A beginner's guide to Ethereum

Key takeaways:

• Ethereum is a programmable blockchain that allows you to interact with an ecosystem of decentralized applications. Ethereum’s native virtual currency is Ether (ETH).
• Ethereum introduced smart contracts, pieces of code that allowed “programmable” money and applications to be built on top of the blockchain.

What is Ethereum?

Launched in 2015 by Vitalik Buterin, the Ethereum blockchain is a global software platform that allows users to hold virtual currencies, transact with them, and deploy decentralized applications.

Ethereum was the first to introduce an innovation called smart contracts that allowed “programmable” money and applications. Smart contracts are digital agreements deployed on the blockchain that automatically execute when pre-defined conditions are met.

Let’s understand this with an example — say you’re looking to take a loan from your bank. With a traditional bank, you’ve got to go through credit checks, fill out a bunch of paperwork, and deal with complex repayment terms. But not with DeFi.

With DeFi, and smart contracts, you can get a loan anytime from anywhere without the need for approval from a central authority like a bank.

What is ETH?

Ether (ETH) is the native currency of the Ethereum blockchain. Every transaction you make on the Ethereum network requires transaction fees as you’re using the network’s resources. These are called gas fees. Gas fees are distributed amongst network participants as rewards for dedicating their computing power to keep the network running.

ETH is also used to transfer value between users of the blockchain. For instance, if you provide a service to a company, you can opt to use ETH as a payment method. Once you fulfill the agreement, the company will send you the set amount of ETH to your wallet.

What are ERC-20 tokens?

ERC-20 tokens are the standard for creating fungible tokens or “digital currencies” on the Ethereum blockchain. Typically, ERC-20 tokens belong to a decentralized application — applications with smart contracts as their backend.

ERC-20 tokens are “currencies” that are individual to each decentralized application and power the app economy for that application. While they all run on the Ethereum blockchain and can be swapped with each other, they are distinctly different.

What can you do on Ethereum?

Since Ethereum is a programmable blockchain, every application you use can have a web3 counterpart. You can have a decentralized avatar in the metaverse, conduct cross-border payments without a banking app, or store files on the blockchain.

Here are some of the popular ways you can use decentralized applications:

Swap tokens with decentralized exchanges

Decentralized exchanges (or DEXs) are peer-to-peer exchanges that allow you to trade tokens quickly, easily, and without any KYC. DEXs became popular due to the shortcomings of custodial centralized exchanges (CEXs) like Binance or Coinbase. CEXs act as a “custodian” or guardian for your crypto assets, similar to banks. However, that also means you are entrusting your money to a third-party — which can restrict or limit your access to your assets in case of problems.

Meanwhile, DEXs are non-custodial exchanges, which means only you have full control over your cryptoassets.

Let’s look at the most popular ways to swap your cryptocurrencies.

Phantom in-app swapper

Phantom’s in-app swapper allows you to swap ETH directly with other ERC-20 tokens within the app. If you don't have ETH, you can purchase it directly in Phantom using MoonPay, Coinbase Pay, Robinhood Connect, or PayPal. Once you have the ETH in your Phantom wallet, you can proceed to trade it for popular cryptocurrencies within the app.

Uniswap

Uniswap is a popular decentralized exchange that allows you to trade ERC-20 tokens. Plus, you can earn rewards for providing liquidity to the platform by depositing token pairs into the liquidity pool.

To use Uniswap, navigate to the exchange’s app, click the “connect” button on the right-hand corner, and click MetaMask as the wallet provider. You’ll need to confirm the connection on your Phantom wallet — this is an extra security step to ensure safe connections. After connecting your wallet, you can swap your tokens or provide liquidity.

Participate in DeFi

Want to take a loan by just providing collateral and bypassing any paperwork? Want to make your money work for you? Welcome to the world of decentralized finance (DeFi).

As the leading smart contract chain, Ethereum is home to several DeFi applications that allow users to borrow, lend, trade, and invest in various cryptocurrencies.  The growth of DeFi has been tremendous, with the total value of assets deposited into DeFi reaching $4 billion at its peak in 2021, and a 20X increase in the number of DeFi projects built on Ethereum.

Phantom allows you to navigate DeFi easily. You can connect with the world of DeFi with just a few clicks.

AAVE

AAVE is the largest lending and borrowing protocol with a diverse range of assets, supporting over 30 Ethereum-based assets like USDT, USDC, and DAI. You can provide liquidity on AAVE to earn a passive income, or borrow by putting up collateral. AAVE also has a governance token which is used for voting and can be staked to earn rewards.

Buy and trade your favorite NFT collections

NFTs are uniquely identifiable tokens on the blockchain that can represent ownership over a range of physical and digital objects. This includes profile pictures, social access cards, investments, in-game avatars, and real estate.

NFTs rose in popularity as an investment in 2021, with some NFTs selling for millions of dollars. Projects like Bored Ape Yacht Club (BAYC) and CryptoPunks have stood the test of time.

Here are some NFT marketplaces worth exploring:

OpenSea

Launched in 2017, OpenSea is one of the biggest NFT marketplaces for Ethereum. It’s a great place for beginners to buy and trade NFTs.

To connect with OpenSea, and explore NFTs, click “connect your wallet” in the top right-hand corner of OpenSea’s website and click “Phantom.” After that, you’ll be prompted to accept the terms and conditions and sign the transaction to connect your Phantom wallet.

Blur

Blur is one of the newer NFT marketplaces on the Ethereum blockchain, but it has quickly become the marketplace of choice for hardcore traders. Its success can be attributed to two core things: strategic token drops and trader-friendly policies, such as no marketplace fees and optional creator royalty fees. The bulk of user activity came during the token launch campaigns – where the marketplace distributed 400M worth of tokens to early users of its marketplace.

NFT collections worth exploring

Azuki

An anime inspired project, Azuki has quickly risen to fame since it was launched in January 2022. Holders of the Azuki NFT get access to the project’s metaverse called the “The Garden” — a social hub where holders can interact with each other. The project keeps adding elements to its metaverse, such as an NFT drop, Beans, and an NFT-backed Golden Skateboard sale. Azuki was the first project to introduce a concept called the “Physically Backed Token” (PBT), where users could burn their NFTs to claim a real-life gold-plated skateboard.

World of Women (WoW)

In a heavily male-dominated crypto industry, World of Women (WoW) champions diversity, featuring 10,000 powerful and diverse women. While it started as a profile picture (PFP) project in July 2021, WoW has expanded to the real world with multiple media endeavors with feature films and Billboard awards. Owning a WoW NFT gives you access to exclusive airdrops, art clubs, and member-only events.

OMGKirby

Third on our list, OMGkirby is a novel music and art-focused NFT project. The project has 3,000 unique songs represented as NFTs.

Each song and its accompanying visuals were made by a collaboration between a decentralized anonymous musician, OMGkirby, and a generative algorithm. NFT Holders will have complete ownership of the song in its entirety, including Master Recording and Publishing rights. This means you can use the song however you want if you just own the NFT.

The Future of Ethereum

As the blockchain that introduced smart contracts, Ethereum is the market-leader in dApp user activity and transaction volume. However, it's widely criticized for its high transaction fees in periods of increased activity. To address this, Ethereum went through several planned upgrades to the network, and scaling solutions like Polygon are gaining momentum. As Ethereum continues to improve, your Phantom wallet will help you interact with every phase of the ecosystem seamlessly.

Looking to get started? Download Phantom and read our setup guides to start exploring the exciting world of Ethereum.