Plus500 does not provide CFD services to residents of the United States. Visit our U.S. website at

What is Ethereum?

Date Modified: 06/08/2023

Ethereum is a user-run system, relying on thousands of independent computers around the globe to monitor and verify transactions. This is achieved by each computer keeping a ledger, and relying only on it’s history to ensure that a transaction is legitimate, without relying on any central body.

In contrast to traditional online communication, which goes directly through a centralized platform or company, such as Meta (FB), Microsoft (MSFT), or Apple (AAPL), blockchain takes a different approach by decentralizing their system, allowing independent computers from around the globe to monitor network activity. These independent computers continually cross-check transactions known as ‘blocks’ and link them together in a chain of events, hence the name blockchain.

While there have been instances of decentralized platforms being manipulated, these occasions are rare because blockchain platforms have to all agree to any changes. This means that a group of compromised computers would trigger suspicion because a vast number of other computers would have conflicting registers.

Ethereum silver cryptocurrency coins.

How does Ethereum work?

Ethereum takes the blockchain technology used to manage Bitcoin and expands upon the idea to include digital applications.

Digital applications can be anything from rental to employment contracts but must use the currency of Ethereum, known as Ether. These applications do not rely on human engagement, rather they are triggered by events and do not need human interventions.

For example, if a delivery is registered as delivered to a warehouse, payment is automatically transferred from one Ethereum wallet to another, in Ether. This allows for quick payments while removing the need for a bookkeeper to confirm receipt, wait for paperwork, issue a payment, then await a receipt.

Is Ethereum a cryptocurrency?

Ether is a cryptocurrency and is used as the recognized tender for transactions on the Ethereum blockchain platform. Some people use the terms ‘Ether’ and ‘Ethereum’ interchangeably even though the platform’s crypto currency is more well known amongst traders than their services.

Main Ethereum terms

  • Blockchain- A decentralized system that is checked by a register, being able to confirm the rightful owner of a currency or event by reviewing the full history of a currency’s or contract’s life.
  • Dapps- Decentralized Applications are applications that run independently and rely on a blockchain ledger.
  • Decentralized- Without a central user or governing body. This creates transparency and uniformity across the network.
  • Ether- The currency used for transactions on the Ethereum platform.
  • Ethereum- A decentralized platform to run Smart Contracts and Dapps.
  • Gas- A system which calculates the amount of energy needed to complete a transaction based on computational complexity, storage demands, and bandwidth needs.
  • Hard Fork- A significant upgrade or protocol change that is accepted unanimously across all of the platforms users. The split resembles a subway map where those who disagree with the new policies break off and terminate while most of the users continue on.
  • Miners- People who offer computing power to the network in exchange for currency.
  • Mining- The act of supporting the network through confirming transactions in exchange for currency.
  • Permissioned- Transactions that are confirmed by a select group of users.
  • Permissionless- Transactions are approved by any and all users.
  • Smart contracts- Contracts with strictly defined parameters that are executed without needing human interaction.

Related News & Market Insights

Get more from Plus500

Expand your knowledge

Learn insights through informative videos, webinars, articles, and guides with our comprehensive Trading Academy.

Explore our +Insights

Discover what’s trending in and outside of Plus500.

Stay up-to-date

Never miss a beat with the latest News & Markets Insights on major market events.

Need Help?
24/7 Support