What is ETH?

Ether (ETH) is the native cryptocurrency of the Ethereum blockchain and is used for many things on the network. It is the only form of payment accepted for transaction fees. When a user initiates a transaction, they must pay ETH for it to be recognized on the blockchain. This is also known as a gas fee, and depends on the amount of computing work required to execute the transaction and the level of demand for block space at the time. You can read more about this here. ETH is also the primary form of collateral in many DeFi (decentralized finance) lending markets. On the AAVE lending platform for example, depositing ETH gives users the highest Loan to Value (LTV) ratio (82.5%) and liquidation threshold (85%) of any of the supported assets. It is also the primary monetary unit of measurement of value in NFT marketplaces. The underlying Ethereum protocol creates the new ETH with each block as rewards for the miners at present. After the transition to Proof of Stake is completed in 2022, mining will end and ETH will be required to stake for validators to propose and validate new blocks. You can learn more about this here. ETH can also be destroyed and permanently removed from circulation. This is known as burning and occurs with each transaction as a portion of the ETH paid by users for gas fees gets destroyed with every block. Depending on network demand, some blocks burn more ETH than they create. After the transition to Proof of Stake, the issuance of new ETH with each block will decrease. Some analysts predict ETH will then become a deflationary asset as more ETH may be burned than created with every block.

For more information regarding burning click here.

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