What is ethereum?

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Andrew Goldman

Andrew Goldman has been writing for over 20 years and investing for the past 10 years. He currently writes about personal finance and investing for Wealthsimple. Andrew's past work has been published in The New York Times Magazine, Bloomberg Businessweek, New York Magazine and Wired. Television appearances include NBC's Today show as well as Fox News. Andrew holds a Bachelor of Arts (English) from the University of Texas. He and his wife Robin live in Westport, Connecticut with their two boys and a Bedlington terrier. In his spare time, he hosts “The Originals" podcast.

Ethereum is a computing platform primarily known as the means for transmitting the cryptocurrency called ether. So what’s a cryptocurrency, you may ask? A cryptocurrency is a digital currency that only exists online, has no physical form or intrinsic value, and isn’t regulated or controlled by a central bank or server, but is rather transacted between individuals. (The “crypto” refers to the fact that the currency transactions are made securely using cryptography.)

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The most well-known cryptocurrency was the first one to take off — bitcoin, created in 2009 and which sought to create a digital cash system that could transmit payment just as easily from one side of the earth to the other as it could between two people living next door to one another. Ether and bitcoin are similar in a lot of ways. Both, for instance, rely on a blockchain, a publicly accessible electronic ledger that permanently, and immutably records every transfer of the cryptocurrency units, and by doing so, provides the system with both self-policing and accountability.

One of the biggest differences between them is how they came to be. Bitcoin’s creation is great mystery--it was created by a person or group of people going by “Satoshi Nakamoto” who have still yet to be publicly identified, and is so “decentralized” that it has no office you can visit. Ethereum, however, arrived on the scene with actual human faces, and though it is also decentralized, has an actual Zurich office filled with flesh and blood humans. Ethereum was first described in a 2013 white paper by the Russian born, Canadian programmer Vitalik Buterin, a cryptocurrency expert well known for his work writing for Bitcoin Magazine. Ethereum devotees tout the increased speed of the system, because ethereum is not dependant on bitcoin’s relatively poky system that requires that all transactions be confirmed by a third party before becoming part of the blockchain. It might take a few minutes for a bitcoin transaction confirmation but ethereum’s so called “smart contracts” system eliminates the need for these third party confirmations making transactions virtually instantaneous.

Last Updated January 29, 2018

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