What is Ethereum?
Bitcoin records who paid whom. Ethereum also runs programs, and that single difference explains its fees, its tokens and most of its risks.
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On this page
- Ethereum is a blockchain network and software platform; its native currency is ether (ETH).
- Smart contracts are programs stored on Ethereum that anyone can use, which lets developers build tokens and applications on top.
- Every transaction pays a gas fee in ETH: gas used × (base fee + priority fee). The base fee is burned.
- Ethereum switched from proof of work to proof of stake on September 15, 2022, cutting its energy use by an estimated 99.95%.
- The Merge did not lower gas fees; ethereum.org lists that as a common misconception.
Ethereum is a decentralized blockchain that runs programs called smart contracts. Its native cryptocurrency, ether (ETH), pays the fees, called gas, for every transaction and computation. Since 2022 it has been secured by proof of stake, where validators lock up ETH instead of mining.
What makes Ethereum different from Bitcoin?
ethereum.org describes Ethereum as a decentralized blockchain network and software development platform powered by ether. The key word is platform. Bitcoin's ledger mainly records payments. Ethereum's ledger also stores programs and their data, and every computer on the network runs those programs the same way.
The idea came from Vitalik Buterin, who proposed it in a white paper; ethereum.org dates the proposal to 2013 and the network launch to July 2015. The paper's pitch was a blockchain with a built-in programming language, so that anyone could write smart contracts with their own rules.
| Feature | Bitcoin | Ethereum |
|---|---|---|
| Main purpose | Peer-to-peer payments | Payments plus programmable applications |
| Native coin | bitcoin (BTC) | ether (ETH) |
| Supply | Capped at 21 million | No fixed cap; new ETH is issued and some is burned |
| Consensus | Proof of work (mining) | Proof of stake (validators) since 2022 |
| New block | About every 10 minutes on average | One slot every 12 seconds |
| Programs | Limited scripting | Full programming language for smart contracts |
| Tokens | Not a core design goal | Built with standards such as ERC-20 |
What is ether (ETH) used for?
ethereum.org calls ether the native cryptocurrency that powers the network. It has three jobs:
- Paying fees. Every Ethereum transaction requires a fee paid in ETH, even if you are moving a different token.
- Securing the network. Validators lock up ETH as collateral to propose and check blocks, and earn ETH for doing it honestly. See what is staking.
- Acting as money inside applications, for payments or as collateral.
Unlike bitcoin, ether has no fixed supply cap. New ETH goes to validators, while part of every fee is permanently destroyed ("burned"). Depending on network use, total supply can grow or shrink.
How are Ethereum gas fees calculated?
Gas measures how much computing work a transaction needs. Simple actions use little gas; complex smart-contract calls use more. ethereum.org gives the formula:
fee = gas units used × (base fee + priority fee)
Prices are quoted in gwei, where 1 gwei is 0.000000001 ETH. The base fee is set by the protocol according to demand and is burned. The priority fee is a tip to the validator who includes your transaction. A plain ETH transfer needs 21,000 gas.
When the network is busy, the base fee rises, so the same transfer can cost much more at peak times. Fees exist partly to stop spam: if computation were free, attackers could clog the network cheaply.
What changed when Ethereum moved to proof of stake?
Ethereum originally used mining, like Bitcoin. A separate proof-of-stake chain, the Beacon Chain, launched on December 1, 2020 and ran alongside it. On September 15, 2022 the two were joined in an upgrade called the Merge, and mining ended.
ethereum.org estimates that the Merge cut Ethereum's energy consumption by about 99.95%. It also lists several things the Merge did not do:
- It did not reduce gas fees. Capacity is being expanded mainly through layer 2 networks.
- It barely changed speed: block times went from about 13.3 seconds to 12 seconds.
- It did not let stakers withdraw; withdrawals came in a later upgrade.
For the trade-offs between the two designs, see proof of work vs proof of stake.
Who controls Ethereum?
No single company. ethereum.org says the network is maintained by developers, node operators, stakers and the wider community. The Ethereum Foundation supports research and development but does not govern decisions. Protocol changes are proposed as Ethereum Improvement Proposals (EIPs) and adopted only if the people running the software choose to upgrade.
That openness cuts both ways. Anyone can deploy a smart contract or create a token without permission, which is why Ethereum hosts so much innovation and so many scams. Being on Ethereum is not a stamp of approval.
What mistakes do beginners make with Ethereum?
- Holding tokens but no ETH. You need ETH to pay gas even when sending a different token. We explain why in coins vs tokens.
- Sending tokens to a contract address. ethereum.org estimates that at least $83.6 million in ERC-20 tokens have been lost this way, because many contracts cannot handle tokens they receive.
- Approving unknown apps. Granting a contract permission to spend your tokens can be abused; see token approvals explained.
- Assuming the original white paper describes today's Ethereum. ethereum.org says it no longer reflects how Ethereum works and keeps it as a historical document.
- Confusing Ethereum with networks that copy it. Many chains run Ethereum-compatible software; see EVM-compatible chains.
Questions readers ask
Is Ethereum the same as ether?
No. Ethereum is the network; ether (ETH) is its native currency. Exchanges often list ETH under the name "Ethereum".
Does Ethereum have a supply limit?
No fixed cap. New ETH is issued to validators and part of every fee is burned, so supply can rise or fall with network activity.
Do I need 32 ETH to use or run Ethereum?
No. ethereum.org notes that anyone can run a non-validating node, and ordinary users need only enough ETH to pay gas. Staking as a solo validator is a separate activity.
Why are Ethereum fees sometimes high?
Because block space is limited and the base fee rises when demand rises. Layer 2 networks were built largely to bring costs down.
Ethereum turned the blockchain into a shared computer, and ether is the fuel that pays for every operation on it. That design made tokens and decentralized applications possible, and it also means fees, smart-contract bugs and permissionless scams come with the territory. Learn how gas and approvals work before you use any Ethereum app.
Sources
- ethereum.org, What is Ethereum? (2025)Primary source
- ethereum.org, What is ether (ETH)? (2025)Primary source
- ethereum.org, Gas and fees (2025)Primary source
- ethereum.org, The Merge (2025)Primary source
- ethereum.org, Blocks (2025)Primary source
- ethereum.org, ERC-20 Token Standard (2025)Primary source
- ethereum.org, Ethereum Whitepaper (2025)Primary source
- ethereum.org, Transactions (2025)Primary source
Educational content only — not financial, investment, legal or tax advice. Crypto-assets are high-risk and you could lose all the money you put in. Rules differ by country; check with your national regulator. See our risk disclosure and editorial policy.
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Gas fee
What you pay to get an Ethereum transaction processed, with the formula worked through.
