Ethereum is a proof-of-stake blockchain for smart contracts and shared state, using ether to price computation and secure consensus.
Ethereum is a programmable blockchain network that executes smart contracts and maintains shared transaction and application state. Ethereum Mainnet uses proof-of-stake consensus, and its native asset, ether (ETH), pays transaction fees and supports validator incentives. Ethereum is the network; ether is the asset.
The names are often used loosely in market commentary, but the distinction is fundamental:
| Term | What it is | Examples of use |
|---|---|---|
| Ethereum | Network, protocol rules, clients, nodes, execution environment, and shared state | Running contracts, verifying transactions, settling application activity |
| Ether or ETH | Native crypto asset | Paying gas, staking, transferring value, collateralizing applications |
| Ethereum token | Asset implemented by a smart contract | Fungible tokens, governance tokens, stablecoins, and NFTs |
| Ethereum application | User-facing software interacting with contracts and nodes | Trading, lending, payments, games, identity, and asset administration |
Owning ETH does not mean owning Ethereum or a share of its software ecosystem. Using an Ethereum application does not necessarily mean the user controls native ETH; the application can rely on tokens, custodians, or layer-2 balances.
Ethereum tracks a global state that includes account balances, contract code, and contract storage. Two broad account types are:
An address identifies an account under network rules. It does not reveal the complete real-world identity, legal owner, or purpose of activity.
The Ethereum Virtual Machine, or EVM, is the execution environment that processes contract instructions. Nodes re-execute transactions so they can independently verify the resulting state. Gas limits bound the work a transaction can request and require users to pay for computation.
EVM compatibility does not make another network Ethereum. Separate EVM-compatible chains can have different validators, bridges, governance, assets, finality, and security.
A current Ethereum node generally runs:
A validator client can be added to perform validator duties. Client diversity matters because a defect concentrated in one implementation can affect a large part of the network.
flowchart LR
A["Wallet constructs and signs transaction"] --> B["Execution client validates and relays"]
B --> C["Validator proposes transaction in a block"]
C --> D["Nodes execute EVM instructions"]
D --> E["Validators attest to the block"]
E --> F["Consensus finalizes checkpoints"]
F --> G["Application and account state updated"]
A transaction can transfer ETH, deploy a contract, or call existing contract code. Before inclusion, it can remain pending or be replaced under applicable rules. After inclusion, confirmations accumulate; proof-of-stake finality provides a stronger protocol checkpoint when the required validator supermajority has attested.
Finality is not the same as correctness. A finalized transaction can still represent a user mistake, malicious contract interaction, stolen key, manipulated price input, or legally disputed transfer.
Suppose a user submits a decentralized-exchange transaction to exchange Token A for Token B.
Assume the interface estimates 100 Token B, with a minimum accepted output of 98 Token B. If execution would produce only 97 Token B, a properly enforced minimum-output condition should revert the swap. That protects the specified price boundary, not the gas fee or the user from interacting with a malicious token or contract.
Ethereum originally used proof-of-work mining. On September 15, 2022, The Merge connected Mainnet’s execution layer with the proof-of-stake consensus layer and ended proof-of-work block production on Ethereum Mainnet.
Under proof of stake:
Proof of stake changes the security and issuance model; it does not make attacks impossible. Concentrated staking, client defects, key compromise, correlated provider failure, censorship, and governance responses remain relevant.
The label “Ethereum 2.0” is now often misleading. The proof-of-stake transition has shipped, while scaling and protocol development continue through separate upgrades. There is no distinct “ETH2” asset that ordinary holders must obtain.
A smart contract is code and state stored at an address. It can define token balances, lending positions, exchange rules, governance votes, collateral requirements, or other application logic.
Important limitations include:
Calling an application decentralized does not identify who controls its interface, upgrade keys, governance, or supporting infrastructure.
Layer-2 systems process or aggregate activity outside Ethereum Mainnet and use mainnet for some combination of data publication, proof verification, and settlement.
| Feature | Ethereum Mainnet | Ethereum layer 2 | Separate EVM-compatible chain |
|---|---|---|---|
| Consensus or settlement base | Ethereum proof of stake | Depends partly on Ethereum plus the layer-2 design | Separate validator or consensus system |
| Typical transaction cost | Can be higher when block space is scarce | Often lower per user transaction | Depends on separate network conditions |
| Asset movement | Native mainnet accounts and contracts | Deposits, withdrawals, and bridges | Cross-chain bridge or exchange transfer often required |
| Additional risks | Base-protocol, validator, client, and fee risk | Sequencer, proof system, bridge, data availability, upgrade, and exit risk | Independent consensus, validator, governance, and bridge risk |
The word rollup or layer 2 does not establish identical security. Analysts should examine data availability, proof design, upgrade authority, sequencer operation, forced-exit mechanisms, and the time and cost required to withdraw.
Ethereum block space is scarce. Users compete through transaction-fee settings, while gas measures the computation and storage requested. When demand rises, fees can increase and low-fee transactions can wait.
Validators or specialized block builders can influence transaction inclusion and ordering. Maximal extractable value, or MEV, refers to value obtained through ordering, inclusion, or exclusion beyond ordinary protocol rewards. Examples can include arbitrage and liquidation ordering, as well as harmful practices such as sandwich attacks.
Layer-2 systems and application design can change fee and ordering dynamics but do not eliminate them.
This page provides general financial and technical education, not a recommendation to use Ethereum or buy any related asset. Smart-contract and cross-network transactions can produce irreversible losses. Verify current protocol, application, custody, legal, and tax details.