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What is Ethereum (ETH) and Decentralized app (Dapp)

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Crypto trading
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Lesson 2

If Bitcoin is the digital gold, then in an abstract way, Ether is the digital oil. The Ether cryptocurrency (ETH) is the fuel that makes the apps run on the Ethereum blockchain.

Traders can buy Ethers as an investment or trade Ethereum CFDs to profit in the short term. Both ways carry significant risk for your investment.

Developers and entrepreneurs use the Ethereum blockchain to build decentralized applications based on smart contracts. To have your app running, you need computing power, so you pay for it with Ethers. The more power you use on the network, the more Ethers you have to spend.

With more developers using the Ethereum blockchain, the demand for Ethers is increasing, which results in higher prices on the crypto exchanges.

What is Ethereum

The Ethereum blockchain network enables developers to build and run decentralized apps. Any app, such as YouTube, Facebook or PayPal, controlled by a central entity could be decentralized on the Ethereum platform.

Similar to the Bitcoin blockchain, the Ethereum network runs by nodes. These are computers that keep full copies of Ethereum blockchain. The nodes are compensated by users and app developers with crypto tokens called Ether (ETH).

The logic bricks in these decentralized apps are called smart contracts. When running on the blockchain, smart contracts are self-programmed. To interact with these contracts, you send them transactions with some data to specify which function you want to invoke.

Ethereum vs. Bitcoin

Bitcoin is a developed Dapp programmed to work as a peer-to-peer electronic cash system, and the Bitcoin blockchain stores each transaction. Ethereum, on the other hand, is open software that anyone can use to build all kinds of decentralized apps.

What is Dapp

Let’s take for example YouTube, which is a Google company and operates centralized with a CEO in charge. The free platform allows publishers to upload videos. By giving Likes (thumb up), the users can value the content. Based on the number of likes and comments, YouTube ranks the top videos when users search on the platform.

The YouTube publishers monetize when they join AdSense, the Google ads program. Basically, at any time, YouTube can stop the monetization on a videos or even completely remove the videos from that publisher’s channel. In such cases, the publish can’t do much but open a dispute and eventually the videos may be restored.

A Dapp project on the Ethereum network would work in a different way with no central entity in control but instead a peer-to-peer protocol. The users on a decentralized video network would be able to share any content they have stored on their devices. Advertisers, viewers, and content creators would be able to engage directly.

Instead of giving Likes to your favourite publishers, you could give them Likecoins in a form of tokens. Thus, people can create a fair environment to share videos with no intermediary, fewer ads (or no ads), and more earnings for the best publishers.

How to buy Ethereum

As we know, the cryptocurrency Ether (ETH) is used to fuel the Ethereum network, and if you believe these Dapp projects have future, you can buy Ethereum coins as an investment. The cryptocurrency is offered on every online exchange, and you just need to choose one and register for an account. Some of the most trusted crypto exchanges worldwide include Coinbase, Bitpanda, Bittrex and Kraken.

After your account on the exchange is verified, you can purchase coins directly with your debit card. You can also fund a U.S. dollar wallet and buy Ethereum with it. To store your Ethers, you can use a web wallet provided by the crypto exchanges or a desktop wallet, which you download and install on your computer. A hardware wallet, such as Trezor and Ledger Nano, is trusted to be the safest way to store your Ethers.

Ethereum chart

You must be aware the cryptocurrency market is extremely volatile, and the price can change by a couple of hundred U.S. dollars in a day. Above, you can see a daily chart from Kraken that follows the last days of 2017 and the opening days of 2018. On the 1st of Dec 2017, the ETH was traded for around $460.00, and on the 13th of Jan 2018, it reached $1600.00, just to drop by 50% a few days later.

With the Ethereum, cryptocurrency offered by exchanges for sale, hedge funds, speculators and retail traders join the crypto market in a hunt for profit. When the wolves join a market, you can expect bubbles and bloodbaths, which we already witnessed in 2017 and 2018.

The Ethereum price could be affected by the release of new projects on the blockchain, as well as government decisions for cryptocurrency regulations. To profit on short term investments retail traders could be looking to trade crypto CFDs.