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Ethereum FAQ

Ethereum FAQ


What’s the difference between Ethereum and ether (ETH)?

The Ethereum network is a decentralized network of computers or nodes which maintain the Ethereum blockchain. Whereas, Ether (ETH) is the network’s native currency. All transactions on the Ethereum network require transaction fees paid in ETH called gas.

Who runs the Ethereum network and how is it secured?

No one and everyone. The Ethereum network is decentralized meaning that no central authority controls the network. Ethereum is open-source and its software is built and maintained by a community of contributors around the world. Also, anyone is able to run an Ethereum node.

Each node on the Ethereum network maintains a copy of the blockchain and decides which transactions are valid. By coming together and forming a social consensus, the nodes agree on what rules operate and govern the Ethereum network.

The Ethereum network is secured through a process called mining. Miners process batches of transactions called blocks. Mining a block requires miners to solve complex math puzzles which are difficult to compute. Once solved, the miner submits the valid block and is rewarded by the network. The first miner to submit a solved block in time earns a ‘block reward’ of newly minted ether as well as any included transaction fees.

The network remains secure as long as no one miner controls 51% or more of the hashrate or processing power put towards mining. The idea is that the reward for mining valid blocks outweighs the potential cost of a 51% attack. And also, the cost of maintaining this type of attack quickly becomes infeasible. This concept of using computational power to secure the network is called Proof of Work.

How many ether (ETH) exist?

The current total supply of ether is around 107 million.

How is ether (ETH) created?

As previously mentioned, Ethereum’s programmed to issue new ether each time someone mines a valid block on the network.

Currently, the Ethereum network’s yearly issuance rate is approximately 4.5% with 2 Ether per block. Although, it should be noted that this rate is set to significantly lower in the future. Approximately 32,568,000 ether have been mined since Ethereum launched in 2015.

The first block, also known as the genesis block, of the Ethereum blockchain distributed 60 million ETH to those who participated in the July 2014 public crowdsale. Additionally, the genesis block set aside another 12,000,000 Ether for a development fund and the Ethereum Foundation.

How fast is the Ethereum network?

The average block time of Ethereum is 12 seconds. Although, transactions may take more time to be included in a block.

What is Proof of Stake?

The Ethereum network has a planned upgrade in its roadmap to a new method of securing the network called Proof of Stake. While Proof of Work uses the cost of computational power to secure the network, Proof of Stake is different.

Instead of miners, validators stake or deposit ether to participate in the mining process. And then, a set of validators take turns proposing and voting on the next block. Validator’s votes are weighted by the size of their deposit. If you’re an active and honest validator, you’re rewarded. But, if you try and cheat the network, you’re punished and your deposit is slashed.

Learn more about Proof of Stake and the path to Ethereum 2.0.

What are ERC-20 tokens?

Tokens are digital assets issued by smart contracts on the Ethereum network. Tokens serve multiple functions in the Ethereum ecosystem. They act as currencies, digitized assets, shares of ownership, and many other assets. ERC-20 is the name of the most token standard.

What are ERC-721 tokens?

ERC-721 tokens are a type of token that are cryptographically, or in other words provably, unique. And so, this makes them perfect for representing collectibles, artwork, or anything that’s one of a kind. These unique tokens are popular with games built on Ethereum. For example, trading games designed with ERC-721 tokens allow users to truly control the ownership of their rare cards.

If Ethereum is open-source, why can’t someone just copy it?

The value of Ethereum comes from its network effect. While a person or corporation could copy and paste the open source code, you cannot copy and paste its community. Ethereum has a vibrant, active, and growing community of users, developers, stakeholders, and companies.