What is Ethereum?

Smart contracts, gas fees, and the rise of programmable money.

TL;DR

Ethereum is a decentralised computer. While Bitcoin lets people send money, Ethereum lets developers run programs called smart contracts — the foundation of DeFi, NFTs, and most of the crypto economy beyond BTC.

The core idea

Launched in 2015 by Vitalik Buterin, Ethereum extends Bitcoin's blockchain concept with a Turing-complete virtual machine. Anyone can deploy code that runs deterministically across the network, with state persisted in the ledger.

Key concepts

These are the building blocks every Ethereum user touches.

→Ether (ETH) — the native token, used to pay for computation
→Gas — the unit of computation; transactions cost gas, paid in ETH
→Smart contracts — programs deployed to addresses that anyone can call
→ERC-20 — the token standard most altcoins use
→ERC-721 — the NFT standard
→Proof-of-Stake — Ethereum switched from mining to staking in 2022 ('The Merge')

Why it matters

If you've used a DEX, a stablecoin like USDC, an NFT marketplace, a lending protocol like Aave, or any 'Layer 2' like Arbitrum or Base — you've used Ethereum or something built on it. ETH the asset captures economic activity from all of that.

Worked example

Sending a token vs running a contract

Compare a basic ETH transfer to a swap on a DEX.

1Simple ETH transfer21,000 gas
2ERC-20 token transfer~65,000 gas
3Uniswap swap~150,000 gas
4Gas price (typical)~20 gwei = 0.00000002 ETH
5Swap cost at $3,000 ETH150,000 × 20 gwei × $3K = ~$9

Takeaway

More complex operations cost more gas. Gas prices spike during network congestion — that's why Layer 2 rollups like Arbitrum and Base exist.

Common mistakes

What to avoid

!Sending ETH to a contract address that doesn't accept it — funds can be lost
!Approving unlimited token allowances without understanding the risk
!Confusing ETH (the asset) with Ethereum (the network) in conversation
!Paying mainnet gas for everyday transactions instead of using a Layer 2

Self-check

Test yourself

Q1What is gas in Ethereum?+

The unit of computation; transactions cost gas which is paid in ETH.

Q2When did Ethereum switch to Proof-of-Stake?+

September 2022, in an event called 'The Merge'.

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