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Many scientists hypothesize that the Archaea are the closest modern relatives of Earth's first living cells. Called "universal ancestors," these are the cells from which all other life is believed to have evolved. This hypothesis is based on two types of evidence. Genetic analyses indicate that the Archaea domain branches off of the phylogenetic tree at a point that is closest to the tree's root. Furthermore, it has been observed that many of the Archaea prefer to live in extremes of temperature, salt concentration, and pH-environmental conditions thought to be similar to those found on Earth over 3.5 billion years ago, when life first originated.

The Archaea share certain characteristics with Bacteria, others with Eukarya, and have some characteristics that are unique. For example, cells of the Archaea are structurally more similar to Bacteria, live predominantly as single cells, and have cell walls, although the walls do not contain the complex material called peptidoglycan that is a signature molecule of the Bacteria. While some Eukarya have cell walls, it is not a universal characteristic of that domain, and the Eukarya walls are composed of chitin or cellulose, neither of which occurs in cell walls of Archaea or Bacteria. Like the Bacteria, the Archaea lack a membrane-enclosed nucleus and their DNA exists in a circular form. On the other hand, their DNA is associated with histones, a characteristic of Eukarya, and their cell machinery (such as proteinsynthesizing enzymes and RNA polymerases) more closely resembles that found in the Eukarya. The lipids that comprise their membranes are unique, resembling neither the Bacteria nor the Eukarya.

Certain members of the Archaea are able to produce methane gas, another unique characteristic. Methane is one of the most important greenhouse gases. An Italian scientist named Alessandro Volta first discovered it as a type of "combustible air" over two hundred years ago. He trapped gas from marsh sediments and showed that it was flammable long before we knew that it was produced by members of the Archaea that lived in salt marsh sediment. Other important habitats for Archaea with this unique ability include the digestive tracts of animals and sewage sludge digesters.

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