What Is Ethereum?

Ethereum is a global opensource platform, decentralized computer, and ecosystem for building decentralized applications or DApps coded as smart contracts on the blockchain. It is an open technology offering data-friendly services and is money-driven by a global community with limitless use cases.

You can think of Ethereum more simply as software that runs on connected computers that, together, ensure that pieces of coded instructions or smart contracts are replicated and processed seamlessly without a central entity or device. It builds on the concept of Bitcoin, which stores and duplicates transaction data but brings more depth into the idea by making it possible to store codes just like transactions across a large number of computers that can participate on the network from anywhere.

Summary of Important Points

  • Ethereum is an open-source, decentralized blockchain for building limitless cases of decentralized applications.
  • Ethereum takes the Bitcoin idea a bit further by making it possible to store codes or smart contracts on the blockchain, just like transactions on the Bitcoin network.
  • Developers can write smart contracts on Ethereum using Turing complete programming languages like Vyper, Lisp, and Solidity.
  • Anyone can become a node on Ethereum, participate in creating blocks, explore the network, and run smart contracts on the blockchain.
  • There is no permission or signup requirement needed to start using Ethereum.
  • Ethereum uses a proof-of-work consensus algorithm which requires nodes to solve complex puzzles to show they have done the work required to solve a block.
  • Ethhash, Ethereum hash function, makes it possible to mine the cryptocurrency with any device.
  • Ethereum has a native currency, ETH, used to settle transactions on the network, although ETH has smaller units such as Gwei, and Wei, the smallest unit of transactions.

Features of Ethereum

Independent Blockchain

Ethereum belongs to the digital asset and cryptocurrency class of coins, and it is also an independent blockchain. Most tokens use the Ethereum virtual machine to create smart contracts or rules that form the basis of their existence. So it is common in the crypto literature to see Ethereum referred to as a blockchain which explains that there are connected blocks of transactions on Ethereum. It is a coin because it does not exist on another blockchain.


Ethereum is a public blockchain with blocks of transaction data and smart contracts created by participants who distribute these updated states to other participants to add to their ledger copy. Each block contains a reference to the fingerprint of the previous blocks, forming the blockchain. Ethereum is also permissionless, which means that anyone can start running a node or deploy a smart contract to the network without contacting someone else or signing up as required in most centralized networks.

Easy to Mine

It is also possible to modify the original Ethereum code into a different network incompatible with the mainchain. Ethereum uses a proof-of-work consensus and mining algorithm similar to Bitcoin.

Still, Ethereum’s hash function, Ethhash, makes it possible to mine the cryptocurrency with common hardware like your PC. Ethereum’s native currency is the ETH, which is used to settle network fees. However, there are other units of ETH such as:

  • Wei, the lowest unit of ETH where 1 ETH is a quintillion Wei
  • Finney, a thousand Wei
  • Szabo, a million Wei
  • Gwei, a billion Wei
  • Mwei, trillion Wei
  • Kwei, a quadrillion Wei

How Ethereum Reduces Data Loss Risks

Since Ethereum is decentralized, it is also possible for anyone to become a node on the network. You can do this by downloading the Ethereum client, which allows you to connect to the blockchain, create smart contracts, explore the blockchain, run smart contracts, and mine new blocks of transactions on the network. Each node on Ethereum works exactly as other nodes, and there is no central or master server or computer with such a status. The programming language of the Ethereum blockchain has a similar syntax to Javascript.

Smart Contracts

Ethereum is the first blockchain that supports smart contracts, and it has become the most popular blockchain for developers for that reason. Smart contracts can be used to automate real-life transactional interactions between individuals without reliance on any central authority.

Ethereum Virtual Machine (EVM)

Ethereum’s decentralized logic layer for computing states and running smart contract logic is the EVM which works as a distributed software that brings smart contracts to life.

Participants on Ethereum can run codes or smart contracts on the EVM. The codes are written in Turing complete programming languages, Vyper, Lisp, or Solidity (the most popular). Written codes encode state changes on the Ethereum network and can be used to create a limitless number of real-life use-cases. Typical examples include a trading platform for digital assets, an NFT platform, and a multi-coin wallet for managing tokens deployed on Ethereum.


For mining or solving blocks on Ethereum, participants pay a fee that is sent to the miner to compensate them and incentivize them to continue to mine blocks. The current calculation for gas fees is gas unit (limit) * (base fee + tip). Miners receive a gas unit (limit) of 21,000 x tip.

Swarm and Whisper

Swarm works like BitTorrent. It stores chunks of data and receives rewards in ETH. Whisper enables the communication between nodes on the Ethereum network.

How Does Ethereum Fair Against Other Cryptocurrencies?

Ethereum has a block time of 14 seconds, and with current proof-of-stake upgrades underway, Ethereum will be more efficient than several other blockchains. Ethereum also enjoys the status of being the most popular platform for blockchain developers.

Popularity sets Ethereum ahead of Bitcoin—its current taproot upgrade—and other smart contract blockchains like Solana or Cardano. Ethereum’s programming languages also have a more gradual learning curve than Rust. Bitcoin transactions take around 10 minutes, which makes Ethereum better in this respect. However, fees on Ethereum became so high at some point, which is a pro for Bitcoin.

That being said, Ethereum remains more useful, and the ETH 2.0 upgrade will make it more scalable with predictably tolerable fees.

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