Ethereum
Ethereum is a decentralised, open-source blockchain platform that extends Bitcoin’s concept of peer-to-peer digital money with programmability. Where Bitcoin is a ledger for one asset (BTC), Ethereum is a global computer — the Ethereum Virtual Machine (EVM) — that can run arbitrary programs called smart contracts.
Ether (ETH) is its native cryptocurrency: both the fuel for computation (gas fees) and a productive staking asset yielding 3–5% APY post-Merge.
Key Properties
| Property | Detail |
|---|---|
| Launched | 30 July 2015 |
| Created by | Vitalik Buterin + 7 co-founders |
| Steward | ethereum-foundation |
| Consensus | Proof-of-stake (since 15 Sep 2022) |
| Native asset | ETH (Ether) |
| Market cap | #2 cryptocurrency (behind Bitcoin) |
| Smart contract language | Solidity (primary), Vyper |
| Throughput (L1) | ~238 TPS theoretical; much less in practice |
| Block time | ~12 seconds |
How It Works
The EVM (Ethereum Virtual Machine)
A deterministic, Turing-complete stack-based virtual machine that runs on every node. Any smart contract code executes identically on all ~8,600+ nodes — producing the same output and enabling consensus without trust.
Two account types:
- Externally-Owned Accounts (EOAs) — controlled by private keys; used by humans and wallets
- Contract Accounts — contain bytecode and storage; execute when transactions are sent to them
Gas
Every EVM operation costs gas — a unit of computational effort. Senders pay gas fees in ETH. Since EIP-1559 (Aug 2021), fees split into:
- Base fee — burned (deleted from supply), making ETH deflationary on busy days
- Tip — goes to the validator who proposed the block
Fees are denominated in Gwei (10⁻⁹ ETH).
Proof-of-Stake (Post-Merge)
Since September 2022, Ethereum uses PoS instead of energy-intensive proof-of-work:
- Validators stake ≥32 ETH (up to 2,048 ETH after Pectra, May 2025)
- Pseudorandomly selected to propose or attest to blocks each ~12-second slot
- Honest validators earn ETH rewards; dishonest validators are slashed
- Energy reduction: >99% vs proof-of-work
What Runs on Ethereum
Smart Contracts
Self-executing programs deployed permanently on the blockchain. Power all Ethereum applications. See smart-contracts.
DeFi (Decentralised Finance)
Lending, borrowing, trading, and yield generation without banks or brokerages. Ethereum holds the dominant share of global DeFi (TVL ~$60B+). See defi.
Stablecoins
Ethereum hosts 60–70% of all cross-chain stablecoin supply ($150B+). USDT, USDC, DAI all run primarily on Ethereum.
NFTs
Non-fungible tokens for digital art, collectibles, gaming, and real-world asset representation. The ERC-721 standard is the Ethereum NFT standard. See nft.
Token Ecosystem
Thousands of ERC-20 fungible tokens and ERC-721/ERC-1155 NFTs. See ethereum-token-standards.
Layer 2 Scaling
Ethereum’s L1 processes ~238 TPS (vs Visa’s ~45,000 TPS). Layer 2 chains inherit Ethereum’s security while dramatically increasing throughput:
- Optimistic rollups: Arbitrum, Optimism, Base
- ZK rollups: ZKSync, StarkNet, Scroll
The Dencun upgrade (March 2024) added “blob” storage (EIP-4844), dramatically reducing L2 data costs. See layer-2.
ETH as an Asset
Post-Merge, ETH has dual-asset properties:
- Store of value — scarce, with supply reduced by fee burns
- Productive asset — 3–5% APY staking yield; liquid staking tokens (stETH, rETH) let holders earn yield while using ETH in DeFi
Institutional adoption: iShares Ethereum Trust ETF (ETHA) launched 2024; $3.6B AUM as of Feb 2025.
Major Protocol Upgrades
| Upgrade | Date | Key Change |
|---|---|---|
| London (EIP-1559) | Aug 2021 | Base fee burn; deflationary mechanism |
| The Merge | Sep 2022 | PoW → PoS; >99% energy reduction |
| Shapella | Apr 2023 | Enabled staking withdrawals |
| Dencun (EIP-4844) | Mar 2024 | Proto-Danksharding; blobs for L2 cost reduction |
| Pectra | May 2025 | Validator stake ceiling 32 → 2,048 ETH |
Quantum Vulnerability
Like Bitcoin, Ethereum uses ECDLP-256 (elliptic-curve-cryptography) for wallet keys and transaction signatures. A future cryptographically relevant quantum computer (CRQC) running Shor’s algorithm could break this. google-quantum-ai estimates this requires <500K physical qubits — urging migration to post-quantum-cryptography by 2029. The ethereum-foundation is coordinating this transition through EIPs. See babbush-neven-2026-quantum-vulnerabilities-cryptocurrency.
Sources: wikipedia-2026-ethereum | ethereumorg-2026-what-is-ethereum | bylund-2025-ethereum-investment-thesis | cryptoslate-2025-ethereum-tokens | babbush-neven-2026-quantum-vulnerabilities-cryptocurrency