Ethereum is a decentralised blockchain that runs programs called smart contracts, which execute automatically without a company in charge. Its native currency, ether (ETH), pays transaction fees and secures the network through staking. Launched in July 2015, Ethereum hosts most wallet.">decentralised finance apps, stablecoins and NFTs.
If Bitcoin is digital money, Ethereum is often described as a shared global computer. This guide explains what Ethereum is, how it works, the key dates of its history, what it is used for, its risks and how to take your first steps safely.
What is Ethereum, exactly?
Ethereum is three things at once. It is a network of thousands of computers that keep the same copy of a blockchain. It is a platform on which anyone can deploy code that others can use. And it has a currency, ether, which you need to pay for every action on the network.
The project was proposed in a whitepaper written in late 2013 by Vitalik Buterin, then a 19-year-old programmer who wrote about Bitcoin. His idea: instead of a blockchain that only tracks payments, build one with a full programming language, so developers can create any kind of application on it. You can find the main facts about the coin on our Ethereum (ETH) page.
How does Ethereum work?
Accounts and transactions
Ethereum has two kinds of accounts. User accounts are controlled by a private key held in a wallet. Contract accounts are controlled by their code. A transaction can send ETH from one account to another, or call a function of a contract, for example “swap 100 USDC for ETH”.
Smart contracts and the EVM
A smart contract is a program stored on the blockchain. Once deployed, it runs exactly as written, and anyone can check its code. Every node executes contracts in the same environment, the Ethereum Virtual Machine (EVM), so all copies reach the same result. Many other blockchains have adopted the EVM, which is why the same wallet often works across several networks.
Gas: paying for computation
Every operation costs a small amount of computation, measured in “gas” and paid in ETH. These gas fees prevent spam and reward the validators who process transactions. Since the London upgrade of 5 August 2021, each transaction pays a base fee that is burned, destroyed for good, plus an optional tip. When the network is busy, the base fee rises.
Proof of stake and validators
Since 15 September 2022, Ethereum is secured by proof of stake. Validators lock up ETH as collateral (32 ETH to run a validator on your own), then propose and confirm blocks. A new slot opens every 12 seconds. Validators earn rewards for honest work and lose part of their stake, a penalty called slashing, if they break the rules. Smaller holders can join through staking pools or platforms, with extra risks.
Layer 2 networks
Ethereum’s main chain handles a limited number of transactions, so fees can spike. Layer 2 networks such as Arbitrum, Optimism and Base process transactions off the main chain, then post compressed data back to Ethereum for security. Upgrades in March 2024 (Dencun) and December 2025 (Fusaka) made this data much cheaper to publish, which lowered fees on these networks.
Supply of ether
Unlike bitcoin, ether has no fixed maximum supply. New ETH is issued to validators, while the burned base fees remove ETH from circulation. Depending on network activity, total supply can rise or fall slightly.
Ethereum and Bitcoin: the main differences
- Purpose: Bitcoin focuses on being sound digital money; Ethereum is a general platform for applications.
- Supply: bitcoin is capped at 21 million; ether has no fixed cap, and part of the fees is burned.
- Security: Bitcoin uses proof of work and miners; Ethereum uses proof of stake and validators.
- Speed: a Bitcoin block arrives about every 10 minutes; an Ethereum slot every 12 seconds.
- Governance: both evolve through open proposals, but Ethereum changes faster, with upgrades roughly once or twice a year.
A short history of Ethereum
The full list of upgrades is published on the ethereum.org forks timeline. The milestones that matter most:
- Late 2013: Vitalik Buterin circulates the Ethereum whitepaper.
- July to September 2014: a public crowdsale raises about $18 million worth of bitcoin to fund development.
- 30 July 2015: launch of the network, a first version named Frontier.
- June to July 2016: an attacker drains millions of ETH from The DAO, an investment contract. On 20 July 2016 the community reverses the theft with a hard fork; those who refused kept the original chain, now called Ethereum Classic.
- 2017: the boom of initial coin offerings (ICOs), most of them built with Ethereum’s ERC-20 token standard.
- 1 December 2020: launch of the Beacon Chain, Ethereum’s proof-of-stake chain, running in parallel at first.
- 15 September 2022: the Merge. Ethereum switches to proof of stake and cuts its energy use by about 99.95%, according to the Ethereum Foundation.
- 12 April 2023: the Shapella upgrade lets stakers withdraw their ETH.
- 13 March 2024: Dencun introduces “blobs”, cheap data space for layer 2 networks.
- 23 July 2024: spot ether exchange-traded funds start trading in the United States.
- 7 May 2025: Pectra raises the maximum stake per validator to 2,048 ETH and lets ordinary accounts use smart-wallet features.
- 3 December 2025: Fusaka activates PeerDAS, a technique that lets nodes check rollup data without downloading all of it.
As of October 2026, developers are testing the next upgrade, Glamsterdam, which has no confirmed mainnet date yet.
What is Ethereum used for?
- Decentralised finance (DeFi): lending, borrowing and trading through protocols that run on smart contracts, without a bank or broker.
- Stablecoins: a large share of dollar-pegged tokens such as USDC and USDT circulate on Ethereum and its layer 2 networks.
- Tokenised assets: asset managers issue fund shares and bonds as tokens on Ethereum.
- NFTs and digital ownership: unique tokens representing art, tickets, game items or domain names.
- Staking: holders lock ETH to help secure the network and receive a variable reward.
The risks of Ethereum
- Volatility: the price of ETH can drop sharply, often more than bitcoin’s in market downturns.
- Smart contract bugs: code is law until it is wrong. Flaws in contracts and cross-chain bridges have led to thefts of hundreds of millions of dollars.
- Phishing and malicious approvals: signing a transaction on a fake site can give a “drainer” permission to empty your wallet. Always check what you sign.
- Fees: during busy periods, simple actions on the main chain can cost several dollars or more.
- Staking risks: slashing, lock-up periods, and the risk of the platform or protocol you stake through.
- Competition and regulation: other blockchains compete for the same uses, and rules on DeFi and staking are still evolving.
How to get started with Ethereum safely
- Learn the basics first. The official ethereum.org documentation explains proof of stake and the roadmap in plain language.
- Buy on a regulated platform. Use a provider licensed where you live, as explained in our guide how to buy crypto. Start with a small amount, for example $50, and only invest what you can afford to lose.
- Set up a self-custody wallet. To use apps, you will need a wallet. Write down its seed phrase on paper and never share it.
- Try a layer 2. Fees on layer 2 networks are usually a few cents, which makes them a cheaper place to learn.
- Check before you sign. Use bookmarks for the apps you trust, read every wallet prompt, and regularly revoke token approvals you no longer need.
- Go hardware for larger sums. A hardware wallet keeps your keys offline and asks you to confirm each transaction on the device.
Key takeaways
- Ethereum is a programmable blockchain launched on 30 July 2015; its currency is ether (ETH).
- Smart contracts run on the EVM, and every action costs gas, paid in ETH.
- Since the Merge of September 2022, validators who stake ETH secure the network instead of miners.
- Layer 2 networks handle most everyday activity at lower cost, helped by the Dencun and Fusaka upgrades.
- Ethereum powers DeFi, stablecoins and tokenised assets, but code bugs, phishing and volatility are real risks.
