What is
Ethereum?

Bitcoin proved you could send money without a bank. Ethereum asked: what else could you do without a middleman?

The answer was smart contracts — programs that run on the blockchain and execute automatically when conditions are met. Think of a vending machine. You put in the right amount, you get the product. No shopkeeper needed. Smart contracts work the same way, but for financial agreements, identity verification, voting systems, and thousands of other use cases.

These programs are public, auditable, and cannot be shut down by any single party. Once deployed on Ethereum, they run as written. That is powerful — and also risky, because bugs in the code cannot easily be patched after deployment.

Ether (ETH) is the native currency of the Ethereum network. Every time you interact with a smart contract — swapping tokens, lending funds, minting an NFT — you pay a fee in ETH. These fees are called “gas.”

Gas prices fluctuate with demand. When the network is busy, fees rise. When it is quiet, they fall. This is why Ethereum developers are constantly working on scaling solutions to bring costs down.

Unlike Bitcoin, Ethereum does not have a fixed supply cap. However, since the network's upgrade in August 2021, a portion of every transaction fee is permanently destroyed (“burned”). During periods of high activity, more ETH is burned than created, making it temporarily deflationary.

DeFi (Decentralised Finance). Lending, borrowing, and trading without banks. Protocols like Aave, Uniswap, and Maker collectively manage billions in value. All run on Ethereum smart contracts.

NFTs.Non-fungible tokens — unique digital certificates of ownership. The 2021 boom was largely an Ethereum phenomenon. The market has cooled significantly, but the underlying technology for proving digital ownership remains.

Stablecoins. Tokens pegged to the value of traditional currencies. USDC and DAI both run primarily on Ethereum. Stablecoins account for the majority of on-chain transaction value.

They solve different problems. Bitcoin aims to be sound money — a store of value with a fixed supply, resistant to inflation and censorship. Ethereum aims to be a global computing platform — a base layer for applications that run without central control.

Bitcoin uses proof of work. Ethereum switched to proof of stake in September 2022, cutting its energy consumption by an estimated 99.95%. Under proof of stake, validators lock up ETH as collateral instead of running energy-intensive mining hardware.

Most investors who hold both treat them as distinct bets. Bitcoin is a bet on digital scarcity. Ethereum is a bet on programmable finance.