What is Ethereum?

Ethereum is a blockchain that can run programs, not only record payments. Its coin is called ether, or ETH. This lesson explains what that adds and how Ethereum differs from Bitcoin.

From payments to programs

Bitcoin's ledger answers one question: who owns which coins. In November 2013, a programmer named Vitalik Buterin proposed a blockchain that could also store and run code. Ethereum went live on 30 July 2015.

Programs on Ethereum are called smart contracts. Every node runs them the same way, so no single company can switch one off or quietly change its result. Lesson 7 looks at them closely.

What ether is for

Ether has two jobs on the network:

Paying fees. Every action uses computing work, and you pay for it in ETH. The fee is called gas, and Lesson 32 explains it.
Securing the network. People lock up ETH to help confirm transactions and earn rewards for doing it. This is called staking, and Lesson 8 covers it.

People also hold and trade ETH as an asset, as they do with bitcoin.

How it differs from Bitcoin

	Bitcoin	Ethereum
Launched	2009	2015
Main purpose	Money and savings	Running applications
Supply	Capped at 21 million	No fixed cap
Secured by	Mining (proof of work)	Staking (proof of stake)
New block	About every 10 minutes	Every 12 seconds

Ether has no maximum supply. New ETH is issued to the people who secure the network, and part of every transaction fee is destroyed, or burned. The total can rise or fall depending on how busy the network is.

What people build on it

Smart contracts made new kinds of assets and services possible:

Tokens, including dollar-linked stablecoins (Lessons 9 and 10)
Lending and trading services that run without a company in the middle
Digital collectibles known as NFTs

Most of these are experimental, and many have failed or been hacked. Running on Ethereum does not make a project safe.

Who controls it

Nobody owns Ethereum, and it has no chief executive. Changes are proposed in public as Ethereum Improvement Proposals and take effect only if the people running the software adopt them. A non-profit, the Ethereum Foundation, funds research but cannot dictate changes.

Layer 2 networks

Ethereum's main network can be slow and costly when busy. Separate networks called layer 2s process transactions more cheaply and record their data back on Ethereum. Lesson 33 explains how to avoid mistakes when moving between networks.