What is Ethereum (ETH)?

The second-largest cryptocurrency and the dominant platform for smart contracts, defi, and tokens.

Most tokens other than Bitcoin run on Ethereum or on chains derived from it. See the Ethereum coin page for current measures. The network's native asset, ether, pays for computation, and the same asset secures the network when staked.

The distinction worth holding onto is between the asset and the platform. People buy ether; developers build on Ethereum. Buying ether does not give you a share of anything built on it, and a token running on Ethereum is not a claim on ether.

How it works

Ethereum runs a shared computer. Every full node executes the same contract code in the evm and reaches the same result, which is what makes the state verifiable rather than reported.

Consensus moved from proof of work to proof of stake at the Merge in September 2022 (source: Ethereum Foundation). Since then, validators stake ether to propose and attest to blocks, time is divided into slots and epochs, and blocks become final after two epochs, roughly thirteen minutes.

Fees follow the eip 1559 design. A protocol-set base fee is burned and an optional priority fee goes to the proposer, so the network destroys part of its own asset every block while issuing new ether to validators. Net supply change is the difference between the two, and it can run in either direction depending on how busy the network is.

Scaling happens on layer 2 networks rather than on Ethereum itself. Rollups execute transactions elsewhere and post data back, which is why the same token can exist at cheaper cost on Arbitrum, Base, or Optimism, and why a withdrawal address is only valid on the network it was given for.

Example

Illustrative arithmetic for a plain transfer. It costs 21,000 gas. At a base fee of 15 gwei plus a 1 gwei tip, that is 21,000 multiplied by 16 gwei, or 0.000336 ETH. At an illustrative price of $3,000 per ether, the transfer costs about $1.01, of which roughly 94 cents is burned. The same transfer on a rollup typically costs a small fraction of that, which is the entire argument for layer 2.

Why it matters when you buy

Ether is listed on essentially every venue, so the decision is about cost and jurisdiction rather than availability, and the network you withdraw on changes what the transfer costs and where the funds land. Compare venue costs at the fee comparison, check what is available where you live at the available-in pages, and read network characteristics at the chain pages.

Related terms

evm — the execution environment, gas — what computation costs, eip 1559 — how fees are set, proof of stake — how the chain reaches consensus, layer 2 — where cheap transactions happen, staking — earning by securing the network.

Questions

Do I need ether to use tokens on Ethereum?

Yes. Every transaction on the network, including moving a token, is paid for in ether. A wallet holding only tokens cannot move them until it also holds a small ether balance.

What is the difference between ETH and an ERC-20 token?

Ether is the network's native asset and is tracked by the protocol itself. An erc 20 token is a balance recorded inside a contract, which is why tokens need ether to move and ether does not.

Should I buy ether on mainnet or on a layer 2?

Exchanges usually let you withdraw to either. Mainnet costs more per transfer and is the network everything settles to; a rollup costs less and requires a bridge to move back. Check which networks your venue supports before deciding.