What Is Ethereum? Smart Contracts Explained
Understand Ethereum, the programmable blockchain that powers DeFi, NFTs, and thousands of decentralized applications.
Ethereum is a decentralized blockchain platform that enables developers to build and deploy smart contracts and decentralized applications (dApps). Created by Vitalik Buterin and launched in 2015, Ethereum extended Bitcoin's blockchain concept by adding programmability.
Ethereum vs Bitcoin
While Bitcoin is primarily digital money, Ethereum is a programmable platform:
| Feature | Bitcoin | Ethereum |
|---|---|---|
| Purpose | Digital currency | Smart contract platform |
| Supply | 21 million max | No fixed cap |
| Block time | ~10 minutes | ~12 seconds |
| Consensus | Proof of Work | Proof of Stake |
| Programming | Limited scripting | Full programming (Solidity) |
What Are Smart Contracts?
Smart contracts are self-executing programs stored on the blockchain. They automatically enforce the terms of an agreement when conditions are met.
Example: Simple Escrow
Instead of trusting a middleman:
- Buyer sends funds to smart contract
- Seller delivers goods/services
- Buyer confirms receipt
- Contract releases funds to seller
No intermediary needed. The code is the arbiter.
The Ethereum Virtual Machine (EVM)
The EVM is Ethereum's computer. It executes smart contract code on every node in the network simultaneously, ensuring consistent results.
Developers write contracts in Solidity (similar to JavaScript) which compiles to bytecode that runs on the EVM.
What Is ETH?
ETH (Ether) is Ethereum's native cryptocurrency. It serves two purposes:
- Gas fees: Pay for computation and storage on the network
- Staking: Lock ETH to help secure the network and earn rewards
Ethereum 2.0 and The Merge
In September 2022, Ethereum completed "The Merge," transitioning from energy-intensive Proof of Work to Proof of Stake. This reduced energy consumption by ~99.95%.
Benefits of Proof of Stake
- 99.95% less energy usage
- Higher security (attack costs more)
- Foundation for sharding (future scaling)
What Can You Do on Ethereum?
DeFi (Decentralized Finance)
- Lending and borrowing (Aave, Compound)
- Trading (Uniswap, Curve)
- Derivatives (dYdX, GMX)
NFTs (Non-Fungible Tokens)
- Digital art and collectibles
- Gaming items and virtual land
- Music and content ownership
DAOs (Decentralized Autonomous Organizations)
- Community governance
- Treasury management
- Collective decision-making
Getting Started with Ethereum
- Get a wallet (MetaMask is most popular)
- Buy ETH from an exchange
- Transfer to your wallet
- Explore dApps on ethereum.org/dapps
James Wright
Education Lead
Educator and content creator with 500K+ YouTube subscribers. Simplifies complex crypto concepts for beginners. Previously taught finance at UCLA Extension.
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