Overview
Ethereum is a decentralized, open-source blockchain platform that supports smart contracts and is the foundation for DeFi, NFTs, and Web3 applications. Launched in July 2015 with ETH as its native token, it introduced the idea of a programmable blockchain where developers can deploy applications that run exactly as written. It remains the largest smart contract ecosystem by developer activity and total value locked.
How It Works
Ethereum executes smart contracts on a virtual machine shared by all nodes, and transactions pay gas fees priced in ETH. In 2022 it completed the Merge, transitioning from proof of work to proof of stake, which cut energy use dramatically and introduced staking. As of 2026, Ethereum is the settlement layer of a broad Layer 2 ecosystem, with rollups handling most user activity while Ethereum guarantees security and finality.
Why It Matters
Ethereum defined the template for programmable money and remains the center of gravity for Web3. Its security and network effects support a massive ecosystem of tokens, applications, and standards. Its trade-offs, including high base-layer fees, are precisely what its Layer 2 roadmap was designed to address, making understanding Ethereum essential to understanding most of the industry.
Related Concepts
Ethereum's ecosystem is built on Concepts like Smart Contracts, DeFi, and the ERC token standards. It anchors Layer 2s such as Arbitrum and Optimism, runs on Proof of Stake with Validators, and its address system is extended by ENS and Account Abstraction.