What is Ethereum?
If Bitcoin is digital gold, Ethereum is a digital world computer. It's a platform that lets anyone build and use applications without middlemen.
Ethereum: More Than Just Money
Ethereum was created in 2015 by Vitalik Buterin. While Bitcoin is primarily digital money, Ethereum is a programmable blockchain.
Bitcoin is like a calculator - it does one thing (transfers value) really well. Ethereum is like a smartphone - it can run thousands of different applications.
Key facts:
- ETH is the cryptocurrency (like gas for the Ethereum machine)
- Ethereum is the network/platform
- Second largest crypto by market cap
- Most widely used blockchain for applications
Smart Contracts - The Magic of Ethereum
Smart contracts are programs that run automatically when conditions are met. No lawyers, no middlemen, no trust needed.
Imagine a vending machine: you insert money → select item → machine gives you the item. No cashier needed. Smart contracts work the same way - they execute automatically when conditions are met.
What smart contracts can do:
- Automatically pay creators royalties when NFTs are sold
- Lend and borrow money without banks
- Create voting systems that can't be rigged
- Build games where players truly own their items
- Execute trades instantly when conditions are met
Ethereum vs Bitcoin
Both are important, but they serve different purposes:
| Feature | Bitcoin (BTC) | Ethereum (ETH) |
|---|---|---|
| Primary Use | Digital gold, store of value | Platform for apps |
| Smart Contracts | Limited | Full support |
| Supply | 21 million cap | No hard cap |
| Transaction Speed | ~10 minutes | ~12 seconds |
| Consensus | Proof of Work | Proof of Stake |
Bitcoin and Ethereum aren't really competing. Bitcoin is trying to be sound money. Ethereum is trying to be a global computer. Many investors hold both.
What's Built on Ethereum
Ethereum powers a massive ecosystem of applications:
DeFi (Decentralized Finance)
Banking without banks. Lend, borrow, trade, and earn interest.
- Uniswap - Trade tokens without an exchange
- Aave - Lend and borrow crypto
- MakerDAO - Create stablecoins
NFTs (Non-Fungible Tokens)
Unique digital ownership. Art, music, games, collectibles.
- OpenSea - NFT marketplace
- CryptoPunks - Historic NFT collection
- ENS - Blockchain domain names
Gaming & Metaverse
Games where you truly own your items.
- Axie Infinity - Play-to-earn game
- Decentraland - Virtual world
Using Ethereum costs "gas" - fees paid in ETH. During busy times, fees can be high ($5-50+ per transaction). Layer 2 solutions like Arbitrum and Optimism offer cheaper alternatives.