Ethereum is a decentralized, programmable blockchain. Where Bitcoin is mainly digital money, Ethereum is a global computer that runs «smart contracts» — programs that execute exactly as written, without a company in the middle. Its native currency, ether (ETH), is used to pay for computation on the network and to secure it through staking.
Key takeaways
- Ethereum was proposed by Vitalik Buterin in 2013 and launched on 30 July 2015.
- Smart contracts power DeFi, stablecoins, NFTs, DAOs and thousands of other apps.
- Every action costs «gas», paid in ETH; part of each fee is burned.
- Since «The Merge» in September 2022, Ethereum runs on proof of stake.
How Ethereum works
Like other blockchains, Ethereum keeps a shared record of transactions. But it also stores state: account balances, contract code and data. Every node runs the Ethereum Virtual Machine (EVM), which executes contract code identically everywhere, so all nodes agree on the result.
Smart contracts
A smart contract is a program deployed to the blockchain. Once live, it runs automatically when someone interacts with it. A simple example: a contract that holds funds and releases them only when two out of three parties approve. More complex contracts power entire exchanges and lending markets — see What is DeFi?
Tokens
Ethereum’s token standards let anyone create new assets. ERC-20 is for interchangeable tokens like USDC or LINK; ERC-721 and ERC-1155 are for non-fungible tokens (NFTs).
What is gas?
Every operation on Ethereum consumes computational effort measured in «gas». You pay for gas in ETH. Since the 2021 London upgrade (EIP-1559), each block has a base fee that rises when the network is busy and falls when it’s quiet. The base fee is burned — permanently removed from supply — and users can add a priority tip to validators to get included faster.
Gas fees on Ethereum’s main layer can be expensive during busy periods. That’s why most everyday activity has moved to Layer 2 networks, where fees are often a few cents.
Proof of stake and The Merge
Ethereum originally used proof of work, like Bitcoin. On 15 September 2022, it switched to proof of stake in an upgrade known as «The Merge», cutting the network’s energy use by an estimated 99.9%+. Instead of miners, validators lock up (stake) ETH — 32 ETH to run a validator yourself — and are chosen to propose and attest to blocks. Honest validators earn rewards; dishonest ones can lose part of their stake («slashing»). Learn more in crypto staking explained and proof of work vs proof of stake.
Ethereum’s major upgrades
| Upgrade | Year | What changed |
|---|---|---|
| Frontier (launch) | 2015 | Mainnet goes live |
| London | 2021 | EIP-1559 fee market; base fee burning |
| The Merge | 2022 | Switch from proof of work to proof of stake |
| Shapella | 2023 | Staked ETH withdrawals enabled |
| Dencun | 2024 | «Blobs» (EIP-4844) made Layer 2 fees much cheaper |
What is Ethereum used for?
- Decentralized finance: lending, borrowing and trading without banks.
- Stablecoins: a large share of dollar-pegged tokens live on Ethereum and its Layer 2s — see what are stablecoins?
- NFTs and digital ownership: art, collectibles, tickets and in-game items.
- DAOs: organizations governed by token-holder votes.
- Tokenized real-world assets: treasury bills, funds and other assets represented on-chain.
Risks to understand
- Smart contract bugs: code can contain flaws that hackers exploit. Audits reduce but don’t remove this risk.
- Phishing and malicious approvals: signing the wrong transaction can drain your wallet. Read common crypto scams.
- Volatility: ETH’s price can swing dramatically.
- Competition: other smart-contract platforms compete for users and developers.
Frequently asked questions
Is Ethereum the same as ether?
Ethereum is the network; ether (ETH) is its native currency. People often use «Ethereum» to mean both.
Does Ethereum have a supply cap?
No fixed cap. New ETH is issued to validators, while part of every transaction fee is burned. Depending on network activity, total supply can grow slowly or even shrink.
Do I need 32 ETH to stake?
Only to run your own validator. Staking pools, exchanges and liquid staking protocols let you stake smaller amounts, each with their own trade-offs and risks.
Why are Ethereum fees so high sometimes?
Block space is limited. When demand spikes, the base fee rises. Using a Layer 2 network usually costs a fraction of mainnet fees.
