CryptocurrencyETHEther
Ethereum (ETH)
A programmable blockchain whose native asset is ether, running smart contracts and secured by proof of stake since the 2022 Merge.
What Ethereum (ETH) means
Ethereum is a blockchain designed to run programs, not just record payments. Smart contracts are pieces of code deployed to the network that execute exactly as written when called, and they are the substrate for decentralised finance protocols, token issuance including most stablecoins, and non-fungible tokens. The native asset is ether, used to pay for computation and to secure the network. Anyone can deploy a contract, and once deployed it is generally immutable, so faults in contract code cannot simply be patched.
In September 2022 Ethereum completed the transition known as the Merge, replacing proof-of-work mining with proof of stake. Validators now lock ether as collateral, propose and attest to blocks, and can be penalised by having stake removed if they misbehave or go offline. The change cut the network's electricity consumption by well over 99 percent and altered issuance materially. Under EIP-1559 each transaction pays a base fee that is burned and a priority tip to the validator, so heavy usage can make net issuance negative.
As a traded asset, ether is correlated with bitcoin but carries additional and distinct risks. Its value is tied to demand for blockspace and to the health of the applications built on it, so a major protocol exploit or a shift of activity to competing chains affects it directly. Network upgrades occur regularly and require validators and infrastructure to follow. Staked ether is subject to entry and exit queues, so it is not instantly liquid, and staking through a third party adds counterparty risk.
Worked example
A simple ether transfer during quiet conditions might cost a base fee of 8 gwei plus a 1 gwei tip on a 21,000 gas transaction, roughly 0.00019 ETH, with the base fee portion permanently removed from supply.
Related terms
- StakingLocking cryptocurrency as collateral to help validate a proof-of-stake network, earning rewards but accepting lock-up and slashing risk.
- Gas FeeThe payment made to a blockchain network for the computation and storage a transaction consumes, priced in the chain's native asset.
- DeFi (Decentralised Finance)Financial services such as lending, trading and derivatives delivered by smart contracts on public blockchains rather than by institutions.
- BlockchainA shared, append-only ledger of transactions grouped into cryptographically linked blocks and validated by a distributed network.
- Hard ForkA backwards-incompatible change to a blockchain's rules that requires all participants to upgrade, and can split the chain in two.
Frequently asked questions
What does Ethereum (ETH) mean in forex trading?
A programmable blockchain whose native asset is ether, running smart contracts and secured by proof of stake since the 2022 Merge.
How does Ethereum (ETH) work in practice?
In September 2022 Ethereum completed the transition known as the Merge, replacing proof-of-work mining with proof of stake. Validators now lock ether as collateral, propose and attest to blocks, and can be penalised by having stake removed if they misbehave or go offline. The change cut the network's electricity consumption by well over 99 percent and altered issuance materially. Under EIP-1559 each transaction pays a base fee that is burned and a priority tip to the validator, so heavy usage can make net issuance negative.
What is an example of Ethereum (ETH)?
A simple ether transfer during quiet conditions might cost a base fee of 8 gwei plus a 1 gwei tip on a 21,000 gas transaction, roughly 0.00019 ETH, with the base fee portion permanently removed from supply.
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