Ethereum (ETH)

What Ethereum is

Ethereum is, in its own documentation's words, "a decentralized blockchain network and software development platform, powered by the cryptocurrency ether (ETH)" (source: ethereum.org). Where Bitcoin is designed to move one asset, Ethereum runs arbitrary programs. Ethereum.org draws the line directly: "Bitcoin is a tool for sending value. Ethereum is a platform for building it." The network is maintained by "thousands of independent computers around the world called nodes," and ether pays for using it.

That programmability is why ethereum.org describes the network as "home to thousands of cryptocurrencies and applications across DeFi, NFTs, gaming, decentralized social media and stablecoins." A large share of the tokens people trade, including major stablecoins, exist as contracts on Ethereum rather than as their own chains.

For where to buy Ethereum from your country or state, see the availability tables on this page and the venue list at Exchanges.

How it works

Ethereum's core object is the smart contract: code deployed to the network that anyone can call and that runs the same way for everyone. Ethereum.org describes these programs as letting "anyone create their own digital assets and decentralized applications (dapps) that run 24/7, globally." Once deployed, a contract executes according to its own logic, without an operator who can decline to run it.

Every contract call, token transfer, and plain ether payment is a transaction, and every transaction costs gas. Gas is the unit that meters computation, and the fee you pay is gas used multiplied by the gas price. Complex operations cost more than simple ones, and fees rise when demand for block space rises. When the network is busy, the same action costs more, which is the main reason layer 2 networks that settle back to Ethereum have become a common way to transact.

Since September 2022, Ethereum has been secured by proof of stake rather than mining. Ethereum.org states that after the upgrade, "mining is no longer the means of producing valid blocks. Instead, the proof-of-stake validators have adopted this role and are now responsible for processing the validity of all transactions and proposing blocks." A validator posts ether as collateral, proposes and attests to blocks, earns rewards for honest work, and can lose part of its stake for misbehavior. Ether holders who do not want to run their own validator can delegate through staking services, which introduces its own counterparty considerations.

ETH itself plays three roles: it pays transaction fees, it is the asset validators stake, and it is a transferable currency. Ethereum.org describes it as "a new kind of digital money you can send to anyone, anywhere in the world in seconds for as little as a few cents," which is true when the network is quiet and less true when it is congested.

Supply and tokenomics

Ethereum has no fixed cap. Its supply is governed by two opposing flows: issuance to validators, and fee burning.

On issuance, ethereum.org publishes precise before-and-after figures for the 2022 transition to proof-of-stake.

The threshold moves as the amount of staked ether changes, so ether is deflationary on busy days and inflationary on quiet ones rather than permanently one or the other.

This is a materially different design from a hard cap. Ethereum.org's own comparison notes Bitcoin's fixed 21 million supply against Ethereum's dynamic supply. Anyone modeling ETH supply should treat the burn rate as a variable driven by network usage, not a constant.

History

Ethereum's live network launched in 2015 as a general-purpose alternative to single-purpose blockchains. The years that followed produced the token standards that most of the industry now depends on, the first large wave of defi protocols, and the nft market, all built on the same contract layer.

The single largest change in the network's history is The Merge. Ethereum.org records that "The Merge was executed on September 15, 2022," and describes it as "the joining of the original execution layer of Ethereum (the Mainnet that has existed since genesis) with its new proof-of-stake consensus layer, the Beacon Chain." The Beacon Chain had been running in parallel beforehand, which allowed the switch to happen without halting the network or asking users to migrate assets.

The effects were immediate and measurable. Ethereum.org states that "Ethereum's energy consumption dropped by an estimated 99.95%," and reports the issuance reduction described above. What The Merge did not change was transaction throughput or fees, a point ethereum.org is careful to make; scaling work moved to layer-2 networks and to later protocol upgrades rather than to the base layer's capacity.

Risks and what to watch

Smart contracts are the source of most user losses on Ethereum, and they are not Ethereum's responsibility. A contract with a bug, a malicious approval you signed months ago, or a project that turns out to be a rug pull will drain a wallet regardless of how sound the underlying chain is. Reviewing and revoking token approvals is basic hygiene.

Fee volatility is a practical risk. A transaction that costs cents during quiet hours can cost far more during a popular launch, and a transaction that runs out of gas still costs money. mev extraction and front running can also change the price you actually receive on a swap relative to the price you were quoted.

On the staking side, watch how concentrated validator operation becomes, since a large share of stake sitting with a handful of operators is a governance and censorship concern that ethereum.org and the wider research community both track. Delegated staking through an exchange or a liquid staking protocol adds a counterparty on top of the protocol risk.

Regulatory treatment of staking services differs sharply by jurisdiction, and some exchanges have withdrawn staking products from specific markets. The jurisdiction pages on RampAtlas cover what is available where.

Frequently asked questions

What is the difference between Ethereum and ether?

Ethereum is the network. Ether, ticker ETH, is the asset that pays for using it. Ethereum.org phrases it as a blockchain network and development platform "powered by the cryptocurrency ether (ETH)." Exchanges usually list the asset as Ethereum, which is why the two names get used interchangeably in practice.

Does Ethereum have a maximum supply?

No. Unlike Bitcoin's fixed 21 million, Ethereum's supply changes continuously. Validators receive newly issued ether at roughly 0.52% annualized since The Merge, while the base fee on every transaction is burned. Ethereum.org notes that a sustained average gas price of at least 16 gwei over a day would burn more than the roughly 1,700 ETH issued daily.

What changed at The Merge?

Ethereum switched from proof-of-work to proof-of-stake on September 15, 2022. Ethereum.org reports an estimated 99.95% drop in energy consumption and roughly an 88.7% reduction in annual ether issuance. Transaction fees and throughput were not part of that upgrade.

Why are Ethereum transaction fees sometimes high?

Fees are set by demand for block space. Every operation consumes gas, and when many people want to transact at once the price per unit of gas rises. Layer-2 networks that batch transactions and settle to Ethereum exist mainly to reduce this cost.

Where can you buy Ethereum?

Availability varies by country and by US state. See where to buy Ethereum for the exchanges that serve your jurisdiction, and Exchanges to compare fees and features across venues.