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What is Ethereum and Why Should You Care?

Ethereum was founded in 2014 by Vitalik Buterin, Charles Hoskinson, and six others in order to improve upon the DeFi technology that was Bitcoin. Ethereum upgraded blockchain technology in the wake of the successful launch of Bitcoin’s blockchain back in 2008. A blockchain is a chronological, digital ledger of transactions linked together by cryptography. Each block represents a decentralized, private, peer-to-peer transaction.

Originally there was only the Bitcoin blockchain which allowed decentralized exchanges of value in the form of Bitcoin. Ethereum is decentralized in the same way that Bitcoin is decentralized, namely that there is no centralized authority managing the ecosystem. However, it upgrades the transactional possibilities of blockchain technology as a “programmable money” blockchain.

The innovation with Ethereum is the introduction of smart contract programming into blockchain technology. ERC20 smart contracts allow users to program transactions with conditional requirements. That is to say that users can state that certain transactions will occur but only under specific circumstances.

Many people think of crypto transactions as being a simple exchange of currency, as in any other fiat transaction, very much along the lines of “Bob pays Alice X amount of crypto asset A.” However, with the Ethereum blockchain’s programmable digital contracts, it becomes possible for these secure transactions to take on more complicated forms, such as “Bob pays Alice X amount of crypto asset A, but only after John agrees with this transaction.”

While this may sound like a routine escrow transaction, here lies the innovation: these kinds of transactions and more can be done between individuals on the blockchain without the need for an escrow company or any other middleman. This means maximum security, no third party fees, no delays, and no biases from market manipulators and financial bullies.

Programmable digital contracts on the Ethereum blockchain allows for much more than just simple escrow transactions without third party interference. Digital contracts create endless possibilities, such as “Bob pays Alice crypto asset X, but only after 5 years AND if John agrees with it,” or, “Bob pays Alice crypto asset X if John wins, but does not pay Alice crypto asset X if John loses.”

So why, then, is the ETH token valuable? Ethereum separates economy and government. Ethereum is an economic network just like the United States. The US dollar (USD) is the reserve currency for the United States (and the world, actually). Similarly, the ETH token is the reserve currency of the Ethereum network. Companies and individuals utilize the Ethereum blockchain every single day in order to transfer value, with the network currently supporting between one and two million transactions per day. Furthermore, companies that desire to employ the blockchain for their projects must hold ETH tokens as liquidity. This means that each company that uses the blockchain takes more ETH tokens out of circulation, creating scarcity and raising the price.

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