What is Ethereum?
Ethereum is a blockchain network that can run programs, not just record payments. It was proposed by programmer Vitalik Buterin in 2013 and launched in 2015 with a group of co-founders. The Ethereum Foundation, a non-profit, supports its research and development, but it does not control the network.
Its native coin is ether (ETH). You need ETH to pay the fees, called gas, for any action on the network.
How does it work?
Ethereum stores small programs called smart contracts. A smart contract is code that runs automatically when certain conditions are met, for example releasing funds when a payment arrives. Anyone can write one and deploy it to the network.
Since an upgrade known as The Merge in 2022, Ethereum uses proof of stake. Instead of miners, validators lock up ETH as a deposit to propose and check new blocks. If they act dishonestly or go offline, they can lose part of that deposit.
Part of each transaction fee is burned, meaning it is permanently removed, while new ETH is issued as a reward to validators. Whether total supply rises or falls depends on how busy the network is.
What is it used for?
Ethereum is the base layer for many crypto services:
- Stablecoins and other tokens, many of which are issued on Ethereum
- Decentralised finance (DeFi) apps for lending, borrowing and trading without a middleman
- NFTs, which are unique digital items such as art or tickets
- Layer 2 networks that bundle transactions and settle them on Ethereum
Because so many apps and tokens live on Ethereum, ETH is often used as a base currency inside DeFi. Holders can also stake ETH, directly or through a provider, to earn rewards for helping secure the network.
Key facts
- Launched: 2015
- Creator: Vitalik Buterin and co-founders; supported by the Ethereum Foundation
- Consensus: proof of stake (since 2022)
- Blockchain: its own network, Ethereum
- Supply: no fixed maximum
Explainer written by Finvane from official project documentation. It is not investment advice.