Knowledge Base

What Is Ethereum? A Newcomer's Guide

mad scientist

Ethereum is a cryptocurrency similar to Bitcoin that can be used to pay for goods and services online. It has it’s own value and can be earned by using your computer hardware. In this blog, I explain what Ethereum is and how it, and other cryptocurrencies work.


What Is Ethereum?


You may have heard the name ‘Ethereum’ being shared around the internet. I certainly have, and it sparked my interest enough to delve into the workings of it and find out exactly what it is just a few months ago.


Ethereum is a type of currency that works differently to regular currency issued by banks. There’s no physical notes or coins denoted to it - it’s entirely digital. This type of currency is called cryptocurrency, and it has a number of benefits over standard currency.


I’ll start by explaining how cryptocurrency is created, then I’ll explain the benefits of cryptocurrency, and after that, I’ll take a look at Ethereum specifically and the future of Ethereum, and it’s future potential.

Wait, How Does A Cryptocurrency Work?


So, keeping it simple, cryptocurrencies are computer generated currencies. Everybody has the chance to earn cryptocurrency by using their computer hardware.


Your computer hardware can be used to solve very complex mathematical problems. Every time one of these mathematical problems is solved, a cryptocurrency is created. As more cryptocurrency is created, the mathematical problems become increasingly more complex. This process is known by the cryptocurrency community as ‘mining’.


Typically, solving a question is too difficult to do on your own PC. It would take a few years for most modern high-end PCs to solve a problem to create a bitcoin on it’s own.


Because of this, people usually use software that helps them to mine together with other computers across the world. The mined currency that is created through this team effort is then split throughout the computers that mine it.


Things get more complex when you look further into cryptocurrency like Ethereum, but that’s the basics of how it’s created.


ethereum.pngThe Current Price of Ethereum. Source:


Because of this system, cryptocurrency has something that normal currency doesn’t have. Cryptocurrency has a very predictable distribution - currency is brought into the ecosystem at a steady rate that cannot be influenced by governments or entities - nobody can create more money to add into the system like banks can.


There is another big benefit to using cryptocurrency like Ethereum. Because everything is digital and recorded online, every single coin created can be traced back to it’s roots. There is anonymity behind transactions, but the creation of bitcoins and Ethereum is recorded effectively forever.


This means it’s impossible to forge cryptocurrency. In the non-digital world, governments and banks go to extreme lengths to make currency that’s hard to replicate. They go to these lengths because criminals have historically tried to replicate and create fake money. With cryptocurrency, this cannot happen.


The Value of Ethereum - Can I Use It To Buy Everyday Things?


There are two major cryptocurrencies in the game right now - Ethereum and Bitcoin. Ethereum has been a much more recent addition, whilst Bitcoin has been around since 2008.


There is room for more cryptocurrencies to shine in the future, and there’s really no limit to how many are created. The success of a new cryptocurrency is usually determined by popular interest, but once enough interest comes in, the value of the cryptocurrency usually stays pretty healthy.


The reason Ethereum has surged in value so much recently is almost entirely related to the public exposure it has been given. Ethereum hit mainstream media - this helped to skyrocket Ethereum prices and a digital gold rush was created.


Because Ethereum is so new, it doesn’t actually have much real world value for individuals when compared to standard currency or even Bitcoin.


cex-bitcoin.pngCEX is one of the few national stores to accept cryptocurrency. source:


Even adoption for Bitcoin has been slow - it’s rare to see a retail store or business that accepts Bitcoin. There are some exceptions, such as CEX, the UK electronics retail chain. Technically, you can buy a few things with Ethereum and Bitcoin, but we’re far away from a world where you could leave your debit card at home in favour of your cryptocurrency wallet.


Ethereum on the other hand is even less useful for buying from companies. Far less businesses have accepted it as a form of payment.


The value in both Ethereum and Bitcoin for individuals is currently focused on anonymous person-to-person payments. Unfortunately, this has lead cryptocurrency to be used as a form to pay for illegal services.


It can be hard to understand why currencies that don’t serve much purpose for individuals in our consumer-driven world can have so much value.


The best way to look at it is that it’s a new technology and new currency. The value so far has mostly grown through the interest of early adopters; people that believe currency like Ethereum and Bitcoin will be the future.


It’s a reasonable theory - cryptocurrency gives users person-to-person transactions that cut out the middleman. (the banks). There’s no way to forge it, and it has the potential to be a very stable worldwide currency that can’t be over-inflated because it’s not tied down to any specific government or country.


Because of this, today’s value of Ethereum isn’t in using it as a new way to pay and get paid. Instead, the value is in investing in the currency, in a bid to prepare for the future.


There may be a time where Ethereum and Bitcoin are used as much as the dollar and the pound, and if this is the case you can be sure that the prices of each cryptocurrency will multiply by thousands.


bitcoin.pngThe current price of Bitcoin. Source:


Currently, a Bitcoin is selling for under $3,000, but some speculate that it could be worth $500,000 in 10-20 years. It’s a bold statement, but with that kind of future potential, there’s no doubt that plenty of the initial growth of cryptocurrency has been by those that are banking on it growing big.

What are your thoughts on Ethereum and cryptocurrencies? Do you think it has a chance to become a popular worldwide currency?




ollie_1.jpgOllie (zerodudex333) is a big mobile/tech fan. He posts blogs on Monday and Tuesday Mornings.

Follow his Twitter and his Instagram travel account.





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Crypto currency is more like gold than a currency. It is mined at a cost, and its value is due to a limited supply. However, in the case of crypto currency, there is nothing to stop someone creating their own coin. Litecoin for example.

grand master

I bought stuff with bitcoin, nobody seems to be excepting ether yet.


Over my head I'm afraid !!


Never used it. Is confusing


Hadn't heard of Ethereum until now. Little bit sceptical about cryptocoins to be honest. I'm sure the cyber criminal community could probably generate fake Bitcoins or Ethereum, so how do you know that you have brought the genuine thing?

mad scientist

@seanalert that's a good question! It's actually one of the main reasons why cryptocoin supporters like the currency. It's essentially impossible to create fake or forged Bitcoin. The system that's used is quite complicated, but essentially every Bitcoin creation and transaction has to be accounted for. This is in contrast to normal currency, which can be forged because physical coins or notes are used to denote the currency.


@zerodudex333 Thanks for that, but saying it's essentially impossible to fake or forge does not fill me with great confidence. I am sure there are some pretty robust checks and balances in situ but nothing is impossible and where there is a will, there is a way! If the value continues to shoot up, I'd be pretty certain they will turn there attention to cyber currencies.


Bitcoin / block chain is definitely the future and the banks are **bleep** themselves it will take a few more years yet for people to take to it but as soon as they see the benefits of crypto currency and fully understand the way it works its going to really hit every bank to try and keep its customer base

banks take note ! give customers a better deal or its good nite for greedy bankers

its exciting to watch crypto grow the possibilities are are also worth keeping an eye on