Ethereum is a programmable blockchain — a computer that nobody owns and nobody can switch off, that lets anyone build applications that run exactly as written, every time, without any middleman.
Bitcoin stores value. Ethereum runs programs.
If Bitcoin is digital gold — a place to store value — Ethereum is something different. It is a platform. A shared computer that thousands of people around the world run simultaneously, where anyone can deploy code that executes automatically when conditions are met.
This code is called a smart contract. And it changes what is possible. Imagine a vending machine: you put in money, press a button, and it gives you what you paid for — no shop assistant needed, no trust required. Ethereum makes that possible for far more complex agreements: loans, trades, insurance, voting, ownership records, and more.
Nobody controls Ethereum. Not its creator. Not any government. Not any company. The code runs on thousands of computers simultaneously, so there is no single point that can be shut down or censored.
Who built it — and why?
Ethereum was proposed in 2013 by Vitalik Buterin, a Canadian-Russian programmer who was 19 years old at the time. He had been involved with Bitcoin and believed it was too limited — it could transfer value, but it could not run complex programs. He wrote a whitepaper describing a new kind of blockchain that could.
Ethereum launched in July 2015. It was built by a small group including Gavin Wood, who wrote the technical specification, and Joseph Lubin, who helped fund it. Unlike Bitcoin — where the creator vanished — Ethereum's early team is publicly known, and an organisation called the Ethereum Foundation continues to support its development.
What does it actually do that Bitcoin cannot?
The key difference is programmability. Bitcoin's rules are deliberately simple and fixed. Ethereum allows developers to deploy their own programs — smart contracts — directly onto the blockchain. Once deployed, those programs cannot be changed or deleted. They run exactly as written, automatically, every time someone interacts with them.
This is how DeFi works. A lending protocol on Ethereum is just code: deposit ETH, borrow another asset, repay with interest, get your ETH back. No bank involved. No loan officer. No business hours. The code handles all of it, 24 hours a day, for anyone in the world with an internet connection.
It is also how most NFTs work. The ownership record of a piece of digital art lives in an Ethereum smart contract. When it is sold, the contract automatically transfers ownership and sends a royalty to the creator — no gallery or auction house needed.
What is ETH — the actual coin?
ETH is the fuel that runs the Ethereum computer. Every time someone sends a transaction or interacts with a smart contract, they pay a small fee in ETH. This fee is called gas. It compensates the people running the computers that process the transaction.
Unlike Bitcoin's hard cap of 21 million coins, Ethereum has no fixed maximum supply — but since a major upgrade in 2021 (called EIP-1559), a portion of every transaction fee is permanently destroyed rather than paid to validators. This makes ETH deflationary during periods of high network activity.
The Merge — Ethereum's biggest change
In September 2022, Ethereum completed what it called "The Merge" — one of the most significant events in crypto history. Before it, Ethereum used the same energy-intensive mining system as Bitcoin. After it, Ethereum switched to a different system called Proof of Stake, where validators lock up ETH as collateral instead of using electricity to secure the network.
The Merge reduced Ethereum's energy consumption by approximately 99.95%. Overnight, one of the world's largest blockchains stopped consuming as much electricity as a medium-sized country.
Is it legal in India?
Yes. ETH is legal to buy, sell, and hold in India under the same rules as all Virtual Digital Assets — 30% flat tax on gains, 1% TDS on transactions above the threshold. It trades on all major Indian exchanges. See India's crypto regulation page for full detail.
How smart contracts work in practice
A smart contract is a program stored on the Ethereum blockchain. Once deployed, it has its own address — just like a wallet — and anyone can interact with it by sending a transaction. The contract's code executes automatically based on the transaction's inputs.
A simple example: a crowdfunding contract. It holds ETH sent by contributors. If the funding goal is reached by a deadline, it releases the funds to the project. If not, it automatically refunds every contributor. This all happens without anyone managing it — the code enforces the rules perfectly, every time.
More complex examples include Uniswap — an exchange where two people can trade tokens without a company in the middle — or Aave, where anyone can deposit assets and earn interest, or borrow against collateral, entirely through code. These protocols collectively hold tens of billions of dollars of value.
DeFi lending and trading (Aave, Uniswap, Compound), NFT ownership and royalties (most major NFT collections run on Ethereum), stablecoin issuance (DAI is created by a smart contract, not a company), tokenised real-world assets (bonds, property), corporate treasury operations, and as the settlement layer for billions in daily transaction volume.
Gas: how transactions are priced
Every operation on Ethereum costs a certain amount of "gas" — a unit measuring computational effort. A simple ETH transfer costs 21,000 gas. A complex smart contract interaction might cost hundreds of thousands. Users pay gas fees in ETH, and the fee fluctuates based on network demand.
The EIP-1559 upgrade (August 2021) reformed the fee market. It introduced a "base fee" — a minimum price set algorithmically based on network congestion — that is burned (destroyed) rather than paid to validators. Users can add a "priority tip" to get faster inclusion. This mechanism makes fee estimation more predictable and reduces ETH supply when usage is high.
When Ethereum is busy — during NFT launches, token drops, or market volatility — gas fees can spike significantly. This is why Layer 2 solutions like Arbitrum and Optimism exist: they process transactions off the main chain and settle periodically to Ethereum, reducing costs by 10–100x.
Key metrics for Ethereum: Total Value Locked (TVL) across DeFi protocols built on it, daily active addresses, gas fees (indicator of network demand), ETH staking rate (how much ETH is locked as validator collateral), and net issuance (whether ETH supply is shrinking or growing). Live data: CoinGecko · Etherscan · ultrasound.money (ETH supply tracker).
Proof of Stake: how Ethereum is secured now
Since The Merge (September 2022), Ethereum uses Proof of Stake. Instead of miners competing to solve puzzles, validators lock up (stake) a minimum of 32 ETH as collateral. They are randomly selected to propose and attest to new blocks. If they behave honestly, they earn rewards. If they try to cheat the network, a portion of their staked ETH is destroyed — a penalty called slashing.
As of April 2026, over 30 million ETH is staked — more than 25% of total supply. This means a large fraction of all ETH is committed to securing the network, reducing circulating supply and earning rewards for its holders. Validators earn approximately 3–5% annually, paid in newly issued ETH.
You do not need 32 ETH to participate. Liquid staking protocols like Lido and Rocket Pool allow anyone to stake any amount, receiving a liquid token (stETH, rETH) that represents their staked position and accrues rewards.
The Ethereum ecosystem: what lives on it
Ethereum is the foundation layer for an enormous ecosystem. Thousands of tokens, protocols, and applications run as smart contracts on Ethereum's main chain. The most significant categories: DeFi protocols (Uniswap, Aave, Compound, MakerDAO, Curve), NFT platforms (OpenSea settlements, most major collections), stablecoins (USDC, DAI, USDT on Ethereum), Layer 2 networks (Arbitrum, Optimism, zkSync, StarkNet, Base), and RWA tokenisation platforms.
Ethereum also has the largest developer community of any blockchain — measured by active GitHub contributors, hackathon participants, and deployed smart contracts. This network effect is one of the primary reasons it remains dominant despite competition from faster, cheaper chains like Solana.
The whitepaper: Buterin's original vision
Vitalik Buterin published the Ethereum whitepaper in late 2013, titled "Ethereum: A Next-Generation Smart Contract and Decentralized Application Platform." Its central insight was that Bitcoin's scripting language (Script) was intentionally limited and that a Turing-complete blockchain — one capable of running any computation — would unlock an entirely new design space for decentralised applications.
The yellow paper, authored by Gavin Wood in 2014, formalised the Ethereum Virtual Machine (EVM) — the specification that defines exactly how Ethereum contracts execute. The EVM remains the industry standard; dozens of other blockchains (Polygon, BNB Chain, Avalanche C-Chain, Arbitrum, Optimism) are EVM-compatible, meaning Ethereum contracts deploy on them unchanged.
Sources: Buterin, V. (2013). Ethereum Whitepaper. ethereum.org/en/whitepaper/ · Wood, G. (2014). Ethereum Yellow Paper. ethereum.github.io/yellowpaper/paper.pdf
The Ethereum Virtual Machine (EVM)
The EVM is a sandboxed, stack-based virtual machine that executes smart contract bytecode. Every Ethereum node runs the EVM and executes the same transactions, arriving at the same state — this is how global consensus is maintained. The EVM is deterministic: given the same input and state, it always produces the same output, on every node worldwide.
Smart contracts are written in high-level languages (primarily Solidity, also Vyper) and compiled to EVM bytecode. The bytecode is deployed to the blockchain at a specific address and executed when called. Each EVM opcode (ADD, MUL, SLOAD, SSTORE, CALL, etc.) has a defined gas cost, making computation costs predictable and preventing infinite loops (a computation that runs too long simply runs out of gas and reverts).
EVM state consists of accounts (externally owned accounts with a balance and nonce; contract accounts with balance, nonce, code, and storage), the world state (a Merkle Patricia Trie mapping addresses to account states), and the transaction pool.
Ethereum uses a modified Merkle Patricia Trie (MPT) for state storage. The state root — a 32-byte hash of the entire world state — is included in every block header. This allows any node to verify the full state of the network by computing a single hash. The transition from PoW to PoS (The Merge, September 2022, block 15537393) replaced the ethash mining algorithm with the Gasper consensus protocol — a combination of Casper FFG (finality) and LMD-GHOST (fork choice rule).
The Merge: technical mechanics
The Merge connected the existing Ethereum execution layer (the chain that ran since 2015) with the Beacon Chain (launched December 2020), which had been running Proof of Stake consensus in parallel. At the Terminal Total Difficulty (TTD) of 58750000000000000000000, the execution layer stopped accepting PoW blocks and began following the Beacon Chain's PoS consensus.
The Beacon Chain uses a slot/epoch structure: one slot every 12 seconds, 32 slots per epoch (6.4 minutes). Each slot a validator is randomly selected to propose a block; committees of validators attest to block validity. Finality is achieved after two consecutive justified checkpoints — approximately 12–15 minutes after a transaction is included.
The Gasper consensus protocol combines Casper the Friendly Finality Gadget (Casper FFG) for economic finality with Latest Message Driven GHOST (LMD-GHOST) for fork choice. This provides both liveness (the chain keeps producing blocks) and safety (finalised blocks cannot be reverted without destroying at least one-third of staked ETH).
Sources: Buterin et al. (2020). Combining GHOST and Casper. arxiv.org/abs/2003.03052 · ethereum.org/en/developers/docs/consensus-mechanisms/pos/
EIP-1559 and ETH supply mechanics
EIP-1559 (London upgrade, August 2021) reformed Ethereum's fee market. Pre-1559, users bid in a first-price auction for block space. Post-1559, a protocol-set base fee adjusts ±12.5% each block to target 50% block utilisation. The base fee is burned; only priority tips go to validators.
The burn mechanism created a deflationary pressure on ETH supply. When network activity is high enough that burn rate exceeds new ETH issuance to validators, ETH supply contracts. This is tracked publicly at ultrasound.money. Since The Merge, the combination of reduced validator issuance (~0.3% annual) and base fee burns has made ETH net deflationary during periods of sustained demand.
Source: EIP-1559: Fee market change for ETH 1.0 chain. eips.ethereum.org/EIPS/eip-1559
Key protocol parameters
- Consensus: Gasper (Casper FFG + LMD-GHOST)
- Block time: 12 seconds (one slot)
- Finality time: ~12–15 minutes (two epochs)
- Minimum validator stake: 32 ETH
- Slashing penalty: Up to full 32 ETH for double-signing
- Annual validator yield: ~3–5% (variable, based on total staked)
- Gas limit per block: ~30 million gas (targeting 15M average)
- Smart contract language: Solidity (primary), Vyper
- VM: EVM (256-bit word size, stack-based)
- Hash function: Keccak-256
- Signature scheme: ECDSA (secp256k1); BLS12-381 for validators
Source: ethereum.org/en/developers/docs/ · github.com/ethereum/execution-specs