for payments. Users can send ether to another user and, just like cash, does not require a third party to process or approve the payment.
  • Powering Decentralized Applications: Ether is required to use decentralized applications (dapps) built on Ethereum, from staking ERC-20 tokens for yield farming to performing functions such as governance voting.
  • Transaction Fees: Every Ethereum transaction, from payments to dapp usage, requires a fee.

Why are there ether fees?

When users send funds to and from a dapp, or transfer an ERC20 token between wallets, they must pay a fee to do so. Indeed, Ethereum currently uses miners to verify transactions on the network. These miners use their specialized hardware to add new transactions to the blockchain.

Prior to the London hard fork (a non-backward compatible upgrade that introduces new features), an auction-like system was used to determine how miners chose which transactions to execute first. The higher the gas fees attached to a transaction, the higher it is added to the top of the miner's list. However, this has meant that fees are incredibly unpredictable and can increase significantly during times of heavy congestion.

New base fees were introduced as part of EIP 1559 in 2021 to create a more predictable fee structure for Ethereum users. Instead of an auction-like system, fees are now determined algorithmically based on the number of active users on the network at any given time. Hints can be added if a user wants their action done faster, but this is entirely optional.

What is Ethereum gas?

Ethereum transaction fees are calculated based on the amount of "gas" the action requires.
Each action costs some gas depending on the computational power and execution time required. A transaction is multiplied by the base rate and any tip you wish to add, regardless of your gas limit.

Total Charges = Gas Units (Limits) * (Base Fare + End)

As such, ether is sometimes referred to as "digital oil" because it's used to pay for mileage, so to speak.

How to use ether to power a dapp?

Ether acts as fuel for dapps in the network. Let's say you are using an Ethereum-based notebook application that allows you to write immutable to-do lists that are saved on the blockchain. To post a note, a user may have to pay an ether transaction fee to add a new list to the notebook.

Each of the dapps enables this in a different way. For example, when a user goes to send a note, the Notebook application may ask the user to send the fee. Metamask, an in-browser ERC20 wallet, can be useful for this as it sits in the corner of the browser and can automatically understand when to help send transactions.

What is the difference between Ether and Ethereum?

Ethereum is the entire network. Ether is the primary token that works on it, making it a very important part of Ethereum.

How much ether do we have?

According to data provider Messari, there are currently more than 119,120,909 ethers.

Five ethers are formed approximately every 12 seconds. But beyond that, the rules of the Ether economy are clear and change frequently, as new proposals for improvement are agreed upon by the Ethereum developer community. Bitcoin has a fixed limit of 21 million bitcoins, while the primary Ethereum token has no set maximum supply limit.