Ethereum (ETH) Definition, Current Price and How It Works

Ethereum is a central building block of the economy developed around cryptocurrency.

Ethereum’s native token, Ether (ETH), is the second-most valuable cryptocurrency by market capitalization. And Ethereum’s underlying technology has been used to create many other high-profile projects, including additional cryptocurrencies, NFTs, and financial products.

Launched in 2015, Ethereum introduced functionality that Bitcoin does not offer. While Ethereum, like Bitcoin, can be used for peer-to-peer payments, Ethereum also allows developers to write applications that interact directly with its code.

Ethereum’s ascendence has not come without its hiccups. It remains one of the most expensive cryptocurrencies to use, thanks to high transaction fees that pay for the computing power to run the network. Transaction speeds also can be relatively slow. Several competing technologies, such as Cardano and Solana, have recently cropped up, promising to provide similar functionality more quickly or at a lower cost.

Now, Ethereum is at a pivotal moment

Ethereum.org. The Merge. Accessed Jun 2, 2022.

. Its developers are preparing for an operation known as “the merge,” which could add speed and efficiency by eliminating the reliance on energy-intensive and expensive digital mining to reward people who secure the network.

The success or failure of the merge could have vast implications for Ethereum and cryptocurrency in general.

How much does Ethereum cost?

Like most cryptocurrencies in recent months, Ethereum has fallen significantly off of all-time highs reached in 2021. You can view the current price for Ethereum below.

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NerdWallet rating 
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Fees

0.5% – 4.5%

varies by type of transaction; other fees may apply

Fees

0.5% – 3.99%

depending on payment method and platform

Will Ethereum recover?

Ethereum optimists believe that demand for Ethereum will rise over time, potentially pushing its price upward.

Because Ethereum is used in so many applications in the world of cryptocurrency, it’s possible that broad adoption of crypto could lead more people to use its technology, which could mean more people will need to buy Ethereum if they want to use products linked to crypto.

That said, anyone who tells you they can make a confident price prediction about Ethereum, or any other digital asset, is either fooling themselves or trying to fool you. Cryptocurrency has historically been an extremely volatile space, with dizzying highs followed by precipitous drops.

The price of Ethereum is often affected by more significant trends in the cryptocurrency market, which can be affected by government regulations globally, broader economic cycles, and other factors beyond the reach of any one asset — even a major player such as Ethereum.

It’s possible that cryptocurrency and its underlying blockchain technology will not achieve the broad adoption that its boosters hope. And even if it does, Ethereum may not beat out the emerging class of competitors for market dominance.

When deciding on Ethereum, it’s good to bring a balanced perspective and a healthy dose of humility. So here are some pros and cons you can consider when evaluating Ethereum.

Pros of Ethereum

Broad adoption within crypto: Ethereum is among a few projects with high levels of adoption. There are routinely more than 1 million transactions per day on the Ethereum network

The merge: This is a qualified “pro,” as Ethereum’s merge has not yet been completed. But if Ethereum can successfully move away from mining, it may help convince some crypto skeptics that blockchain technologies can work without a substantial environmental cost. Ethereum, like Bitcoin, currently uses a “proof-of-work” protocol to ensure that transactions on the network are recorded correctly. This process relies on mining, which expends massive computing power and uses vast amounts of energy. If the merge is successful, Ethereum will move to a “proof-of-stake” system in which people can verify transactions and earn rewards through a process known as staking. Proof-of-stake systems use much less energy. Also important: Ethereum’s developers believe the merge will help speed up their network.

Cons of Ethereum

Cost: The cost of a single transaction on the Ethereum network has, at times, exceeded $20. And while that may not be a considerable amount for a trade worth thousands of dollars, the fees for small transactions can sometimes be higher than the value of Ethereum changing hands. So while these transaction costs may not affect you very much if you’re simply holding ETH and not doing anything with it, the fees add up quickly if you want to use the Ethereum network.

Speed: Ethereum processes somewhere around a dozen transactions per second. That is dramatically slower than some other blockchains, and far slower from legacy technologies such as the Visa network, which can carry out 24,000 transactions per second

The author owned Ethereum at the time of publication.