Ethereum is a decentralized and open-source blockchain platform. It's built to support the deployment of smart contracts and decentralized applications (DApps) without the need for intermediaries like banks, service companies, or organizations.
Ether (ETH) is the digital currency of Ethereum. Users can use this cryptocurrency to pay transaction fees within the network and conduct transactions on the network. Upon its launch in 2015, Ethereum ushered in a new era for "blockchain 2.0".
Ethereum operates on a distributed network of servers, where each node maintains the ledger (blockchain) and processes transactions. This mechanism includes:
How does ETH (Ethereum) work?
Smart Contracts: These are pieces of code implemented on the blockchain. When certain conditions are met (e.g., sufficient funds are transferred to the contract, network fees are paid), the contract automatically executes its programmed commands, completely without the need for intervention from any third party, agency, or international organization.
Ethereum Virtual Machine (EVM): This virtual machine allows smart contracts to run on any node in the network, ensuring consistency, transparency, and public access to the calculation results.
Gas and Transaction Fees: Every action on Ethereum incurs a certain amount of fees (based on market fluctuations and transaction time) called gas. This is paid in Eth to incentivize nodes to validate and process transactions, and to prevent spam.
Consensus mechanism: Following the “The Merge” event in 2022, Ethereum transitioned from Proof-of-Work (PoW) to Proof-of-Stake (PoS). PoS significantly reduces energy consumption (by approximately 99%) and enhances the network's scalability globally.
What are the features of Ethereum?
1.Smart contracts
Ethereum has integrated features aimed at automating agreement execution. This allows all participants in the network to be immediately certain of the outcome without the involvement of any intermediaries; it occurs based on nodes.
Smart contracts also have the ability to automate workflows, automatically activating when prior conditions are met.
2.Decentralized Applications(Dapps)
- There is no central point of control; operation is based on network consensus.
- Data is recorded on a public blockchain, making it immutable and irreversible.
- Source code is typically public so anyone can inspect and copy it.
- Smart contracts are used to enforce rules without the need for a third party or intermediary.
- Data is encrypted and protected on the blockchain.
Therefore, it can be used for buying and selling, lending, and managing assets safely and risk-free (with attention to market fluctuations).It can be used for transactions between blockchain games and in-game assets (NFTs).The platform provides a content sharing experience that is not subject to centralized censorship and is extremely secure.It increases transparency and traceability.It securely manages digital identities.
What should you keep in mind before entering the world of Ethereum?
Before entering the market (Ethereum, Bitcoin, etc.), you need to understand that the cryptocurrency market is very volatile. The price of ETH can skyrocket in a few hours but can also plummet without warning. This market is not for the faint-hearted or those in need of short-term capital.
Therefore, you should only invest small amounts of money that won't affect your life, an amount you can afford to lose if the market moves in an unexpected direction. Clearly define your investment goals: short-term or long-term? Each approach requires its own strategy and a strong mindset to avoid being swept away by market emotions and losing everything. The market can give you opportunities, but it can also take everything away if you don't maintain a strong mindset.
Choose a reputable exchange.
When investing in Ethereum, you need a reliable and secure place to store your assets. Currently, there are two main options: hot wallets (online) and cold wallets (offline). Hot wallets include those from exchanges like Binance, Bybit, OKX, etc. Cold wallets, such as Trust Wallet and Metamask, are safer, but be aware of the term "secret."
At the same time, you should also trade through large exchanges with a high reputation for reliability and transparency, such as Binance, OKX, and Bybit. Before creating an account, enable two-factor authentication (2FA), set a strong password, and absolutely do not share your security code with anyone to avoid any problems.
Choose the right time.
Ethereum uses gas fees to pay for network activities such as sending ETH, using DeFi applications, buying NFTs, etc. When too many users are using the network simultaneously, it becomes congested and gas fees spike. At certain times, investors may see gas fees reaching tens of dollars for a simple transaction. Therefore, it is necessary to choose the right time to avoid this situation.
Ethereum can be considered a promising technological platform for the digital future. However, before investing in ETH or any other digital asset, you need to equip yourself with basic knowledge, understand how it works and the risks involved to make informed decisions.
Disclaimer: This article is for informational purposes only and provides an overview of the investment project in the cryptocurrency market. Investors and traders should not rely on the information provided here to make investment decisions.