The Ethereum blockchain was proposed in late 2013 by Vitalik Buterin, a Russia-born programmer who co-founded Bitcoin Magazine in 2011. Buterin saw that bitcoin's blockchain could be used to create more than just a digital currency. He envisioned a new way for decentralized applications (dapps) to share information through a peer-to-peer network. The ongoing development of the Ethereum blockchain is managed by a worldwide team of open-source programmers. Anyone may contribute to protocol upgrades, but overall changes are voted upon by the active ethereum community.

'Ethereum' generally refers to the blockchain network as a whole, while ETH and ETHER refer to the native currency.


The crowd sale distribution, commonly referred as a pre-mine, of Ethereum raised 31,529 BTC and ended in September 2014. The initial sale of ETH was conducted by a simple smart contract which made it possible for anyone to send BTC to the crowd sale contract address, and in exchange receive ETHER. The ETHER was then minted in the first block mined at the genesis of the Ethereum Blockchain.

While 60 million ETHER was created by people investing in the initial crowd sale, interested people could also mine ETHER using common desktop computers and graphics cards. This is an important difference between Ethereum and Bitcoin: Bitcoin has ultimately ended up being mined exclusively on Application Specific Integrated Circuits (ASICs) which have no other purpose than to mine BTC, while ETH is mined on consumer-grade hardware which can also be used for general computing purposes.

Initially, the amount of new ETH that were created via mining led to an overall inflation of 5 ETH per block mined. This was cut to 2 ETH over time but ultimately an additional 60 million ETH was mined bringing the total cap to 120 million ETH in circulation before proof of work was abandoned in favor of proof of stake. Unlike bitcoin there was no hard cap to amount of ETH that could ever exist, though Ethereum reached a total market cap of 121.3 million ETH and is now deflationary due to the fee burn mechanism introduced in EIP-1559.

EIP-1559 (Ethereum Improvement Proposal #1559) introduced a new fee structure to the Ethereum blockchain which burns ETH used as a transaction fee. An additional ETH tip goes directly to the block proposer that includes the transaction into the next block. This fee burn has the effect of lowering the overall amount of ETH in the ecosystem. Since the merge to proof of stake ETH inflation has dropped from ~3.60% to near 0% with some days, depending on network activity, entering negative issuance, which many in the space refer to as "going ultrasound". You can track network activity and ETH burn rates at Ultrasound.Money.

ETH as ultra-sound money

Sound currencies are those that maintain their value over time. A sound currency is usually backed by a commodity or a precious metal which has intrinsic value and can be used as a store of value. They also generally have a hard cap to the amount that can exist or otherwise be very difficult to produce. Gold is sound since it must be mined and is rare. Compare this to USD which can easily be printed by the Federal Reserve leading to near double-digit precent inflation. Many refer to Fiat currencies as "unsound-money".

Unsound currencies are money that are not backed by any tangible commodity or asset. They are issued by governments and can be used to purchase goods and services in the country where it is issued. The main problem with un-sound currencies is that they can lose their value over time due to inflation.

The meme of ETH being an ultrasound money stems from the fee burn mechanism which leads to negative issuance of the currency. The more ETH that is burned the less there is in the total supply which increases the currency value over time. This means that ETH can be thought of as a yield-bearing asset. Aside from that ETH has intrinsic value as the unit of activity on the Ethereum Virtual Machine.

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