Ethereum
The second-largest blockchain and the leading platform for smart contracts and DeFi. Ethereum runs the EVM (Ethereum Virtual Machine) and uses ETH for gas. It moved from Proof of Work to Proof of Stake in 2022. The foundation of most web3 apps, NFTs, and DeFi protocols.
- DeFi and financial primitives.
- NFTs and digital ownership.
- DAOs and governance.
- When you need a large, secure, decentralized smart contract platform.
- High-throughput apps (use L2s or other chains).
- When gas costs are prohibitive.
- Private apps.
Definition
Ethereum is a public blockchain with a Turing-complete virtual machine (EVM) that runs smart contracts. ETH is the native currency for gas. Proof of Stake since The Merge (2022). Layer 1 (mainnet) + Layer 2s (rollups: Arbitrum, Optimism, Base) for scale. ERC-20 (tokens), ERC-721 (NFTs) standards.
Why it exists
Bitcoin is just money. Ethereum adds programmability — smart contracts enable DeFi, NFTs, DAOs, and any trustless application, making blockchain a general-purpose platform.
How it works
Accounts hold ETH. Smart contracts are code at addresses. Transactions call functions (cost gas). Validators propose/attest blocks (PoS). The EVM executes contracts deterministically. Layer 2s batch transactions and settle on Ethereum. ERC standards define token interfaces.
Scaling limits
Layer 1: ~15-30 tx/s, high gas at peak. Layer 2s help but add complexity. Storage grows. Account abstraction (ERC-4337) is improving UX. Finality time (~12 minutes for L1).
Cost shape
Gas fees per transaction (varies with demand, can be $1-$50+ at peak). Running a node: hardware. L2s: much cheaper.
Alternatives
- Solana — Faster, cheaper, less decentralized.
- Layer 2s (Arbitrum, Base) — Ethereum security, cheaper, but bridging complexity.
Failure modes
- High gas fees.
- Smart contract bugs.
- Bridge hacks (L2 ↔ L1).
- Slow finality on L1.
Related terms
Blockchain, Smart contract, Layer 2 (L2), DeFi (Decentralized Finance)