Glossary

Ethereum

Plain-language definition Crypto glossary

Key takeaways

Ethereum is a leading smart-contract platform, launched in 2015, that serves as a programmable blockchain on which developers deploy smart contracts and decentralized applications.
It runs a shared virtual machine that executes contract code identically on every node, and using the network requires paying gas fees in its native asset, ether.
Most of decentralized finance, NFTs, stablecoins, and DAOs were pioneered on Ethereum, and in 2022 it switched its consensus from proof of work to proof of stake, sharply reducing its energy use.

Definition

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.

FAQ

Frequently asked questions

How is Ethereum different from Bitcoin?

Bitcoin focuses on being digital money, while Ethereum is a programmable blockchain designed for running smart contracts and decentralized applications. That programmability is why most DeFi, NFTs, stablecoins, and DAOs were pioneered on Ethereum.

What are gas fees on Ethereum?

Gas fees are the payments required to send transactions or run contracts on Ethereum, and they are paid in its native asset, ether. They compensate the network for the computing resources your action consumes.

What are Layer 2 networks on Ethereum?

Layer 2 networks are separate networks that handle activity at lower cost and then settle their results back to Ethereum. Much activity now happens on Layer 2 to handle demand without the higher fees of transacting directly on Ethereum.