What is Ether?

By Julia Cook
Published Jun 24, 2022 and Updated Mar 20th, 2023

Ether is the name of the cryptocurrency that is produced on the Ethereum blockchain.

Ether (ETH) is the altcoin upon which all transactions, tokens, validations and other operations that occur on the Ethereum blockchain are based. As with Bitcoin (BTC,) ETH is also divisible by denominations or up to 18 decimal places, meaning that one unit of ETH is 1 billionth of an ETH. This Ether denomination is called Gwei, whereas the BTC denomination is called a Satoshi (SATS).

However, the versatility of ETH’s use goes beyond that of BTC. This is because while BTC is a pure cryptocurrency that was intended to decentralize currency, ETH was designed to authenticate and implement decentralized applications (dApps) and smart contracts by charging a small fee for every task that is conducted on the blockchain network and, either directly or indirectly, on its dApps. This fee is called ‘GAS.’ It is based on a unit price of processing power required to perform a transaction on the chain.

The price of gas per transaction is determined by the supply and demand between the miner’s on the Ethereum blockchain and those wishing to conduct a certain activity on the chain.

Part of this fee goes to the miners who participated in validating these tasks by them to the blockchain. Meaning that, the more activity there is on the blockchain, such as when there is a sudden spike in trading such as when BTC goes through a bull run, the demand for mining nodes will be higher, and the mining nodes will be able to charge higher fees to validate the transaction.

This occurs through a proof of stake consensus algorithm. But it is important that it does also function like a basic cryptocurrency such as BTC.