So you heard about cryptocurrency and have already researched what it is. You already know that there are different cryptocurrencies (tokens) meant for different things, such as Bitcoin with its "store of value" and USDC/USDT meant to represent USD on-chain. But now you hear that Ethereum has that game that you'd like to play, an NFT you'd like to buy, financial instrument you'd like to use, or any of the hundreds of great reasons to use Ethereum, and want to learn how to use it. This article will help you out with that.
First things first - let go of your preconceptions about what Ethereum is (no, there is no mining on Ethereum, and its energy use is lower than that of a village). Let's start from a blank slate, and let's not over-complicate it.
Simply put, Ethereum is programmable money. It allows you to enter into smart contracts and make use of your money without the need for an intermediary, such as bank. Here's an example: when you deposit money into a bank in order to earn interest, they can use that money to offer loans to people for a higher interest rate than they're sharing with you. With Ethereum, you can forgo the bank by lending your money directly through AAVE and other liquidity markets in order to earn a higher percentage. This is why you can often get a higher return on your USDC (token on Ethereum) than you can with your local bank. Additionally, sending ETH to somebody on the other side of the world costs almost nothing (as on writing this article).
So that's exciting, right? Well, not so fast; before you can use Ethereum, you need to learn a few key things.
1. In order to use blockchains such as Ethereum, you will need to have a wallet.
Wallets can live on your phone, your computer, or be extensions in your browser. For more information, refer to this great guide by Ethereum Foundation.
2. In order to use blockchains such as Ethereum, you need to pay a commission for most actions.
Each blockchain makes some compromise on either security, scalability, and/or decentralization (also called "blockchain trilemma"). Ethereum, until recently, was a victim of its success. Ethereum is very secure and highly decentralized (more so than, for example, Solana), but it was not able to achieve scalability - that is, it was used so much that it was very expensive to use the network. Thankfully, this was solved with L2s (more below) and blobs, which made using both Ethereum and L2 chains built on top of it very cheap.
3. L2 blockchains are blockchains built on top of Ethereum; they inherit the security of Ethereum while allowing for cheap transactions, and they do it by sending transactions to L1 in compressed batches. You can think of it in the following way. Imagine that you make a table in Excel that has the following:
Sender - X
Receiver - Y
Amount - 1
You email this Excel file to the bank and then it processes the transaction for you. Now, L2s, roughly speaking, send the same table to the "bank" (Ethereum mainnet), but instead of sending each transaction in a separate file, they send it in a single file looking like this:
Sender - X, XX, XXX, XXXX
Receiver Y, YY, YYY, YYYY
Amount - 1, 2, 3, 4
So it makes it more efficient and therefore cheaper. However, it comes at the expense of user experience.
4. In order to use L2s, you may have to use a bridge.
If you buy your Ether on a centralized exchange (Kraken, Coinbase, Binance, etc.) you will most likely have an option to transfer that Ethereum to multiple chains - Arbitrum, Optimism, Base, etc. Generally speaking, any of the chains offered by one of these big exchanges is fine and a new user wouldn't notice much difference. But if you're buying on an exchange that only offers withdrawals to Ethereum or you have already withdrawn your Ether to your own wallet and now want to move the funds to another chain because you found it aligns better with your values or there are incentives for using it, you will have to use a bridge. There's plenty of bridges - Across, Hop, Bungee, Jumper, etc., and they all work roughly the same. You send your funds to the bridge on one chain and receive them on the other chain, and the users that provide this opportunity get a small fee from you.
Additionally, in some wallets such as MetaMask, in order to find your funds on a chain that isn't Ethereum you will have to find the setting that allows you to switch (left top in case of MetaMask). In case the tokens that you are receiving are not extremely popular, you will also have to "import" the tokens to your wallet by providing the token's contract address in order to see them.
But this is more advanced. An article like this could never cover every case and issue that a new user would encounter. Thankfully, there are helpful communities out there that will guide you every step of the way if you simply ask. One such community is r/ethfinance and I highly recommend popping in to "Daily General Discussion" in case you have questions (just make sure you're posting in today's daily, not yesterday's - I've made that mistake).
But how do you actually buy that NFT or play that game that I talked about in the very beginning? Well, once you have a wallet and have transferred Ether to it from your centralized crypto exchange, you can simply open the website of the game, or the website of an NFT trading platform (you can explore NFT marketplaces and other Ethereum dApps through sites like this) and click "Connect wallet". It will ask you to sign to prove you own the wallet (this should be free), and then just use the website as you'd use it normally! You will get a pop-up to confirm a transaction only if you initiate it (like buying or selling), otherwise, the wallet will just be there, waiting for when you need it. It's seamless!
And that's all from me. I wish you luck exploring the Ethereum ecosystem - it's one of a kind.