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Analyzing Market
Glossary

Ethereum

Ethereum is a leading smart-contract platform, launched in 2015. Where Bitcoin focuses on being digital money, Ethereum is a programmable blockchain on which developers deploy smart contracts and decentralized applications.

How it works

Ethereum runs a shared virtual machine that executes contract code identically on every node. Using the network — sending transactions or running contracts — requires paying gas fees in its native asset, ether. In 2022 Ethereum switched its consensus from proof of work to proof of stake, sharply reducing its energy use.

Why it matters

Most of decentralized finance, NFTs, stablecoins and DAOs were pioneered on Ethereum, and its token standards became industry defaults. To handle demand at lower cost, much activity now happens on Layer 2 networks that settle back to Ethereum.

Example

An ERC-20 token and most NFTs are created by smart contracts deployed on Ethereum or on chains compatible with it.

Ethereum: Frequently Asked Questions

How is Ethereum different from Bitcoin?
Bitcoin focuses on being digital money, while Ethereum is a programmable blockchain on which developers deploy smart contracts and decentralized applications. Ethereum runs a shared virtual machine that executes contract code identically on every node. Most decentralized finance, NFTs, stablecoins, and DAOs were pioneered on Ethereum, and its token standards became industry defaults.
What changed when Ethereum moved to proof of stake?
In 2022 Ethereum switched its consensus mechanism from proof of work to proof of stake. Instead of miners competing with computing power, validators secure the network by staking ether. The main practical effect was a sharp reduction in the network's energy use, since proof of stake does not rely on energy-intensive mining.
Why do people talk about Layer 2 networks for Ethereum?
Demand on Ethereum can push gas fees high, making transactions expensive during congestion. To handle activity at lower cost, much of it now happens on Layer 2 networks that process transactions separately and then settle back to Ethereum. This lets users transact more cheaply while still relying on Ethereum's security as the base layer.
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