The name of the currency used within Ethereum is Ether. It is used to pay for computation within the EVM which is done indirectly by purchasing gas for ether. The smallest denomination aka base unit of ether is called Wei.

ETHER SUPPLY

The Issuance Model in Ethereum

Ether (ETH), the crypto fuel that powers distributed applications on the Ethereum platform, will be issued at a constant annual linear rate via the block mining process. This rate is 0.3 times the total sum of ETH amount that will be purchased in the pre-sale.

Though the issuance of ETH is in a fixed amount each year, the rate of growth of the monetary base is not constant.  It decreases every year making ETH a disinflationary currency. 

It is expected that the amount of ETH that will be lost each year caused by transmissions to addresses which are no longer accessible is evaluated to be in the order of 1% of the monetary base. ETH may be lost because of the death of the owner without transmission of private keys, loss of private keys, or deliberate destruction by sending to an address that never had an associated private key generated.

If it is assumed that Ethereum sells 40,000 BTC worth of ETH in the pre-sale, and that, the average price is 1500 ETH/ BTC, 60,000,000 ETH will be created in the genesis block and assigned to purchasers. Every year, in perpetuity, 18,000,000 ETH will be issued through the mining process.  Taking into account both creation of new ETH and loss of existing ETH, in the first year, this represents a monetary inflation rate of 22.4%. In the second year, the rate drops to 18.1%. By the end of the tenth year, the rate is 7.0%. In year 38, it hits 1.9%. And in the 64th year, the level of 1.0% is reached.

Figure: Amount of ETH in existence (dark green curve) on the left axis. Monetary base inflation rate (light green curve) on the right axis. Years on the horizontal axis.

By approximately 2140, the issuance of BTC ceases and since some BTC will likely be lost each year, the monetary base of Bitcoin is expected to start shrinking at that point.

At around the same time, the expected rate of yearly loss and destruction of ETH will balance the rate of issuance.  Under this dynamic, a quasi-steady state is reached and the amount of extant ETH no longer grows. The prices will be in a deflationary regime if the demand for ETH is still growing at that point due to an expanding economy.  This is not an existential problem for the system since ETH is theoretically infinitely divisible. The pricing mechanisms will adjust and the system will operate smoothly as long as the rate of price deflation is not too rapid.   

Note that while the monetary inflation remains greater than zero for many years, price levels are dependent on supply and demand, but not totally controlled by the rate of issuance (supply).  Over time, it is anticipated that growth of the Ethereum economy will significantly outpace the growth of the supply of ETH, which could lead to an increase in the value of ether with respect to legacy currencies and BTC.

One of Bitcoin’s great value propositions was the algorithmically fixed total issuance of the currency which mandated that only 21,000,000 BTC will ever be created.  In a time of profligate legacy, currency printing in an exponentially doomed attempt to patch over the fact that there is too much debt in the global economic system (with more debt), the possibility of a universally accepted cryptocurrency that can serve inevitably as a relatively stable store of value is attractive.  Ethereum recognizes this and seeks to emulate this core value proposition.

Ethereum also recognizes that a system intended to serve as a distributed, consensus-based application platform for worldwide financial and social systems, must firmly emphasize inclusiveness. One of the many ways intended to foster inclusiveness is by maintaining an issuance system which possesses some churn.  New participants in the system will be able to purchase new ETH or mine for new ETH whether they are living in the year 2015 or 2115. The constant issuance, particularly in the early years, will probably make using ETH to build businesses in the Ethereum economy more rewarding than hoarding speculatively.

Below are few of the links that tell about the Ether supply.

GETTING ETHER

In order to obtain Ether, one needs to either-

  • become an Ethereum miner or
  • trade other currencies for Ether using centralized or trustless services, or 
  • use the user-friendly Mist Ethereum GUI Wallet.

Trustless Services

Note that the Ethereum platform is special in that the smart contracts enable trustless services that obviate the need for trusted third parties in a currency exchange transaction, ie. disintermediate currency exchange businesses.

SENDING ETHER

Sending ether via a graphical interface is supported by the Ethereum wallet.

Ether can also be transferred using the geth console.

> var sender = eth.accounts[0];
> var receiver = eth.accounts[1];
> var amount = web3.toWei(0.01, “ether”)
> eth.sendTransaction({from:sender, to:receiver, value: amount})

 

GAS AND ETHER

Gas is a unit that measures the amount of computational effort that it will take to execute certain tasks. Each and every single task that takes part in Ethereum, be it a simple transaction, or a smart contract, or even an ICO takes some amount of gas. Gas is what is used to calculate the amount of fees that need to be paid to the network in order to execute an operation. Gas Price is implemented in terms of Ether. If the cost of ether goes up, the Gas Price in terms of ether should go down to keep the real cost of Gas the equivalent.

Gas has various terms associated with it: Gas Prices, Gas Cost, Gas Limit, and Gas Fees. The principle behind Gas is to have a steady value for how much a transaction or computation costs on the Ethereum network.

ONLINE WALLETS, PAPER WALLETS, AND COLD STORAGE

To know more about this refer to this article.

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