Ethereum (ETH) is not just the second-largest cryptocurrency by market capitalization after Bitcoin — it’s a foundational technological platform that has transformed the very concept of blockchain. It evolved blockchain from a system for transferring value into a universal environment for decentralized computing.
Ethereum is a global decentralized network that enables developers to build and deploy smart contracts, decentralized applications (dApps), next-generation financial services (DeFi), non-fungible tokens (NFTs), and decentralized autonomous organizations (DAOs) — all without intermediaries and with full transparency.
The project was created to expand the capabilities of blockchain, making it not only a medium for storing and transferring cryptocurrency, but also the infrastructure for a new internet — Web3, where users retain control over their data, digital assets, and interactions.
The idea for Ethereum was conceived by Canadian programmer of Russian origin — Vitalik Buterin. In 2013, inspired by the limitations of Bitcoin and the broader possibilities that blockchain technology could offer, he published a white paper outlining the concept of a decentralized platform capable not only of processing transactions but also executing smart contracts — self-executing programs running on the blockchain.
Buterin shared his proposal with the developer community, and a team of like-minded individuals soon began to form around the idea. In 2014, one of the first large-scale cryptocurrency ICOs (Initial Coin Offerings) was held, raising over $18 million. These funds laid the foundation for the development of the Ethereum network.
History and Vision of Ethereum
The Ethereum mainnet was launched on July 30, 2015. From that moment, the platform began to grow rapidly. Its distinctive feature was support for decentralized applications (dApps) and the creation of custom tokens based on the ERC-20 standard, which laid the foundation for an entire ecosystem of projects in areas such as finance, gaming, art, and governance.
Ethereum has undergone several major technical upgrades and hard forks, including Byzantium (2017), Constantinople (2019), Istanbul (2019), Berlin (2021), London (2021), and Altair (2021). One of the most significant events in Ethereum’s history was the Merge, which was completed in September 2022.
This upgrade transitioned the network from the Proof-of-Work (PoW) consensus algorithm to the more environmentally friendly and energy-efficient Proof-of-Stake (PoS). The shift was a major milestone in Ethereum’s scaling strategy and preparation for the next phases of development — such as sharding and Ethereum 2.0. Ethereum continues to be one of the key projects in the blockchain and cryptocurrency space, setting the pace for the global evolution of decentralized technologies.
How Ethereum Works
Ethereum is not just a cryptocurrency — it’s an entire infrastructure for building decentralized applications. At the core of the Ethereum network are several key components that enable smart contract execution, user interaction, and the security of all operations.
Ethereum Virtual Machine (EVM)
The Ethereum Virtual Machine (EVM) is the engine that runs smart contract code. It is a universal computing environment that behaves identically on every Ethereum node. This consistency ensures that any contract behaves the same regardless of location or the hardware it runs on.
You can think of the EVM as the “brain” of Ethereum — it processes millions of contracts, enforces their logic, and enables decentralized applications (dApps) to operate without relying on centralized servers. Thanks to the EVM, Ethereum has become the go-to platform for developing custom tokens, DeFi protocols, NFT marketplaces, DAOs, and much more.
How Ethereum Works
Smart Contracts
Smart contracts are programmable algorithms stored and executed on the Ethereum blockchain. They function as digital agreements in which the terms of interaction between parties are written in code. Typically written in Solidity, these contracts are deployed to the Ethereum network and become immutable — no one can alter their logic once published, which guarantees transparency and reliability in execution.
Example of use: Suppose a company signs a contract with a supplier for product delivery. A smart contract can be programmed to automatically transfer payment to the supplier once delivery confirmation is recorded on the blockchain — for instance, through an IoT device or an oracle. This removes the need for intermediaries and reduces fraud risks.
Gas and Transaction Fees
Unlike centralized platforms where computation is handled by data centers, Ethereum requires distributed computation for every action — and users must pay for it. The fee for performing operations on the network is called Gas. It is paid in small fractions of ETH (gwei) and depends on:
Operation complexity — More computation (e.g., running a smart contract or interacting with a DeFi protocol) requires more gas.
Network load — When many users are active, gas fees can rise significantly.
Gas plays a critical role: it helps prevent network congestion and spam attacks, since every action has a cost. Additionally, users can set their own gas price — the higher the fee, the more likely miners or validators will include the transaction in a block quickly.
About ETH — the Native Token of the Ethereum Network
ETH (Ether) is not just the primary cryptocurrency of the Ethereum network; it is a critical component of its economy. ETH serves multiple roles, powering smart contracts, decentralized applications (dApps), and financial protocols. Within the Ethereum ecosystem, ETH is used as:
Payment for Network Usage (Gas)
About ETH
Every operation on the Ethereum network consumes computational resources, whether it’s a simple token transfer or the execution of a complex smart contract. These resources are paid for in ETH — more precisely, in units of gas, which are calculated based on the computational effort required and the current network load. Thus, ETH acts as the “fuel” for the entire platform. Without it, deploying applications, conducting transactions, or interacting with any smart contract would be impossible.
Medium of Exchange
ETH is widely used as a cryptocurrency for exchanging goods, services, and other tokens both within the Ethereum network and beyond. It serves as a base currency for trading on decentralized exchanges (DEXs) such as Uniswap, SushiSwap, and others, and often functions as a reserve asset in trading pairs with other ERC-20 tokens.
Staking Instrument (in Proof-of-Stake)
Following Ethereum’s transition to the Proof-of-Stake consensus algorithm (with The Merge in 2022), ETH became a staking asset. Network participants — known as validators — must stake at least 32 ETH to earn the right to validate blocks and receive rewards. Staking has replaced mining and offers a more energy-efficient way to secure the network. Additionally, staking pools and DeFi protocols have emerged, allowing users with smaller amounts to participate in staking collectively.
Collateral in DeFi Platforms
ETH is actively used in decentralized finance (DeFi) as collateral or financial backing. For example:
On platforms like MakerDAO, users can lock up ETH as collateral to mint stablecoins (e.g., DAI).
In lending protocols such as Aave or Compound, ETH can be used as collateral for loans or earn passive income by providing liquidity.
ETH is often included in liquidity pools as a core asset, ensuring stable operations of trading pairs.
Since its launch, Ethereum has become more than just a platform for smart contracts; it has evolved into a comprehensive ecosystem on which hundreds of thousands of decentralized applications are built. Below are the key areas where Ethereum holds a leading position.
1. DeFi — Decentralized Finance
DeFi (Decentralized Finance) is an alternative financial system that operates without intermediaries, banks, or traditional institutions. Ethereum has become the backbone for most DeFi protocols due to its ability to create secure and transparent smart contracts. Notable projects include:
Uniswap — A decentralized exchange (DEX) allowing users to trade tokens directly from their wallets without trusting a centralized exchange.
Aave and Compound — Platforms for lending and borrowing crypto assets. Users can earn interest on deposits or take out loans against collateral.
MakerDAO — A decentralized bank that issued the stablecoin DAI, which is backed by cryptocurrency and independent of traditional currencies.
DeFi provides access to financial services to millions of users worldwide, especially in countries with unstable economies.
2. NFT — Non-Fungible Tokens
NFT (Non-Fungible Tokens) are unique tokens representing ownership of digital (and even physical) assets. Ethereum is the first and largest platform for issuing and trading NFTs thanks to the ERC-721 standard. Popular NFT platforms include:
OpenSea — The largest marketplace for buying and selling NFTs.
Rarible — A platform allowing users to create and trade NFTs without coding skills.
Foundation — A creative platform for artists and digital art collectors.
DAO (Decentralized Autonomous Organization) is an organization where decisions are made in a decentralized manner based on open code and participant voting. Management is done through tokens — holders vote on project development, budget allocation, and key initiatives. Examples of DAOs include:
MolochDAO — Supports Ethereum ecosystem development by funding infrastructure projects.
ENS DAO — Manages the Ethereum Name Service (ENS) domain system, where addresses like yourname.eth can be registered.
DAOs offer a path to a more transparent and fair governance model, replacing traditional corporate structures.
Ethereum is actively used in the GameFi (gaming finance) and metaverse industries. Here, blockchain ensures the ownership of digital assets, trade between users, and the in-game economy. Prominent projects utilizing Ethereum include:
Decentraland — A virtual world where users can purchase land, build structures, and participate in events.
Axie Infinity — A play-to-earn blockchain game where players breed and battle Axie pets.
The Sandbox — A metaverse allowing users to create and monetize user-generated content and assets.
These projects are creating a new economic reality where digital assets truly belong to users rather than centralized companies.
Ethereum remains one of the most ambitious and technologically advanced blockchain platforms. The development of the network is guided by the Ethereum Roadmap — a phased update plan aimed at scalability, security, and the sustainability of decentralized applications.
Below are the key areas of this roadmap.
Sharding Implementation
Sharding is a scalable solution where the network is divided into several parallel chains (shards), each capable of processing its own transactions and smart contracts. This will allow Ethereum to:
Significantly increase network throughput
Reduce the load on each individual node
Increase speed and lower transaction fees
Sharding will become a key step in scaling the Ethereum blockchain following the transition to Proof-of-Stake, alongside Layer-2 solutions.
Ethereum Prospects for Development
Improving UX through Account Abstraction
Account Abstraction is a step towards simplifying user interaction with the blockchain. Its goal is to merge external accounts (EOA) and contract accounts, making their behavior more flexible and customizable. The benefits include:
Support for custom authorization rules (e.g., biometrics, social media authentication)
Ability to recover wallet access without a seed phrase
Multi-signature, spending limits, and other “banking” functions in standard wallets
This will make using Ethereum more user-friendly and familiar for the general public.
Closer Integration with Other Blockchains (Interoperability)
Ethereum is actively moving towards interoperability — the ability to interact with other blockchains and ecosystems. This is being achieved through:
Bridges — connections between networks allowing asset transfers between Ethereum and other blockchains (e.g., Arbitrum, Polygon, BNB Chain)
Rollups and ZK-protocols — Layer-2 solutions compatible with other ecosystems
Cross-chain standards — development of shared protocols for secure data and asset exchange
The goal is to create an interconnected, decentralized Web3 environment where users can freely move between networks.
Ethereum Virtual Machine
Expanding the Functionality of EVM (Ethereum Virtual Machine)
The Ethereum Virtual Machine (EVM) is continually being improved to support new types of computations, optimizations, and programming languages. Future prospects include:
Support for alternative languages beyond Solidity (e.g., Vyper, Huff)
Increased contract execution speed
Development of eWASM — a potential replacement for EVM based on WebAssembly, offering greater flexibility and performance
These updates make Ethereum not only a platform for smart contracts but also a full-fledged environment for scalable decentralized computing.
Layer-2 Solutions — Scaling in Action
While main Ethereum is progressing toward scaling through sharding, Layer-2 technologies are already providing high performance and low fees:
Rollups (Optimistic and ZK): Arbitrum, Optimism, zkSync, Scroll
State Channels and other methods for off-chain transaction processing
These technologies allow most operations to be executed faster and more affordably without overloading the main blockchain. In the future, Layer-2 solutions will be an integral part of the Ethereum ecosystem, enabling dApps to scale to millions of users.
Frequently Asked Questions
1. What is the current price of Ethereum and where can I find accurate information about its rate?
Ethereum (ETH) continues to hold the position as the second largest cryptocurrency by market capitalization after BTC. Its price fluctuates depending on market activity, demand, trading volumes, and news. For example, in one month, the price can change by tens of percent — from $1,800 to $3,500 or more. To get the latest price and ETH value, you can use reliable sources:
Official cryptocurrency platforms: Binance, Bybit, Kraken, Coinbase
Analytical aggregators: CoinMarketCap, CoinGecko
Exchange terminals: TradingView, where you can set up detailed charts and track the price in real-time by days and even hours
These sources not only provide the current price but also allow you to compare it with previous periods, which is important for making investment decisions.
2. Is it a good time to buy Ethereum — is it justified as an investment?
Ethereum has a strong technological foundation and continues to develop according to the ambitious Ethereum Roadmap. After switching to Proof-of-Stake (The Merge update), the ecosystem became more stable and attractive for long-term investors. However, investments in ETH are always associated with risks:
High volatility can result in both profits and losses within a day
Due to macroeconomic factors (such as the Federal Reserve interest rate hikes or capital outflows from risky assets), ETH may temporarily lose value
There are scalability issues that have not been completely resolved
Ethereum is worth considering for those who are willing to hold the asset for the medium- or long-term and use a dollar-cost averaging strategy. Also, ETH can be staked to earn passive income by locking funds within the network.
3. What are the advantages of Ethereum compared to other cryptocurrencies, including Bitcoin (BTC)?
Ethereum is not just a cryptocurrency. It has a powerful programmable infrastructure based on the Ethereum Virtual Machine (EVM), allowing:
Creation and execution of smart contracts
Use in DeFi and NFT sectors
Implementation of DAOs and games with digital economies
Unlike BTC, which is primarily used as a store of value and for transfers, Ethereum serves as a building block for various solutions — from exchanges and lending to insurance and identity management. Ethereum has thousands of real-world applications, making it unique in the world of crypto investments.
4. How does the Ethereum blockchain differ from the Bitcoin blockchain (BTC)?
Although both Ethereum and Bitcoin operate on blockchain technology, they implement it differently and for different purposes.
Blockchain Purpose
Bitcoin’s blockchain was created as a simple transaction ledger, designed as an alternative to traditional money — a way to transfer value directly without banks and intermediaries.
Ethereum’s blockchain is a multifunctional computational environment. It’s not just a database but a full platform where smart contracts — programs that execute directly on the blockchain — run. Ethereum acts as a global “computer,” distributed across thousands of nodes worldwide.
Flexibility
Bitcoin’s blockchain is quite rigid, suitable for secure BTC transfers but not designed for complex logic.
Ethereum was designed to be flexible. Its blockchain allows the uploading and execution of user-defined code — smart contracts, dApps, DAOs, and other Web3 applications, all running on the Ethereum Virtual Machine (EVM).
Consensus Mechanisms
Initially, both blockchains used Proof-of-Work (PoW), but:
Bitcoin stuck to PoW, requiring a large amount of energy.
Ethereum transitioned to Proof-of-Stake (PoS) in 2022 (The Merge update), which significantly reduced energy consumption and improved scalability.
Speed and Scalability
Bitcoin’s block time is about 10 minutes, while Ethereum’s is only 12–14 seconds.
Ethereum is actively developing towards scalability through Layer-2 solutions (e.g., Arbitrum, Optimism, zkSync) and, in the future, through sharding. These technologies significantly reduce fees and increase network throughput.
Data and State Storage
Bitcoin’s blockchain only stores transaction information (who owns how many BTC).
Ethereum’s blockchain stores not only balances but also smart contract states, variable data, application code, and even NFTs.
If Bitcoin is considered “digital gold,” Ethereum is the “infrastructure” for the digital world. Ethereum’s blockchain does not just store records — it executes code. It has become the foundation for an entire ecosystem of decentralized solutions, from finance to digital art, from autonomous organizations to gaming worlds
Conclusion
Ethereum is a technological giant in the blockchain world. It has not only transformed the concept of cryptocurrencies but has also become the foundation for a new digital economy. Thanks to its ongoing development, scalability, and wide range of use cases, Ethereum remains at the forefront of crypto technologies and is set to play a crucial role in building a decentralized future.
Crypto market expert. A practicing investor in financial and cryptocurrency markets with over 9 years of experience.
Specializations: cryptocurrencies, DeFi tools, crypto exchanges, and exchangers.
I participate in token sales, earn through holding, staking, and DeFi tools. I actively trade on crypto exchanges, test various cryptocurrency services, and share my knowledge with the website's readers. Always up to date with current events and well-versed in the latest trends in the cryptocurrency industry.
