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Many don’t think of “cryptocurrency” when they think of the Ethereum blockchain, yet at its inception using its ether for payments was one of its primary uses.
Ethereum’s Ether Is Used For Payments
In order to understand how ether (ETH) was — and is — used, it’s important to know what a cryptocurrency is. A cryptocurrency is a digital currency that uses a blockchain to transport digital assets between parties using a blockchain protocol. The cryptocurrency, or coin, is the asset that is transported on the blockchain.
It uses cryptography to securely send an asset that can only be received by the recipient. A portmanteau (cryptography + currency), cryptocurrency transactions are first encrypted (made secret), sent, and then decrypted (decoded) by the recipient. The root world “crypto” comes from kryptós, a Greek word that can mean “secret,” “hidden,” or “not perceived immediately or with certainty.”
Ether (or ETH) is the cryptocurrency found on the blockchain. Let’s look at how ETH compares with other popular and established cryptocurrencies.
ETH, BTC, and Other Cryptocurrencies
Bitcoin itself was the first cryptocurrency and is still used almost exclusively as a cryptocurrency-focused blockchain . To clear up any confusion, while Ethereum’s cryptocurrency is called ether, some blockchains and their associated cryptocurrency use the same name. For example, Bitcoin is both a payment system (the blockchain protocol itself) and a cryptocurrency (limited to 21 million bitcoin).
Other notable cryptocurrencies include bitcoin cash (BCH), litecoin (LTC), dash (DASH), monero (XMR), and zcash (ZEC). These cryptocurrencies are sent and received on their own bespoke blockchains.
The Uses of Ether (ETH): Then and Now
As a cryptocurrency, ether is simply used as an alternative way to purchase things that are more commonly purchased using a fiat currency such as the U.S. dollar (USD) or euro (EUR). ETH has been used to purchase everything from coffee to houses; As long as the seller is willing to accept it (and this willingness has been trending upwards), there is really nothing that can’t be purchased with it.
More common in the mid-to-late 2010s, ETH was also often used as a trading pair on centralized cryptocurrency exchanges (CEXs). Unlike today, there wasn’t always an option to trade crypto for fiat or the stablecoins that track their value like tether (USDT), USD coin (USDC), or Binance USD (BUSD). “Crypto for crypto” was the only trading option; common trading pairs included ETH/BTC and ETH/BCH, among others.
However, it's worth noting that using ETH for payments and trading incurs a small transaction fee (also paid in ETH). This is used to both support the Ethereum network and discourage malicious spam transactions that could clog the network. As a result, while payments and trading are still relevant use cases for this cryptocurrency, ETH is perhaps more commonly used to execute more computationally intensive tasks and programs.
ETH Is the Lifeblood of the Ethereum Protocol
Beyond the aforementioned uses, ETH is used to power all the other things that are possible on Ethereum. Conceived to do much more than Bitcoin, Ethereum was designed to be a borderless, decentralized, and censorship-resistant supercomputer. For this reason, you will find smart contracts (programs that execute on the blockchain) and dApps (decentralized applications) on Ethereum that also require ETH fees. ETH fees for these programs are often referred to as gas fees and are typically denoted in gwei (a denomination of ETH).
Ether is also required to pay for minting, or creating, its popular ERC-20 fungible tokens and its ERC-721 non-fungible tokens (NFTs), among others. With the popularity and demand for Ethereum-based NFTs, the buying and selling of them on NFT marketplaces is perhaps how ETH is now most widely used as a cryptocurrency.
When these NFTs are bought and sold, they are typically priced in ETH — not dollars. When you read headlines like “CryptoPunk sells for $6 million” or “Bored Ape sells for $3 million,” the writer is merely converting the purchase (say 2,000 ETH) into dollars to put it in context. If you want to buy an Ethereum NFT, you’ll likely need the cryptocurrency ether — fiat isn’t accepted.
- Ether (or ETH) is the cryptocurrency found on the Ethereum blockchain.
- Ether is required to pay for minting, or creating, its popular ERC-20 fungible tokens and its ERC-721 non-fungible tokens (NFTs), among others.
Ready to buy some ETH? We'll show you how to open a wallet on MetaMask.