What is Ethereum? Complete set of Ethereum for beginners

By Le Anh | Experience

What is ethereum

There is a fact that:

When asked, "What is Ethereum?" then 90% of the participants in the cryptocurrency market answered that ETH.

However, the truth is not so?

In this article, I have designed and arranged the knowledge about Ethereum and ETH in the most understandable flow for newcomers to enter this cryptocurrency market.

Hopefully after reading this article, you will have a better overview of Ethereum in general and ETH in particular.

Let's Goooo!

1. Introduction to Ethereum

What is Ethereum?

Ethereum is a distributed, open source computing platform based on Blockchain technology capable of enforcing smart contracts (Smart Contract).

At the same time, it allows developers to build decentralized applications (dapps) and decentralized autonomous organizations (decentralized autonomous deals).

Easier to understand:

Ethereum is a Blockchain platform, allowing developers to build decentralized applications (dapps) and decentralized autonomous organizations (decentralized autonomous deals).

Ethereum history


In October 10, Vitalik Buterin a young and passionate Bitcoin programmer proposed an improved solution for the Mastercoin project. (now OmniLayer).

In that proposal, Vitalik proposed a solution that allowed MasterCoin to support more types of contracts without the need to add complex features.

Although, the Mastercoin development team is very impressed with Vitalik's proposal. But, they did not apply that solution to their project.

The beginning of Ethereum

After MasterCoin did not apply its solution, Vitalk continued to research and realized that: Smart contracts can be completely generalized.

In November 11, Vitalik shared the edition for the first time whitepaper outline of ethereum.

Only a few dozen people have access and read ahead of this sketch. They then provided feedback, making it possible for Vitalik to finalize the whitepaper for Ethereum.

Since sharing the whitepaper, Vitalik has added another teammate to build Ethereum and that person is: Gavin Wood.

Gavin Wood was the first to actively contact Vitalik and offer to help with his C ++ programming skills.

In the summer of 2014, Gavin Wood announced yellow paper for Ethereum. At the same time, Vitalik also announced that Ethereum will be developed by the non-profit Ethereum Foundation.

After a year of construction and development, in June 06 the first block of Ethereum was mined. It marks the official formation of the Ethereum blockchain.

One of the most important block chains in the entire cryptocurrency ecosystem later.

The DAO Hack

Ethereum has been operating for about 1 year and has started to shape its ecosystem.

In particular, it is impossible not to mention The DAO project - an investment fund under the decentralized autonomous model (Decentralized autonomous organizations) The first is built on Ethereum.

The DAO was founded and started raising capital in May 05 with a total value of up to 2016 million.


After 1 month, The DAO encountered an incident so serious that it caused the Ethereum blockchain to split later.

The problem is called - The DAO Hack.

On June 17, 06, a hacker triggered the split (split function) in the code of The DAO smart contact. It allows hackers to establish a "child DAO"from The DAO and transferred about $ 50 million into"child DAO".

The DAO's smart contract stipulates that the money in the wallet will have to be locked for 28 days before the owner of the wallet has the right to use it.

Since splitting from The DAO, "child DAO”Will have the same smart contract structure as The DAO.

Therefore, 50 million dollars in the wallet of "child DAO"it will take 28 days before the hacker has full access to the assets.

Facing such a situation, Vitalik could not stand by and look at the deteriorating image of Ethereum in the eyes of the community.

Vitalik had a solution through the proposal soft fork, block all transactions from The DAO wallet address and "child DAO".

At the same time, urging miners to still confirm the transaction as usual and ready to install when the soft fork is approved.

With the soft fork update, it made it impossible for hackers to withdraw money after 28 days of waiting.

So phase 1 is done, by freezing the amount in the wallet of "child DAO".

Now, to get the money back from the wallet "child DAO"?

The Hard Fork

A few hours before the soft fork was released, several members of the community discovered an error that put Ethereum's network at risk of a DoS (service attack) attack.

To protect the network, the Ethereum community agreed with the only option - The Hard Fork.

Hard fork is the last resort. While being able to recover the money stolen at "child DAO", it also helps prevent the Ethereum network from being attacked by DoS.

The entire Ethereum community has decided to conduct a hard fork at the 1,920,000 block. This is the block before "child DAO" separates from The DAO.

Despite regaining the lost money, the consequences of the hard fork made Ethereum's network split into two - Ethereum and Ethereum Classic.

Structure of Ethereum

Ethereum Blockchain

Before you understand Ethereum, you have to understand how Blockchain works.


If you do not understand Blockchain, you can read the article - What is blockchain? which Coin98 has written. Then come back here and let's continue.



OK, got it So you have a rough understanding of Blockchain, right?

Now I will briefly describe the network of Ethereum for you to capture its components offline!

Basically, Ethereum's Blockchain is like other blockchains. It is made up of a network of computers or Nodes.

To join the network, nodes need to install software Ethereum Client like Geth, Parity ... etc.

When installing the Ethereum Client, the nodes will have to run a virtual machine program called - Ethereum Virtual Machine (EVM).

EVM will be responsible for executing named programs - Smart Contract or smart contract.

When developers want to build decentralized applications (dapps) On Ethereum, they need to deploy smart contracts through programming languages Solidity.

In order to activate the execution of activities such as smart contracts, orders ... the network needs a fee called "Gas".

The "Gas" fee in the Ethereum network will be paid in a digital currency called Ether (Ξ or ETH).

When the transaction is executed, it's time to confirm whether the transaction is valid or not.

In the Ethereum network, the component responsible for confirming this transaction is named - Miner Node.

For the network to operate independently, consistently, the miner nodes must follow the consensus law - Consensus (aka consensus mechanism).

Ethereum uses the law of consensus named - Proof of Work (PoW) also known as proof of work.

That is, the miner nodes must demonstrate the work they have completed and notify the network.

Then, the other miner nodes in the network will verify whether this evidence is valid or not.

The work here could be:

  • Create new blocks by finding solutions through algorithms - Ethash.
  • Confirm the transaction on the network.

When proof is passed (ie valid), transaction data will be written to the Ethereum Blockchain and cannot be changed.

Ethereum vs. Bitcoin

The most fundamental difference between Ethereum and Bitcoin is the vision of these two blockchains.

While Bitcoin was founded with the vision of becoming a peer-to-peer payment system, Ethereum has a vision to become a platform that makes Dapps easier to develop.

In addition, technically (technical) Ethereum and Bitcoin also have some differences such as:

Total supply: While the total supply of Bitcoin is fixed at 21 million BTC, Ethereum does not fix the total supply.

Algorithm: Although similar to the Proof of Work (PoW) consensus mechanism. However, Ethereum uses a different Ethash algorithm from Bitcoin (SHA-56).

Transaction per seconds: The transaction speed of Bitcoin is only about 7 TPS per second, this figure of Ethereum falls to about 20-25 TPS, nearly 3 times that of Bitcoin.

How to appear for the first time: Bitcoin first appeared after Satoshi Nakamoto exploited the first block (Genesis Block) of the Bitcoin blockchain. Meanwhile, Ethereum appears through capital raising activities ICO after pre-mine (digging first) nearly 72 million ETH.

Creator: The founder of Bitcoin is Satoshi Nakamoto, an anonymous individual or organization. The founder of Ethereum is Vitalik Buterin, a Canadian programmer (identification).


These are organizations that play an important role in promoting the entire ecosystem of Ethereum.

In particular, including the following 3 organizations:

Ethereum Foundation

This is a non-profit organization responsible for developing the features of the Ethereum Blockchain. It was founded in 2014 and is headquartered in Switzerland.

Enterprise Ethereum Alliance

This is the organization that will be responsible for promoting and expanding the use of Ethereum blockchain technology for ALL businesses.


This is an important company for Ethereum in particular and Crypto in general.

For Ethereum, Consensys is like a nursery for projects running on the Ethereum platform.

2. Ethereum Token Standard

ERC, short for Ethereum Request for Comments are the set of rules needed to deploy tokens on the Ethereum network.

These standards are used by developers to deploy smart contracts on Ethereum's Blockchain platform.

Before becoming the standard applied on the Ethereum blockchain, the ERC must be revised, commented and accepted by the community through EIP. (Ethereum Improvement Proposal) also known as Ethereum improvement proposal.

What is ERC20?

ERC20 is a set of rules and regulations for the issuance of tokens on the Ethereum platform, first proposed by Vitalik Buterin in June 06.

With the advent of ERC20 standard, it has helped developers have a common standard when deploying Fungible Token on Ethereum platform.

At the same time, ERC20 makes it easier than ever to create a token on the Ethereum blockchain.

That, combined with the boom of the ICO fundraising movement in 2017.

As a result, the number of tokens issued according to the ERC20 standard on Ethereum increased sharply beyond 228,184 tokens, as of now.

ERC20 rule set

Below is a list of ERC20 standards, with 6 mandatory and 3 optional rules.

6 mandatory rules, including:

  • totalSupply: Total number of tokens issued.
  • balanceOf: Check the token balance in each Ethereum wallet
  • transfer: This function will manage the token transfer to the user's wallet address.
  • transferFrom: Allow token holders to exchange with each other.
  • approve: Check each transaction and compare with total supply to make sure there is no shortage or excess of tokens.
  • allowance: Check the token balance to see if the wallet address has enough tokens to transfer.

3 optional rules, including:

  • Token Name: Token Name
  • Symbol: Token code
  • Decimal (up to 18): Minimum number of decimal

To check the basic rules of a specific token. Brothers to visit Etherscan, find the token you want to see.

Then click on the tab Read Contract, here you will see the full information required of that token.

For example, the image below is Binance Coin (BNB).

Is it hard to create an ERC20 token?

Ethereum applies the ERC20 standard, making it easier than ever to create a token on the Ethereum platform.

And the video below will describe how simple it is to create a token on the Ethereum platform.

What is ERC721?

ERC721 is a set of standards for the issuance of Non-Fungible Token (NFTs) on the Ethereum platform, proposed by William Entriken, Dieter Shirley, Jacob Evans and Nastassia Sachs in January 01.

Quick explanation of NFT:

Non-Fungible Token (NFT) is understood to be a token representing something unique. Therefore, one NFT is not interchangeable, replaced by another NFT.

For example, a token that represents a Spiderman movie ticket cannot be exchanged with a token that represents the Avenger movie ticket.

Thanks to the ERC721 standard, developers on Ethereum have opened up a new ecosystem of dapps using NFTs.

With the first HIT that can't be ignored is CryptoKitties, a cat-raising dapps on the Ethereum platform that has been feverish in the cryptocurrency community for a long time.

Up to now, the number of contracts according to ERC721 standard on Ethereum has exceeded 2,936.

Some other ERC standards

In addition to ERC20 and ERC721, Ethereum has two other token standards that I think you should know about, including:


The ERC777 standard is a standard that improves the problems encountered by ERC20 and is expected to overtake ERC20 by its superiority.


ERC 1155 is the standard for many tokens including Non-Fungible Token and Fungible Token.

It is a combination of the ERC20 and ERC721 standards.

The ERC1155 standard proposed by the CTO of the Enjin Coin project to the Ethereum community in June 06.

Alternatively, you may enter https://eips.ethereum.org/erc for more reference on Ethereum's new EIPs and ERCs.

3. Detailed information about ETH

What is ETH?

ETH or Ether (symbol: Ξ), is the official cryptocurrency of the Ethereum blockchain.

In the Ethereum network, ETH acts as a fuel to carry out transactions-related activities.

You keep thinking simple: The Ethereum blockchain is like a machine. The machine that wants to operate smoothly requires the "ETH" fuel.

ETH Tokenomics

Key Metrics

Initial Token Supply Distribution

As I said above, the development team has pre-mine over 72 million ETH and allocated the following:

  • Ethereum Dev Team holds 12 million ETH.
  • The rest will be sold to investors via ICO.

Graph showing ETH's Supply.

Token Sale

Ethereum's ETH sale process goes through 42 days with different prices from time to time.

The starting price is stated that 1 BTC can buy 2000 ETH and until the end, 1 BTC can only buy 1337 ETH.

Below is a chart showing the amount of ETH sold each day:

As a result, after the token sale, Ethereum sold nearly 60 million ETH, collecting more than 31.5 thousand Bitcoin (BTC) worth 18 million dollars at that time.

ETH Token Incentives

Purpose of using ETH:


  • Gas Fee: Like BTC, ETH is used to pay fees "Gas”In the Ethereum network. This fee is not fixed, it depends on the network status of Ethereum. If the network is overloaded, Gas charges will increase and vice versa. However, the normal gas fee is quite cheap, only about $ 0.1 cheaper than Bitcoin's transaction fee.

  • Other Fees: In addition to the ETH transaction fee, it is used to pay for other activities on the network such as deploying smart contracts, data storage fees.

Block Reward

As you may remember, Ethereum uses the Proof of Work (PoW) consensus law so the block reward in the Ethereum network is ETH.

Initially this block reward was 5 ETH. Through multiple network upgrades, the current block reward of Ethereum is at 2 ETH per block.

Should ETH investment?

To answer this million dollar question. We analyze the use cases that may affect the price of ETH.

From there, you will have a look, evaluate about ETH before investing money into it.


ETH is used to pay transaction fees within the Ethereum network. Transaction fees will belong to the ETH miners in the Ethereum network.

For the total amount of transaction fees to increase, the number of transactions must increase and this is reflected in the trend of the number of Dapps developed on the Ethereum platform.

But, even a surge in transaction costs doesn't really affect the price of a project worth tens of billions of dollars.

Chart of total fees Vs. value of ETH

It is really a difference, when the daily total cost of Ethereum network is about 64 thousand dollars while the total value of ETH is up to 16 billion dollars.

That's not to mention the case where miners will sell the collected fees to cover the costs of their ETH mining activities.


ETH is the block reward in the Ethereum network. This is what makes many people involved in ETH mining will increase the hashrate, resulting in a secure Ethereum network.

The current reward of Ethereum is 2 ETH / block. It is estimated that around 2020 million ETH will be mined in 4.8.

After mining ETH, miners will have to sell ETH to the market to pay for operating costs such as electricity, machine maintenance, staff salaries, etc.

Thus, you see the mining of ETH is a case that makes the supply of ETH in the market increase by about 4.8% by 2020.

ICO Raising Fund

As I mentioned above, Ethereum is the platform that makes developing dapps easier than ever.

The development of Dapps has led to the need to raise funds through the form of ICOs. That peak was at the end of 2017 and early 2018.

So, did the ICO boom affect the price of ETH?

If any of you who are in the final phase of 2017 have also experienced the feeling of waking up and watching your account increase continuously after the ICO project hit the floor.

I remember clearly, the market at that time was extremely FOMO, the multiple asset multiplication has made the crowd participating in the ICO game soared.

When the FOMO market participates in buying ICOs, the demand for buying ETH increases many times.

Below is a chart showing the correlation between ETH price and the cash flow invested in ICOs in early 2018 by the team. Coin98 perform.

According to 2018 statistics, ETH prices have dropped nearly 10 times compared to the beginning of the year.

The amount of money invested in ICOs also saw a huge drop from $ 1.52 billion in January 01 to $ 2018 million in December 74.5.

You can clearly see how the price of ETH and the money invested in the ICO are almost the same.

Therefore, it can be said that:

The price of ETH is affected by the fluctuations of the cash flow invested in the ICO.

Locked in DeFi

Another use case of ETH that few investors paid attention to. It is ETH used as a collateral assets in the decentralized financial ecosystem - DeFi.

When becoming a collateral, ETH will be locked in the DeFi ecosystem on Ethereum.

So, DeFi on Ethereum will thrive in the future?

To answer this question, you can look at the chart showing the amount of ETH locked in the DeFi ecosystem below.

It can be seen that the amount of ETH locked up tends to increase from 1.6 million in mid-2019 to 2.6 million ETH in December 12.

With the growth of more than 68.75% in the past 6 months, you can expect a bright future of the ecosystem. DeFi in the near future.

4. Storage and Security

What is an Ethereum wallet?

Ethereum wallet is a tool that allows users to create Ethereum wallet address to store tokens issued on Ethereum's block chain, including ETH.

Ethereum Wallet Address

This is a string, usually starting with "0x" and can be searched on the Etherscan tool.

To access the Ethereum wallet address, you need to have a string of characters called "Private Key".

"Private Key”On Blockchain will not be changed, each wallet address will have only 1 fixed private key.

Therefore, you need to keep your private key carefully and not let anyone know this string.

You keep thinking simple:

  • Ethereum wallet address as a bank account.
  • The private key is the password of a bank account.

Example of Ethereum wallet address:

0xBE0eB53F46cd790Cd13851d5EFf43D12404d33E8 - is one of Ethereum's wallets Binance Exchange.

You copy this wallet address into Etherscan will be able to look up all the transaction history of this wallet address.

Popular Ethereum wallets

Ethereum wallets are divided into 4 common types, including:

Paper Wallet

True to its name, this is an Ethereum wallet that has all the important information such as the private key chain, the public key and the wallet address printed on paper.

Although, there are advantages that will not be hacked or disappear when your phone or device is lost.

However, paper wallets are difficult to use when trading and are easily damaged, burned, and destroyed.

Hardware Wallet

This type of wallet stores the Private Key in a hardware device, which is easy to use and safe.

But, this type of wallet users have to use money to buy.

Some reputable Ethereum storage hardware wallets: Ledger Nano S, Ledger Nano X, Trezor, KeepKey.

Wallet software

This type of wallet stores Ethereum on the hard drive of a computer or phone. Easy to use but also vulnerable to hacker attacks and insecure by hardware wallets.

Some reputable Ethereum storage software wallets:

  • Desktop: Jaxx, Coinomi, Etherwall, Exodus ...
  • Mobile: Trust Wallet, Coinbase Wallet, imToken ...

Web wallet

This type of wallet is hosted on a website, acting as an interface for users to easily create and use Ethereum wallet addresses.

However, Web wallets rely on vendors, security is not equal to hardware wallets.

Some popular Web wallets: MyEtherWallet (aka MEW wallet), MyCrypto, Metamask.


  • To store Ethereum securely, you should use a hardware wallet.
  • To use simple, fast, you can use web wallet or mobile wallet.

As you can see, among the most secure Ethereum storage wallets are hardware wallets but not handy. Meanwhile, mobile wallets and web wallets are very handy but easily attacked, stealing private keys.

Here are some security tips for you to store Ethereum as safely as possible.


Do not save the private key, seed phrase on computer software, but you should save it offline as a note on paper (write out multiple copies) and store it in a memorable and indelible place.

Avoid scam sites

  • Double check the website address of Ethereum wallets before making login to the Ethereum wallet address.
  • Do not click on search ads on google to avoid being on a fake website.
  • Before making a transaction, always check the address you are sending money to. Once transferred, there is no way to stop the transaction or resume it.

Avoid being hacked, keylog, virus

  • Do not log into the Ethereum wallet address using public WiFi such as cafes, milk tea, hotels ...
  • Do not access strange websites and links to avoid keylock and virus.
  • Always use the security of Two-Factor Authenticator (2FA) for the Ethereum wallet application.

5. Conclusion

I believe that when you read up to here, you have also fully grasped the most necessary information about Ethereum in general and ETH in particular.

Hopefully, from the information provided in the article, you can see for yourself the opportunities and risks before making a decision to invest in Ethereum and ETH.

If you have any questions about Ethereum, please leave your question in the comment section at the end of the article. I will respond to you as quickly as possible.

And if you see the information by yourself and the team Coin98 The offer is helpful. Do not forget to share this article with other brothers to read it!

Goodbye and see you again in the upcoming articles!

Le Anh

Cryptocurrency is our chance to become the new 1% of the world.

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