If you’ve been following our other blog posts, you have likely noticed that we discuss several different types of cryptocurrency. While the most recognizable among these is Bitcoin, other cryptocurrencies are gaining in popularity as well. One of these is Ethereum. Although we have discussed Ethereum on this blog before, this piece will take a more in-depth look at Ethereum and how it works in the cryptocurrency space.
What is Ethereum?
Launched in 2015, Ethereum is a technology that allows users to send cryptocurrency to anyone. It is an open-sourced, programmable blockchain that is part of the decentralized internet movement.
What does this mean?
Many cryptocurrencies like Bitcoin and Ethereum let you spend and buy digital money without payments to banks or other third-party providers. Ethereum is different. It is programmable, so it can be used for other digital assets. This makes Ethereum a marketplace not just of Ether, but of financial services, games, and apps.
If you use Ethereum, they cannot access or steal your data and you are free from centralized control. This is otherwise known as decentralized finance. Decentralized finance refers to financial products that are open to anyone who can use Ethereum.
Three are no market closings or centralized institutions to block payments or purchases. Ethereum aims to be accessible to all by being open to anyone with an internet connection.
What is Ether (ETH)?
Ether is the cryptographic token used in the Ethereum marketplace. It is traded as a digital currency (like Bitcoin.) As such, it is secured by cryptography, open to anyone, and available in flexible amounts.
Ether can be sent peer-to-peer like cash, doesn’t require a third party to process or approve of transactions, and helps power Ethereum. Anytime you send ETH or use an Ethereum application, a small fee is paid to use the service.
This small fee is used to keep Ethereum secure for its users and decentralized. In simplified terms, when you are spending Ether (cryptocurrency), you are also powering and supporting Ethereum (programmable blockchain).
Currently, Ether is the second-largest virtual currency on the market and only takes seconds to acquire. There are also more units (or tokens) in circulation than Bitcoin, and there is no limit to the number of tokens that can be mined each year. Due to its quick gain in popularity by investors, the value of Ether has quadrupled in 2021 alone!
What Else Can I Do With Ethereum?
Understanding what you can do with Ethereum and how Ether is involved may seem complicated. In reality it's pretty simple. It can be used a lot like money except it lets you purchase items without traditional financial regulations. You can use it for crowdfunding, app creation, loan collateral, or even to buy insurance. The goal of Ethereum is to allow its users anonymity and security in a decentralized space on the internet.
Can I Make Cryptocurrency Donations With Ethereum?
The short answer is yes! There are now many ways you can make a cryptocurrency donation to charitable organizations. We have discussed cryptocurrency donation before and how it benefits the charitable organization. The most important part of this process is planning when to donate to be most advantageous to you and the organization. For this reason, we recommend making your cryptocurrency donations as part of your overall tax planning.
Randy Tarpey CPA