What is Ether (ETH)

Ether (ETH) is the native cryptocurrency of the Ethereum blockchain the fuel that powers every operation on the world's most widely used smart contract platform. While Ethereum is the network, Ether is the currency that denominates all economic activity on it. Every transaction, smart contract execution, and DeFi interaction on Ethereum requires ETH to pay for computational resources.

ETH AS GAS

"Gas" is the unit measuring the computational work required to execute operations on Ethereum. Every transaction specifies a gas limit (maximum gas allowed) and pays a gas price in ETH (denominated in Gwei one billionth of one ETH). Since EIP-1559 (August 2021), gas fees have two components: the base fee (burned and destroyed, removing ETH from supply) and the priority fee (tip paid to validators). During high-demand periods popular NFT mints, DeFi market movements gas fees can spike dramatically.

ETH AS STAKING COLLATERAL

Since The Merge (September 2022), Ethereum uses Proof of Stake consensus. Validators must stake a minimum of 32 ETH as collateral to participate in block validation. Dishonest behaviour results in slashing partial destruction of the staked ETH. Approximately 32 million ETH is currently staked across all validators (as of 2024) representing a significant portion of the total supply locked as network security collateral.

THE ULTRASOUND MONEY NARRATIVE

EIP-1559 burns a portion of every transaction fee in ETH. During periods of high network activity, the burn rate can exceed the rate of new ETH issuance through staking rewards making ETH net deflationary. ETH supply has decreased by over 1 million ETH since The Merge due to this deflationary pressure. This dynamic has generated the "ultrasound money" narrative positioning ETH as more deflationary than Bitcoin (which still has modest inflation until all 21M coins are mined).

ETH STAKING YIELD

Staking ETH directly (32 ETH minimum) or via liquid staking protocols like Lido (no minimum) earns approximately 3-4% APY in additional ETH rewards making it an income-generating asset in addition to a speculative investment.

Terms in addition to the Ether (ETH)

Blockchain

A blockchain is a subset of a distributed database. The Bitcoin inventors originally prototyped the system in 2008. This modern database is made up of separate blocks that are connected together in a chronological chain. Blockchains may be used to store a wide range of data types. It has mostly been utilized as a public ledger for bitcoin transactions to date. A peer-to-peer network comprised of independent nodes uses a consensus process to ensure the blockchain's security and legitimacy. Each node in the network keeps a public and immutable copy of the data.

2 Factor Authentication (2FA)

2 Factor Authentication is a security measure with two layers. It is used by the majority of cryptocurrency exchanges. To log in, you must provide not only a password, but also a code obtained, for example, from the Google authenticator.

Airdrop

An airdrop is a method of distributing coins. End users can typically obtain coins for free or in exchange for doing a small task, such as subscribing to a newsletter, sending a tweet, or inviting others via a personal affiliate link. Cryptocurrency airdrops — the act of depositing cryptocurrency into public crypto wallets — are utilized as a marketing, liquidity creation, and network bootstrapping technique for many different types of blockchain initiatives.

Altcoin

Altcoin - "alternative coin" - is any kind of digital currency other than Bitcoin. Since the launch of Bitcoin, the world's first digital currency, many altcoins (as well as supporting blockchains) have been created. Altcoin digital currencies share many similarities to Bitcoin, but consistently and have significant differences. There are about 20,000 altcoins, and this number is expected to grow significantly in the coming years. Altcoins often develop Bitcoin features. Ethereum, currently the most widely used blockchain, supports digital contracts and separate applications where Bitcoin does not. Altcoins are also often created to cater to the needs of different users. The Litecoin blockchain, for example, can process payments quarterly for the duration of Bitcoin.

Cold Storage

Cold storage is the way to store cryptocurrency offline. The word refers to the use of offline wallets that are not connected to the internet. Cold storage is the most secure way to keep cryptocurrencies since an offline currency becomes less likely to be hacked and stolen. Paper wallets, printed renditions of private keys, and offline hardware and software wallets are all examples of cold storage.