What Is Ethereum And How Does It Work?

What Is Ethereum And How Does It Work?

The Ethereum network can also be used to store data and run decentralized applications. Rather than hosting software on a server owned and operated by Google or Amazon, where the one company controls the data, people can host applications on the Ethereum blockchain. This gives users control over their data and they have open use of the app as there’s no central authority managing everything.

Perhaps one of the most intriguing use cases involving Ether and Ethereum are self-executing contracts, or so-called smart contracts. Like any other contract, two parties make an agreement about the delivery of goods or services in the future. Unlike conventional contracts, lawyers aren’t necessary: The parties code the contract on the Ethereum blockchain, and once the conditions of the contract are met, it self-executes and delivers Ether to the appropriate party.

Ethereum vs Bitcoin

Bitcoin’s primary use is as a virtual currency and store of value. Ether also works as a virtual currency and store of value, but the decentralized Ethereum network makes it possible to create and run applications, smart contracts and other transactions on the network. Bitcoin doesn’t offer these functions. It’s only used as a currency and store of value.

How to Save on Ethereum Gas Fees • Benzinga

Benzinga Money is a reader-supported publication. We may earn a commission when you click on links in this article.

Blockchain affords immense benefits to many use cases in the financial industry and others. But use of a powerful decentralized computing network like Ethereum comes at a cost.

The Ethereum blockchain is secured by a decentralized group of miners, who are paid for their work. This payment ensures that the miners behave properly and prevents spammers from clogging the network.

But what happens when the demand for computing power on the blockchain outpaces the limits of the network? Fees skyrocket and small transactions become entirely uneconomical.

This is happening right now, and Ethereum is under intense pressure to expand their network capabilities. Currently, Ethereum can handle around 15 transactions per second. For reference, Bitcoin can handle around 5 and major credit cards can handle around 3,000.

To save on Ethereum Gas Fees visit www.gasnow.org/ where you can track the current network congestion and gas prices.

What Determines Ethereum Gas Prices

The cost for power, or space on the Ethereum blockchain, is set by the market. Gas fees fluctuate constantly depending on the number of miners working, and the number of decentralized applications (DApps) being used at any given time.

Different types of blockchain interactions require different amounts of computational power, called gas. Each unit of gas has a price, and the gas price is known as GWEI.

When interacting with the blockchain, the amount of gas is based on the action, but you decide your gas price. By selecting a GWEI over the market price, you can be sure that your transaction will get processed quickly. If you can wait, you can set a lower GWEI and hope it gets filled when the market is quiet.

Wallets such as MetaMask simplify this process for users, allowing them to choose slow, medium or fast.

Why are Ethereum Gas Fees So High?

DApps powered by Ethereum can do anything from mint NFTs to provide automated liquidity pools. Because Ethereum has the largest decentralized network capable of handling smart contracts, it’s theoretically the most secure option for DApps to run on.

This demand for Ethereum is clearly shown by the sky-high gas fees. Minting an NFT can cost upwards of $100, making them inaccessible for a lot of low-budget artists right now.

The same goes for gaming and other low-volume financial applications that could see huge benefits from the blockchain as soon as it becomes more affordable.

Ethereum gas prices might drop much sooner than you think.

How Ethereum 2.0 Will Drastically Lower Gas Prices

Ethereum has ambitious plans to scale the network to handle 150,000 transactions per seconds by the end of 2021. A major network overhaul, dubbed Ethereum 2.0, promises to deliver on this scale at the same time as making the network more secure and eco-friendly.

Ethereum 2.0 will upgrade the network from Proof of Work (PoW) to Proof of Stake (PoS). Proof of Stake networks are maintained by validators, who stake currency in exchange for the right to verify transactions. They earn the reward associated with each transaction they verify, which is estimated to payout around 7.5% of your staked tokens yearly.

Proof of Stake eliminates the energy-intensive problem solving from the PoW model, but the bump in transaction volume comes from sharding.

Sharding splits up each block of transactions into smaller chunks called shards. These shards are distributed randomly and secretly to validators. Before sharding, each miner was responsible for authenticating every transaction in the block. This much duplicate work made the system secure, but the randomization aspect of sharding actually makes it more secure than the previous system.

When Ethereum 2.0 is complete, the network should be able to handle between 100,000-150,000 transactions per second, but the upgrade has been on the way for years with multiple delays already.

With so much demand for Ethereum, there needs to be a quicker solution: Enter Layer 2.

Ethereum Layer 2

Large amounts of transactions can be offloaded to layer 2 applications via Ethereum smart contracts. These smart contracts anchor layer 2 solutions in the security of the base level blockchain without clogging the network.

An a16z-backed startup called Optimism promises to allow Ethereum to process 2,000 to 3,000 transactions per second by May 2021, drastically reducing fees.

What is Ethereum?

Where to Buy Ethereum

Interested in purchasing some Ethereum before the 2.0 upgrade? These platforms all offer access to buy, sell and trade ETH tokens.

Best For Crypto Trading Overall Rating Read Review Get started securely through eToro’s website More Details Best For Crypto Trading N/A 1 Minute Review eToro, headquartered in Cyprus, England and Israel, has provided forex products and other CFD derivatives to retail clients since 2007. A major eToro plus is its social trading operations, including OpenBook, which allows new clients to copy trade the platform’s best performers. Its social trading features are top notch, but eToro loses points for its lack of tradable currency pairs and underwhelming research and customer service features Best For U.S.-based cryptocurrency traders

Social and copy traders

Simple user interface

Community engagement and following other traders Pros Expansive network of social trading features

Large client base for new traders to imitate Cons U.S. traders can only buy cryptocurrency

Only 15 cryptocurrency pairs available Best For Buying & selling Bitcoin Overall Rating Read Review get started securely through Robinhood’s website Best For New Investors Overall Rating Read Review try for free securely through Gemini Crypto’s website More Details Best For New Investors N/A 1 Minute Review Gemini is a cryptocurrency exchange and custodian that offers investors access to 26 coins and tokens. Founded in the US, Gemini is expanding globally, in particular into Europe and Asia. Offerings include both major cryptocurrency projects like Bitcoin and Ethereum, and smaller altcoins like Orchid and 0x. Gemini is 1 of the only brokers with multiple platform options based on skill level. New investors will love the streamlined interface of Gemini’s mobile and web apps, while advanced investors might appreciate all the tools that come with ActiveTrader. In addition to a host of platform choices, Gemini users also have access to insured hot wallets to store tokens without worrying about digital asset theft. Learn more about what Gemini can do for you in our review. Best For New investors looking for a simple mobile and web app

Experienced investors who need a more advanced platform with more tools

Users looking for a 1-stop-shop to buy, sell and store all of their coins Pros Easy and quick signups — can get started in as little as a few minutes

Multitude of platforms to accommodate traders of all skill levels

Hot wallets include insurance to protect your from theft and hacking attempts Cons Charges both a commission and a convenience fee for users buying and selling through the desktop or mobile app Best For Crypto Investing Overall Rating Read Review Get started securely through Coinbase’s website More Details Best For Crypto Investing N/A 1 Minute Review Coinbase is one of the Internet’s largest cryptocurrency trading platforms. From Bitcoin to Litecoin or Basic Attention Token to Chainlink, Coinbase makes it exceptionally simple to buy and sell major cryptocurrency pairs. You can even earn cryptocurrency rewards through Coinbase’s unique Coinbase Earn feature. More advanced traders will love the Coinbase Pro platform, which offers more order types and enhanced functionality. Though Coinbase doesn’t offer the most affordable pricing or the lowest fees, its simple platform is easy enough for complete beginners to master in as little as a single trade. Best For New cryptocurrency traders

Cryptocurrency traders interested in major pairs

Cryptocurrency traders interested in a simple platform Pros Simple platform is easy to operate

Comprehensive mobile app mirrors desktop functionality

Coinbase Earn feature rewards you with crypto for learning about available coins Cons Higher fees than competitors Best For Mobile Traders Overall Rating Read Review get started securely through Voyager’s website More Details Best For Mobile Traders N/A 1 Minute Review Voyager is a leading name in the sphere of cryptocurrency investing, giving you access to over 50 tokens and coins. Buy, sell and swap assets using Voyager Crypto’s simple mobile platform available as a free download for iOS and Android users. When you invest through Voyager, you’ll pay nothing in commissions, which is a major benefit when compared to other cryptocurrency brokers. Voyager is also one of the only brokers we’ve seen that allows users to earn interest on their crypto investments. Though the broker could do more to improve its customer service, it’s an excellent option for beginner investors and seasoned professionals alike. Best For Cryptocurrency investors looking for a wide selection of supported projects.

Investors who prefer mobile trading.

Anyone interested in earning interest on their crypto investments. Pros Simple, straightforward and intuitive mobile platform

Wealth of investment opportunities

Allows users to earn interest on select crypto investments Cons Only available for mobile users — no desktop platform

Limited routes to contact customer service team Best For No or Low Fees Overall Rating Read Review get started securely through BlockFi’s website More Details Best For No or Low Fees N/A 1 Minute Review Maybe you think cryptocurrency is the future, or perhaps you were swept up in the initial waves of Bitcoin. BlockFi may be your next step if you’re ready to evolve as a crypto investor. Whether you’re a native crypto user or curious enough to start investing, BlockFi seeks to bring institutional-grade financial products to crypto markets that often face restricted access. It strives to bring clients low-cost, simple applications designed to maximize the potential of crypto assets. Learn more in our BlockFi review. Best For Crypto native clients. You own Bitcoin now. You’re the friend who fills in the blanks when conversation turns to cryptocurrency, and you devour crypto literacy content like it’s your job (and maybe it is). BlockFi’s platform can help take your crypto assets to the next level.

Crypto fringe clients. If you’ve dabbled in buying alternative assets like crypto or know enough to be interested, BlockFi can help you take the next step.

Crypto curious clients. If you’re both intrigued by bitcoin and the type of person who obsessively learns everything you can about things you’re new to, BlockFi’s crypto asset platform might be the entry point you’re looking for. Pros Mostly fee-free platform

Market-best interest rates

Earn interest, trade and borrow from a centralized hub using the BlockFi app Cons Mostly restricted to those with a base knowledge of cryptocurrency

No dedicated relationship with an investment advisor, so best for those who have a solid handle on crypto trading Best For High Spending Limits Overall Rating get started securely through Coinmama’s website Best For DeFi Swap Overall Rating Get started securely through crypto.com’s website

Pros and Cons of the Ethereum Network

Ethereum is a platform for building decentralized applications. Developers choose to build on Ethereum because of it’s turing-complete programming language, Solidity, which makes developing smart contracts really easy.

They also choose Ethereum because of its large decentralized network of miners. Remember more decentralized is directly correlated to more security.

The downside to Ethereum is it’s outdated proof of work consensus model and low transaction volume. This is the biggest hindrance to the project currently, and the reason Bitcoin has been outpacing it so much in 2021.

Layer 2 solutions like Optimism promise to bring scale soon enough to buy Vitalik Buterin and his team more time to finish up the Ethereum 2.0 overhaul.

ETH in Your Tank

Ethereum is the biggest and most decentralized smart contract platform in the blockchain space today. Despite it’s outdated transaction volume, promised upgrades have kept users and developers interested in the platform.

Currently, Ethereum can only process around 15 transactions per second, so those willing to pay the most are the ones that get through. To find out when the best time is to make a transaction use a network monitoring tool such as gasnow.org.

Frequently Asked Questions

Ethereum, Litecoin, and Ripple’s XRP – Daily Tech Analysis – March 26th, 2021

Ethereum

Ethereum rose by 0.32% on Thursday. Partially reversing a 5.19% slide from Wednesday, Ethereum ended the day at $1,587.08.

A bearish start to the day saw Ethereum fall to an early morning intraday low $1,548.69 before making a move.

While steering clear of the first major support level at $1,508, Ethereum fell through the 23.6% FIB of $1,579.

Finding support in the early hours, however, Ethereum rallied to a late morning intraday high $1,622.27 before hitting reverse.

While falling short of the first major resistance level at $1,699, Ethereum broke back through the 23.6% FIB.

The reversal, however, saw Ethereum revisit sub-$1,560 levels before ending the day at $1,587 levels.

At the time of writing, Ethereum was up by 1.02% to $1,603.21. A mixed start to the day saw Ethereum fall to an early morning low $1,586.81 before rising to a high $1,604.43.

Ethereum left the major support and resistance levels untested early on.

For the day ahead

Ethereum would need to avoid a fall through the pivot level at $1,586 to support a run at the first major resistance level at $1,623.

Support from the broader market would be needed, however, for Ethereum to break back through to $1,620 levels.

Barring an extended crypto rally, the first major resistance level and Thursday’s high $1,622.27 would likely cap any upside.

In the event of a breakout, Ethereum could test resistance at $1,700 before any pullback. The second major resistance level sits at $1,660.

Failure to avoid a fall through the $1,586 pivot would bring the 23.6% FIB of $1,579 and the first major support level at $1,550 into play.

Barring another extended sell-off, however, Ethereum should steer clear of $1,500 levels. The second major support level at $1,512 should limit the downside.

Looking at the Technical Indicators

First Major Support Level: $1,550

Pivot Level: $1,586

First Major Resistance Level: $1,623

23.6% FIB Retracement Level: $1,579

38.2% FIB Retracement Level: $1,292

62% FIB Retracement Level: $830

Story continues

Litecoin

Litecoin fell by 2.54% on Thursday. Following on from a 5.33% slide on Wednesday, Litecoin ended the day at $171.48.

A mixed start to the day saw Litecoin rise to an early morning intraday high $178.24 before hitting reverse.

Falling short of the first major resistance level at $191, Litecoin slid to a mid-day intraday low $167.78.

Steering clear of the first major support level at $167, Litecoin revisited $175 levels before easing back.

At the time of writing, Litecoin was up by 1.08% to $173.34. A bullish start to the day saw Litecoin rise from an early morning low $171.47 to a high $173.39.

Litecoin left the major support and resistance levels untested early on.

For the day ahead

Litecoin would need to avoid a fall back through the $173 pivot level to support a run at the first major resistance level at $177.

Support from the broader market would be needed, however, for Litecoin to break out from $175 levels.

Barring an extended crypto rally, the first major resistance level and Thursday’s high $178.24 would likely cap any upside.

In the event of an extended rally, Litecoin could test resistance at $190 before any pullback. The second major resistance level sits at $183.

Failure to move through the $173 pivot level would bring the first major support level at $167 into play.

Barring another extended sell-off, Litecoin should steer clear of sub-$160 levels.

The 38.2% FIB of $163 and the second major support level at $162 should limit the downside.

Looking at the Technical Indicators

First Major Support Level: $167

Pivot Level: $173

First Major Resistance Level: $177

23.6% FIB Retracement Level: $195

38.2% FIB Retracement Level: $163

62% FIB Retracement Level: $110

Ripple’s XRP

Ripple’s XRP rallied by 6.66% on Thursday. Partially reversing a 12.77% tumble from Wednesday, Ripple’s XRP ended the day at $0.51231.

A bearish start saw Ripple’s XRP slide to an early morning intraday low $0.45701 before making a move.

While steering clear of the first major support level at $0.4341, Ripple’s XRP fell through the 38.2% FIB of $0.4632.

Finding early morning support, however, Ripple’s XRP rallied to a late intraday high $0.52400.

In spite of the rebound, Ripple’s XRP fell short of the 23.6% FIB of $0.5320 and the first major resistance level at $0.5435.

The recovery did see Ripple’s XRP break back through the 38.2% FIB of $0.4632, however, to end the day at $0.51 levels.

At the time of writing, Ripple’s XRP was up by 2.66% to $0.52595. A bullish start to the day saw Ripple’s XRP rise from an early morning low $0.51053 to a high $0.52842.

Ripple’s XRP left the major support and resistance levels untested early on.

For the day ahead

Ripple’s XRP will need to avoid a fall through the $0.4978 pivot level to bring 23.6% FIB of $0.5320 and the first major resistance level at $0.5385 into play.

Support from the broader market would be needed, however, for Ripple’s XRP to break back through to $0.53 levels.

Barring an extended crypto rally, the 23.6% FIB and first major resistance level would cap any upside.

In the event of an extended rally, Ripple’s XRP could test resistance at $0.58 levels before any pullback. The second major resistance level sits at $0.5648.

Failure to avoid a fall through the $0.4978 pivot would bring the first major support level at $0.4715 and the 38.2% FIB of $0.4632 into play.

Barring an extended sell-off, however, Ripple’s XRP should steer clear of sub-$0.45 levels. The second major support level sits at $0.4308.

Looking at the Technical Indicators

First Major Support Level: $0.4715

Pivot Level: $0.4978

First Major resistance Level: $0.5385

23.6% FIB Retracement Level: $0.5320

38.2% FIB Retracement Level: $0.4632

62% FIB Retracement Level: $0.3521

Please let us know what you think in the comments below.

Thanks, Bob

This article was originally posted on FX Empire

More From FXEMPIRE: