Ethereum is the largest programmable blockchain and the second-biggest cryptocurrency after bitcoin. Where bitcoin is mainly digital money, ethereum is a platform that runs software called smart contracts, which power decentralized finance, NFTs, and thousands of applications. Its native coin is called ether, or ETH. The project was proposed by Vitalik Buterin along with several co-founders and launched in 2015 as an extension of the ideas bitcoin introduced, aiming to make blockchains programmable rather than limited to simple transfers.

Smart contracts: the core idea

A smart contract is code that runs exactly as written on the ethereum network, without a middleman. It can hold funds, enforce rules, and execute automatically when conditions are met, with the outcome visible and verifiable by anyone on the network. This is what lets developers build lending apps, exchanges, and games that no single company controls. Once deployed, a smart contract’s code generally cannot be altered, which is part of what makes its behavior predictable, though it also means bugs in the original code can be costly if discovered after launch.

Key facts

Gas and fees

Every action on ethereum costs a fee called gas, paid in ETH, which compensates the validators who process transactions and include them in a block. Gas rises when the network is busy, since block space is limited and users effectively bid for the next available slot. This fee model is part of what makes ETH useful beyond simple speculation, since it functions as the payment method for computation across the entire network, not just as a tradable asset.

Proof of stake and staking

Ethereum uses proof of stake, where validators lock up ETH as collateral to propose and confirm blocks, and can lose part of that stake if they act dishonestly or go offline for extended periods. This replaced the energy-intensive mining model ethereum originally launched with. Locking up ETH to help secure the network also means holders can earn rewards through staking, either by running a validator directly or through a staking service. For how consensus works in general, see our blockchain guide.

Ethereum’s ecosystem: DeFi, NFTs, and layer 2s

Ethereum hosts the largest ecosystem of decentralized finance applications, including lending markets, decentralized exchanges, and stablecoins that let users borrow, trade, and save without a traditional bank. It is also the network where NFTs, unique digital tokens representing ownership of art, collectibles, or in-game items, first gained mainstream attention. To address rising gas costs during busy periods, developers built layer-2 networks that process transactions separately and then settle the results back to ethereum, inheriting its security while offering lower fees. These layer-2s have become a central part of how the ecosystem scales.

Ethereum compared with bitcoin and solana

Ethereum sits between bitcoin and solana in how it approaches trade-offs. Bitcoin prioritizes simplicity and a long, uninterrupted security record over flexibility. Solana prioritizes raw transaction speed and low fees at the base layer. Ethereum instead leans on a large, established developer ecosystem and a layered scaling approach, pushing volume onto layer-2 networks rather than maximizing throughput on the base chain itself. Each design reflects different priorities rather than one network being strictly better than the others.

Risks to understand

Ether is volatile, and its price has moved through sharp rallies and drawdowns over its history, with no guarantee of future gains. Smart contract risk is specific to ethereum and similar platforms, since even carefully audited code can contain bugs that lead to lost or stolen funds, and once a flaw is exploited it often cannot simply be undone. Gas costs can also spike unpredictably during periods of high demand, which affects the cost of using applications built on the network, not just the price of ETH itself. Regulatory treatment of ether, staking services, and DeFi more broadly continues to evolve, and our crypto regulation overview tracks the current legal landscape.

How to own ethereum

Buy ETH on an exchange, such as those covered in our Coinbase review, and store it in a wallet you control rather than leaving it on the exchange long term. Start with how to buy crypto, then secure your holdings using our crypto wallets guide. For larger amounts, a hardware wallet like the ones in our Ledger review adds an extra layer of protection against online theft.

Frequently asked questions

What is the difference between bitcoin and ethereum?
Bitcoin is mainly digital money with a fixed supply and simple functionality. Ethereum is a programmable platform for building applications, with smart contracts at its core.

Why are ethereum gas fees so high?
Gas reflects demand for block space. When many people use the network at once, fees rise. Upgrades and layer-2 networks aim to reduce costs by processing transactions elsewhere and settling them back to ethereum.

Can I earn interest on ethereum?
Yes, through staking, which pays rewards for helping secure the proof-of-stake network. It carries price risk and, depending on the method used, some custodial risk as well.

Is ethereum controlled by one company?
No. Ethereum’s protocol is maintained by a decentralized community of developers, researchers, and node operators worldwide, and no single company can unilaterally change how the network operates.

What happened to ethereum mining?
Ethereum used proof-of-work mining at launch but moved to proof of stake in an upgrade known as the Merge, retiring energy-intensive mining in favor of validators who stake ETH instead.

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