Intro to Ether

Prerequisites

Before diving into this guide, we recommend familiarizing yourself with the basics of Ethereum.

What Is a Cryptocurrency?

A cryptocurrency is a digital medium of exchange secured by blockchain-based ledger technology. Unlike traditional currencies, cryptocurrencies operate without centralized control, relying instead on decentralized validation mechanisms.

Key characteristics:

Medium of exchange: Widely accepted for goods/services.
Blockchain-based ledger: Transparent and tamper-proof transaction records.
Decentralization: Eliminates reliance on trusted third parties.

Bitcoin (2009) pioneered this space, inspiring thousands of other cryptocurrencies across different blockchains.

What Is Ether?

Ether (ETH) is Ethereum’s native cryptocurrency, serving multiple critical functions:

Transaction fees: Pays for gas fees on Ethereum.
Block validation: Required for staking post-The Merge.
Collateral: Backs loans in decentralized finance (DeFi).
NFT trading: Primary currency in marketplaces.

Ether also regulates Ethereum’s computing resources by pricing transactions via gas fees, preventing network spam. For example, an infinite-loop transaction would exhaust its paid ether, halting execution automatically.

👉 Learn more about Ethereum’s gas mechanics

Despite technical distinctions, "Ethereum’s price" commonly refers to ether’s market value.

Minting Ether

New ether enters circulation through block rewards, distributed as:

Block proposals: Validators earn rewards for adding blocks.
Epoch checkpoints: Validators receive rewards for consensus-related activities.

The protocol controls issuance, with no user-minted ether. Approximately 1/8 of rewards go to block proposers; the rest is shared among active validators. Proposers also earn transaction tips and MEV income—recycled ether, not new issuance.

Burning Ether

Ether is permanently removed (burned) to offset inflation:

Base fee destruction: A portion of gas fees burns per transaction.
Dynamic offset: High-demand blocks may burn more ether than they mint.

Burning the base fee prevents validator manipulation (e.g., free self-transactions or off-chain refunds), ensuring a fair fee market.

Ether Denominations

Ether’s divisibility supports microtransactions:

| Unit | Value (ETH) | Use Case |
|-------|------------|-----------------------|
| Wei | 10⁻¹⁸ | Technical calculations|
| Gwei | 10⁻⁹ | Gas fee quoting |

👉 Convert ETH units easily

Transferring Ether

Transactions include a value field specifying wei-denominated transfers between addresses. Transferred ether funds smart contract execution when recipients are contracts.

Querying Ether Balances

Check any address’s balance via:

Etherscan (e.g., Ethereum Foundation’s holdings).
Wallet apps or direct node queries.

Balances display in wei by default.

FAQ

1. Can I mine ether after The Merge?

No. Ethereum shifted from proof-of-work (mining) to proof-of-stake (validating). Validators now earn ether via staking.

2. Why does ether burn?

Burning reduces supply inflation and prevents validator exploitation of transaction fees.

3. What’s the smallest ether unit?

Wei (1 ETH = 10¹⁸ wei).

4. How do gas fees work?

Users pay ether based on computational demand and network congestion. Fees adjust dynamically.

5. Is ether inflation fixed?

No. Issuance depends on validator activity, with burns counteracting new supply.