Ethereum launched in 2015 and changed what a blockchain could do. Bitcoin settles payments. Ethereum runs code. Developers write smart contracts that execute automatically when conditions are met. That simple capability opened the door to decentralized exchanges, lending protocols, stablecoins, NFTs, and thousands of tokens built on top of the network. Ether, or ETH, is the coin that pays for computation. Every transaction and every contract call costs gas, and gas is priced in ETH.

The network started with proof-of-work mining. In September 2022, it switched to proof-of-stake in an event called the Merge. The change cut energy consumption by more than 99 percent. Validators now lock ETH instead of miners running graphics cards. The supply of ETH is not capped like Bitcoin's, but a fee-burning mechanism destroys a portion of every transaction fee. During busy periods, more ETH is burned than minted. Layer 2 networks like Arbitrum and Optimism handle transactions off the main chain and settle back to Ethereum, which reduces fees for users.

Ethereum essentials

• Smart contracts — code that runs on the blockchain
• Gas — fees paid in ETH for computation
• ERC-20 — the standard for fungible tokens
• The Merge — transition to proof-of-stake in 2022
• Layer 2 — scaling solutions that settle on Ethereum

Ethereum is the largest smart contract platform by developer activity and total value locked. Competitors are faster and cheaper, but Ethereum has the network effects.