Ethereum (ETH) is the second best-known cryptocurrency after Bitcoin and the largest smart-contract platform in the industry. Bitcoin was designed as digital money; Ethereum was designed as a “world computer” — a network where anyone can run programs, issue tokens and build decentralized exchanges, lending protocols and NFT projects. The ERC-20 token standard, most of DeFi and the whole Layer 2 ecosystem all grew out of Ethereum.
Still, many users have open questions: how is ether different from Bitcoin, how did the network move to Proof of Stake, why do fees rise and fall, does ETH have a supply cap, and what are Arbitrum, Optimism and Base actually for? This Ethereum review explains how the network works for beginners and helps existing users put their knowledge in order.
You will learn the project’s history and key upgrades, how validators work, how ETH issuance and burning interact, how gas works, why Layer 2 networks exist, Ethereum’s strengths and weaknesses, who it suits, and how to buy and store ether safely. There is no investment advice or price forecasting here.
- What is Ethereum
- Ethereum history: key upgrades
- How Ethereum works after Proof of Stake
- ETH issuance and burning
- Ethereum key specs: table
- Smart contracts, tokens and dApps
- Fees and gas
- Layer 2 networks
- Ethereum pros, cons and risks
- Who Ethereum is for
- How to buy and store ETH
- FAQ
- Conclusion
- Sources
What is Ethereum
Ethereum is a decentralized, open-source blockchain platform on which developers can build and run applications without a central server. Ether (ETH) is the network’s native cryptocurrency. It pays for transaction fees, serves as collateral for the validators who secure the network, and acts as a base asset across DeFi.
The key difference from Bitcoin is programmability. Ethereum runs the Ethereum Virtual Machine (EVM), a virtual machine that executes smart-contract code identically on every node. That makes it possible to launch your own token, exchange or lending protocol on Ethereum, all running under transparent rules recorded on the blockchain.
It helps to separate the terms: Ethereum is the network and platform, while ETH is the coin. People often use the words interchangeably, but the distinction matters for understanding the network’s economics — demand for ETH is closely tied to how actively the platform itself is used.
Ethereum history: key upgrades
Programmer Vitalik Buterin proposed Ethereum in a white paper that began circulating in late 2013, with the official version published in 2014. A public crowdsale took place the same year, and the co-founders included Gavin Wood, Joseph Lubin, Charles Hoskinson, Anthony Di Iorio and others. The mainnet launched on July 30, 2015, under the name Frontier.
In 2016, the hack of The DAO led to a hard fork: most of the community backed returning the funds, while a minority continued the original chain, which became Ethereum Classic (ETC). Since then, Ethereum has evolved through regular, named network upgrades.
- London (August 2021) introduced EIP-1559: the base portion of every fee is burned, and fee estimation became more predictable.
- The Merge (September 15, 2022) moved the network from Proof of Work to Proof of Stake. According to ethereum.org, energy consumption fell by roughly 99.95%.
- Shapella (April 2023) enabled withdrawals of staked ETH.
- Dencun (March 2024) added “blobs” (EIP-4844), sharply lowering the cost of publishing data for Layer 2 networks.
- Pectra (May 2025) improved accounts (EIP-7702) and raised the maximum effective validator balance to 2,048 ETH.
- Fusaka (December 3, 2025) introduced PeerDAS, which lets nodes verify data availability by sampling and scales capacity for Layer 2.
The next major upgrade, Glamsterdam, is in testing at the time of writing; its mainnet activation date is set by core developers on public calls.
How Ethereum works after Proof of Stake
Since September 2022, Ethereum has used Proof of Stake. Instead of miners with graphics cards, the network is secured by validators — participants who lock up (stake) ETH and run dedicated software. Activating a single validator requires at least 32 ETH.
Time on the network is divided into 12-second slots. In each slot, a randomly selected validator proposes a block and committees of other validators vote on it. Thirty-two slots form an epoch (about 6.4 minutes). Once a block gathers enough support across two epochs, it becomes finalized — reversing it would require destroying an enormous amount of staked ETH.
Honest validators earn rewards, while misbehavior — such as signing two conflicting blocks — triggers slashing: part of the stake is burned and the validator is forcibly exited. Users without 32 ETH can take part through staking pools and liquid-staking services. Our guide on what staking is covers the mechanics in detail.
Every Ethereum node now has two parts: an execution client (processes transactions and runs the EVM) and a consensus client (handles Proof of Stake). Having several independent clients written by different teams reduces the risk that a single bug halts the entire network.
ETH issuance and burning
Unlike Bitcoin, ETH has no hard supply cap. New coins are issued as validator rewards, and the amount depends on the total quantity of staked ETH. At the same time, EIP-1559 applies: the base fee of every transaction does not go to the validator but is burned — permanently removed from circulation.
As a result, net ETH supply can either grow or shrink. During periods of heavy mainnet activity, more ETH is burned than issued and supply falls. When activity shifts to Layer 2 networks and mainnet fees are low, burning slows down and net issuance turns positive. So claims that “ETH is deflationary” are only true for certain periods.
The smallest unit of ether is the wei: 1 ETH equals 10 to the power of 18 wei, a one followed by eighteen zeros. In practice, fees are usually quoted in gwei (1 gwei = one billion wei = 0.000000001 ETH).
Ethereum key specs: table
| Parameter | Ethereum (ETH) | For comparison: Bitcoin (BTC) |
|---|---|---|
| Mainnet launch | July 30, 2015 | January 3, 2009 |
| Founder | Vitalik Buterin and co-founders | Satoshi Nakamoto |
| Consensus | Proof of Stake (since September 2022) | Proof of Work |
| Block time | 12-second slots | About 10 minutes |
| Supply cap | None; issuance partly offset by burning | 21,000,000 BTC |
| Smart contracts | Fully featured, EVM | Limited scripting language |
| Smallest unit | 1 wei = 0.000000000000000001 ETH | 1 satoshi = 0.00000001 BTC |
| Address format | 0x + 40 hexadecimal characters | 1…, 3…, bc1q…, bc1p… |
| Token standards | ERC-20, ERC-721, ERC-1155 | — |
Smart contracts, tokens and dApps
A smart contract is a program deployed on the blockchain that executes predefined conditions automatically. A decentralized exchange contract, for example, swaps one token for another according to a formula, and a lending protocol issues loans against collateral and liquidates positions when collateral loses value. Our article on what a smart contract is explains the concept in depth.
Thousands of tokens live on Ethereum. Fungible tokens follow the ERC-20 standard — that is how USDT and USDC are issued on Ethereum, for instance. Non-fungible tokens (NFTs) use ERC-721 and ERC-1155. Shared standards let wallets and apps support new tokens without custom integration work.
An entire ecosystem of decentralized applications (dApps) has grown around smart contracts: DEXs, lending platforms, stablecoins, derivatives, naming services (ENS) and DAOs for collective governance. The EVM has also become an industry standard: many other networks are compatible with it, so developers and users can carry their skills and tools over from Ethereum.
Fees and gas
Every operation on Ethereum consumes computing resources, measured in units of gas. A simple ETH transfer uses 21,000 gas, while interacting with a complex smart contract uses far more. The final fee equals the gas consumed multiplied by the gas price.
The gas price has two components: the base fee, which the protocol sets automatically based on how full blocks are and which is burned, and the priority fee (tip), which goes to the validator. When demand for block space is high, the base fee rises; when demand is low, it falls. That is why transaction costs on Ethereum are not fixed and can change noticeably over the course of a day.
One more important detail: every operation on the network, including an ERC-20 token transfer, requires ETH in your balance. If you hold USDT on Ethereum but no ether, you will not be able to send those tokens. We cover ways to save on fees in our guide to gas on Ethereum.
Layer 2 networks
Ethereum mainnet deliberately limits throughput so that nodes are not restricted to large data centers. The community has assigned scaling to Layer 2 networks. They process transactions separately and publish compressed data and proofs to Ethereum mainnet, inheriting part of its security.
There are two main rollup types. Optimistic rollups (Arbitrum, Optimism, Base) assume transactions are valid and allow a window to challenge fraud. ZK rollups (such as zkSync) attach a cryptographic proof of validity to every batch. To a user, an L2 looks like a separate network in the wallet with the same 0x address format, but much lower fees.
The Dencun and Fusaka upgrades were aimed primarily at making L2s cheaper. Rollups come with their own trade-offs, though: varying degrees of sequencer decentralization, bridges, and withdrawal times back to mainnet. We compare the popular options in our Ethereum Layer 2 comparison.
Ethereum pros, cons and risks
Advantages
- The largest smart-contract ecosystem. The most DeFi protocols, stablecoins, tooling and developers.
- Strong security and decentralization. A large amount of staked ETH, many validators and several independent clients.
- The EVM standard. Ethereum skills and tools carry over to dozens of compatible networks.
- A transparent roadmap. Upgrades go through open discussion and extensive testing.
- Low energy use since the move to Proof of Stake.
Disadvantages
- Expensive mainnet transactions during periods of heavy demand.
- L2 fragmentation. Funds and liquidity are spread across many networks, and moving between them requires bridges.
- Complexity for beginners. Gas, networks, signatures and token approvals are easy to mix up.
- No fixed supply cap, and net inflation depends on network activity.
Risks
Beyond price volatility, Ethereum users face smart-contract risk: bugs or exploits in protocols can lead to losses. Phishing sites that ask you to sign token “approvals” and then drain the tokens are common. Staking carries slashing risk and dependence on the provider. Regulation of ETH and related services also differs from country to country.
Who Ethereum is for
Ethereum suits people who want to use DeFi, NFTs and decentralized applications; smart-contract developers; those who see ETH as a long-term asset tied to the growth of the largest programmable platform; and those who want to stake and understand the associated risks.
Ethereum may not suit people who need cheap small transfers on mainnet without using L2s; those looking for a simple asset with fixed issuance; and those unwilling to learn about networks, gas and signature security. For simple, frequent stablecoin transfers, other networks or L2s are often more convenient.
How to buy and store ETH
You can buy ETH on a centralized exchange, through P2P, or by swapping another cryptocurrency for it. If you hold Bitcoin or USDT, an instant exchanger is the fastest route: on RubyCash you can swap BTC to ETH without registration and receive ether straight to your own wallet. See our step-by-step guide on how to exchange BTC to ETH.
- Install a wallet that supports Ethereum. A non-custodial browser, mobile or hardware wallet all work.
- Write down your seed phrase offline and never enter it on any website.
- Pick the right network. ETH on Ethereum mainnet and ETH on Arbitrum or Base are balances on different networks, even though the 0x address is the same.
- Copy your address and verify it in full before sending.
- Send a test transaction the first time.
- Keep some ETH for gas if you plan to send tokens.
- Review and revoke token approvals you granted to apps you no longer use.
Exchange BTC to ETH
FAQ
Bitcoin was built primarily as digital money with a capped supply. Ethereum is a programmable platform that runs smart contracts, tokens and decentralized applications. Ethereum also uses Proof of Stake, while Bitcoin uses Proof of Work.
No, ETH has no hard cap. New coins are issued to validators, while the base portion of fees is burned. Depending on network activity, net supply can either grow or shrink.
The Merge was the September 15, 2022 upgrade that moved Ethereum from Proof of Work to Proof of Stake. Ether mining ended, and the network is now secured by validators who stake ETH.
Running your own validator requires at least 32 ETH. You can participate with less through staking pools and liquid-staking services, but that adds provider and smart-contract risk.
Block space is limited, and when demand is high the base fee rises automatically. Complex smart-contract interactions consume more gas than a simple transfer. Layer 2 networks and transacting at quieter times help reduce costs.
Yes. Fees for any operation on Ethereum are paid in ETH, including ERC-20 token transfers. Without ether in your balance, you cannot send USDT from a non-custodial wallet.
The 0x address is the same on both networks, but balances are tracked separately. If the recipient expects funds on Arbitrum and you send them on Ethereum, they will arrive on mainnet instead. Always choose the network the recipient specified.
Gwei is a fractional unit of ether equal to one billionth of an ETH. Gas prices are usually quoted in gwei, which is why the term appears so often in wallet fee screens.
Conclusion
Ethereum is the largest smart-contract platform, with a mature ecosystem of DeFi, tokens and Layer 2 networks. The move to Proof of Stake, fee burning and successive upgrades such as Dencun, Pectra and Fusaka have made the network more efficient and better prepared for scaling.
Ethereum also comes with trade-offs: variable mainnet fees, fragmentation across L2s, no fixed supply cap and a fairly steep learning curve for newcomers. These are worth weighing before you buy ETH or start using DeFi.
If you decide to use ether, start with a reliable wallet, choose the network carefully on every transfer and always check what you are signing. That habit protects you from the most common mistakes.