What is Ethereum?

A blockchain that runs programs

Bitcoin’s ledger records who owns which coins. Ethereum’s ledger also stores programs and their data, and every node runs the same code to agree on the result. A smart contract is such a program: code deployed at an address, which anyone can call and which runs exactly as written. Ethereum went live in July 2015.

The code runs on the Ethereum Virtual Machine (EVM). Other networks run the same machine, among them BNB Smart Chain, Polygon PoS and Ethereum’s own layer 2s. That is why one Ethereum address works on all of them, and why Wardcrest’s EVM tools cover several chains at once.

Two kinds of account

Where Bitcoin tracks individual unspent coins, Ethereum keeps accounts with balances, like a bank. There are two kinds.

• Externally owned accounts are ordinary wallets, controlled by a private key. Each keeps a counter, the nonce, so every transaction it sends runs once and in order.
• Contract accounts are controlled by their code. They can hold ETH and tokens, and move them only as the code allows.

Addresses are 0x followed by 40 hexadecimal characters. The mix of capital and small letters is a checksum (EIP-55) that catches typos, and the address validator checks it for you. Since the Pectra upgrade in May 2025, an ordinary account can also point to contract code (EIP-7702), which lets wallets offer features such as bundling several actions into one transaction.

Ether, gas and fees

Every operation has a fixed cost in gas. A plain ETH transfer uses 21,000 gas; a token swap often uses 100,000 or more. You pay the gas used multiplied by the gas price, which has two parts: a base fee set by the protocol, which is burned, and a tip for the validator. Gas prices are quoted in gwei, a billionth of an ether, and the unit converter moves between wei, gwei and ether exactly. Gas fees on Ethereum and layer 2s goes into the detail.

Ether has no fixed maximum supply. New ether is issued to validators and burned base fees remove it, so the total grows or shrinks depending on how busy the network is.

Tokens and apps

Most tokens follow the ERC-20 standard: a contract keeps a table of balances and updates it when asked. Sending a token is therefore a call to the token’s contract, not a movement of ether, which is why a token transfer still needs a little ETH for gas. NFTs use the ERC-721 and ERC-1155 standards. Exchanges, lending markets and stablecoins are contracts too, and because contracts can call each other, they can be combined. That is what people mean by decentralised finance.

Proof of stake

Ethereum replaced mining with proof of stake on 15 September 2022, in an upgrade known as the Merge. Running a validator takes at least 32 ETH as collateral. Validators propose and vote on a block every 12 seconds, and lose part of their deposit, a penalty called slashing, if they sign conflicting blocks.

Holders without 32 ETH, or without the time to run a validator, can stake through a pool or an exchange, taking on that provider’s risks as well. The staking rewards calculator shows what an advertised rate compounds to over time.

Layer 2 networks

Each Ethereum block has limited room, so fees rise when demand does. Rollups such as Arbitrum One, OP Mainnet and Base execute transactions on their own and post the data back to Ethereum, which secures them. Since the Dencun upgrade in March 2024 that data has been much cheaper to post, and fees on these networks are usually a small fraction of Ethereum’s.

The same address exists on every one of these networks, but balances do not carry over: ETH on Base is not ETH on Ethereum, and moving it between them takes a bridge. Always check which network a payment is on, and compare what the same action costs on each chain with the gas tracker.