What Is Ethereum?
If Bitcoin is digital money, Ethereum is a global computer that anyone can program. Launched in 2015 by Vitalik Buterin and a team of co-founders, it is the second largest cryptocurrency and the settlement layer for most of the crypto economy. Check the live Ethereum price here.
Smart contracts in one sentence
A smart contract is a program that lives on the blockchain and executes automatically when its conditions are met. No lawyer, no bank, no company that can change its mind. If the code says a loan unlocks when you repay it, that is what happens.
What people build on it
- Lending and trading. Most of decentralised finance runs on Ethereum.
- Stablecoins. The bulk of dollar-pegged tokens are issued on Ethereum. See stablecoins explained.
- NFTs and digital ownership. Read what are NFTs.
- Layer-2 networks. Faster, cheaper chains that settle back to Ethereum.
What is ETH used for?
ETH is the fuel of the network. Every action, from sending tokens to minting an NFT, costs a fee paid in ETH, known as gas. Gas rises when the network is busy and falls when it is quiet. Since 2022 Ethereum has run on proof of stake, which means holders can lock up ETH to help secure the network and earn rewards. Our guide on staking explains how that works.
Ethereum versus Bitcoin
Bitcoin aims to be sound, scarce money and deliberately keeps its features minimal. Ethereum aims to be programmable infrastructure and changes far more often. Neither replaces the other, and many investors hold both. You can compare them side by side on our BTC vs ETH page.
Things to watch out for
Smart contracts are only as safe as their code. Bugs and exploits have cost users billions over the years. Stick to well established, audited applications, and never approve a contract you do not understand. Fees can also spike sharply during busy periods, which makes small transactions uneconomic on the main network.
Frequently Asked Questions
What are gas fees?
Gas is the fee you pay to have the Ethereum network process your transaction. It is paid in ETH and rises when demand for block space is high. Layer-2 networks exist mainly to make these fees much cheaper.
Does Ethereum have a supply limit?
No fixed cap like Bitcoin. However a portion of every fee is burned, so when the network is busy more ETH can be destroyed than created, making supply flat or slightly shrinking.
Is Ethereum still using mining?
No. Ethereum switched from proof of work to proof of stake in September 2022, an upgrade known as the Merge, which cut its energy use by more than 99 percent.