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Just bought 2 ethereums on coinbase recently. What exactly did I purchase? I want to understand what the intrinsic value of an ethereum is in the long run...probably will hold on to them until the value increases significantly and then sell. But just wanted to know what is it that's being "bought" & "sold" on coinbase

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    Pedant's note: the currency/unit of value is ether (lowercase "e" as per the case for the "bitcoin" currency). "Ethereum" is the name of the platform/environment/blockchain. – Richard Horrocks Jun 11 '17 at 0:48
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To add a more abstract answer to compliment the answer on the practical uses of ETH...

I want to understand what the intrinsic value of an ethereum is in the long run...

ether (ETH) have value because the market says they have value. You're buying into something that's speculative, which at a given point in time will be worth a certain amount of fiat currency (i.e. dollars, euro, pounds).

...will hold on to them until the value increases significantly

While all currencies are effectively speculative, if tomorrow everyone decides ETH are worth nothing, they're worth nothing. They have value because currently the market says they have value (through supply and demand, or other factors).

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ETH is gas for the Ethereum blockchain, and used to power transactions with smart contracts. In lawyer-based legal systems (pre-Ethereum in many ways) you pay lawyers to execute contract clauses (and they set things into motion within the common law system or the court system), and with automated law on Ethereum, ETH is the gas that is paid to interact with smart contracts.

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In technical terms you bought a service of making an entry in the ledger saying that certain amount of some units has been moved between accounts. The technology behind this ledger makes sure that:

  • entries that would move units from an account can only be made by someone having access to the private key associated with this account
  • there is no way to move units from one account to another twice (no double spending is possible)
  • the whole ledger is maintained globally by a network of thousands of computers
  • there is no way any individual or organization can force changes in the ledger without consent of most of the participants in the network
  • programs executed by computers participating in the network are executed in the same order and have the same results on each and every computer participating in the network

The main utility of having access to an account with some money on it (ie. having the private key) is that it makes it possible to deploy and execute programs (so called "smart contracts") described above since the network is constructed in such a way that it costs some amount of units to execute programs.

A lot of people believe that because of the above features such an entry in this particular ledger (Ethereum) is worth a lot of money (today it is around 350$ per 1 ETH).

  • How much is "most"? – Jossie Calderon Jun 11 '17 at 9:00
  • It is probabilistic (so the chance grows with the number of cheating nodes) In general - 51% (google for "51 attack") – Michał Kłeczek Jun 11 '17 at 9:18

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