Ethereum is a public blockchain that runs programs, called smart contracts, in addition to transferring value. It was proposed by Vitalik Buterin and launched in 2015. Its native currency is Ether (ETH), used to pay for transactions. Ethereum is the foundation for most of decentralised finance, tokens and NFTs, and its technology has been adopted by many other networks.
How Ethereum Works
Smart contracts are written in languages such as Solidity and executed by the Ethereum Virtual Machine (EVM) on every node in the network. Every transaction costs gas, paid in ETH, which compensates validators and protects the network against spam. Since "the Merge" in September 2022, Ethereum uses proof of stake: validators lock up ETH to propose and confirm blocks, instead of mining with energy-intensive hardware.
Ethereum and Layer 2
Ethereum mainnet prioritises security and decentralisation, which makes transactions relatively expensive at busy times. Layer 2 networks such as Arbitrum, Optimism and Base process transactions off mainnet and settle them on Ethereum, which keeps fees low while inheriting much of Ethereum's security. Many are built as rollups, some on the OP Stack.
What Is Built on Ethereum
- Tokens such as stablecoins and governance tokens, following standards like ERC-20.
- DeFi: lending, trading and yield without traditional intermediaries.
- NFTs, DAOs, on-chain identity and payments.
Because the EVM is the de facto standard, code written for Ethereum usually also runs on other EVM chains. See EVM development and smart contract development.
Frequently Asked Questions
What is the difference between Ethereum and Ether?
Ethereum is the network; Ether (ETH) is its native currency, used to pay transaction fees and for staking.
What is the difference between Ethereum and Bitcoin?
Bitcoin focuses on being digital money. Ethereum is a general-purpose platform for programmable contracts, of which payments are one use.
Why are Ethereum fees sometimes high?
Block space on mainnet is limited, so fees rise when demand is high. Layer 2 networks offer much lower fees for most applications.