Ethereum is a decentralised smart contract platform. Like Bitcoin, the Ethereum network has a token (Ether), a blockchain, nodes and miners. However, unlike Bitcoin the blockchain maintains consensus for a ‘virtual computer’ dubbed the EVM (Ethereum Virtual Machine). Distributed Smart contracts can be created and deployed on the EVM.
What’s an Ether?
Ether is the native token on the Ethereum network. There are around 100 million ether on the network today and the token is used to incentivise miners to run their mining hardware (That helps keep the network decentralised).
The current inflation rate of Ether is around 10% a year but this is looking to go down to 1-2% with future network upgrades. To date, no hard cap has been placed on the Ether supply.
What can an Ether token be used for?
Ether tokens can be used for payments between users like Bitcoin, but it also can be used to power smart contracts. When running a smart contract, the Ether is turned into ‘gas’, to then power a smart contract on the EVM.
Think of this gas in the same way as gasoline you put in your car – you need a different amount of gas depending on how long your journey is or based on what type of road you are driving on. Smart contracts on the Ethereum EVM work in very much the same way.
If you’re a beginner and want to know more about Ethereum, access this definitive guide.