Ethereum Explained: The World's Programmable Blockchain

Ethereum is the second-largest cryptocurrency by market cap and the most widely used blockchain for decentralized applications. This guide covers everything you need to understand Ethereum in 2026.

What is Ethereum?

Created by Vitalik Buterin and launched in 2015, Ethereum extends Bitcoin's concept of decentralized money to decentralized computing. It's often called a "world computer" because:

• Anyone can deploy code that runs on the network
• Applications run exactly as programmed, without downtime or censorship
• Users interact with apps without trusting a central authority

Smart Contracts: The Core Innovation

Smart contracts are self-executing programs stored on the blockchain:

``solidity // Simple smart contract example contract SimpleStorage { uint256 public value; function setValue(uint256 _value) public { value = _value; } } ``

Key properties:

• Immutable: Once deployed, code cannot be changed
• Transparent: Anyone can read the code
• Trustless: Executes exactly as written
• Composable: Contracts can interact with each other

The Ethereum Virtual Machine (EVM)

The EVM is Ethereum's runtime environment:

• Executes smart contract bytecode
• Ensures consistent execution across all nodes
• Measures computational effort in "gas"
• Has been adopted by many other chains (Polygon, BSC, Arbitrum)

Proof of Stake: The Merge

In September 2022, Ethereum transitioned from Proof of Work to Proof of Stake:

Aspect

Before (PoW)

After (PoS)

Energy Use	~100 TWh/year	~0.01 TWh/year
Security	Mining	Staking
Issuance	~4.5M ETH/year	~0.5M ETH/year
Finality	~15 minutes	~15 minutes

Staking

You can earn rewards by staking ETH:

• Solo Staking: Run your own validator (32 ETH minimum)
• Pooled Staking: Join a staking pool (Lido, Rocket Pool)
• Exchange Staking: Stake through Coinbase, Kraken, etc.

Current APY: ~4-5%

Layer 2 Scaling

Ethereum's base layer handles ~15-30 transactions per second. Layer 2 solutions scale this:

Optimistic Rollups

• Arbitrum: Largest L2 by TVL
• Optimism: Powers the OP Stack ecosystem
• Base: Coinbase's L2

ZK Rollups

• zkSync Era: ZK-SNARK based
• Starknet: STARK proofs
• Polygon zkEVM: EVM-equivalent
• Scroll: Community-focused

L2 Benefits

• 10-100x lower fees
• 100x+ higher throughput
• Security inherited from Ethereum

The DeFi Ecosystem

Ethereum hosts the largest DeFi ecosystem:

Decentralized Exchanges (DEXs)

• Uniswap: Largest DEX, ~$1B+ daily volume
• Curve: Specialized for stablecoins
• Balancer: Weighted pools

Lending Protocols

• Aave: Multi-asset lending
• Compound: Algorithmic interest rates
• MakerDAO: DAI stablecoin

Liquid Staking

• Lido: stETH, largest protocol by TVL
• Rocket Pool: rETH, decentralized
• Coinbase: cbETH

Total Value Locked (TVL)

Ethereum and L2s combined: $50B+ (as of 2026)

NFTs and Digital Ownership

Ethereum pioneered NFTs (Non-Fungible Tokens):

• ERC-721: Standard for unique tokens
• ERC-1155: Multi-token standard
• Use cases: Art, gaming, music, identity, tickets

Major marketplaces: OpenSea, Blur, Magic Eden

How to Use Ethereum

1. Get a Wallet

• MetaMask: Most popular browser extension
• Rainbow: Mobile-focused
• Rabby: Multi-chain support
• Hardware: Ledger, Trezor for security

2. Buy ETH

Purchase on an exchange and transfer to your wallet.

3. Interact with dApps

Connect your wallet to decentralized applications:

Visit the dApp (e.g., uniswap.org)

Click "Connect Wallet"

Approve the connection

Sign transactions as needed

Gas Fees

Every transaction requires gas:

• Measured in Gwei (1 Gwei = 0.000000001 ETH)
• Higher gas = faster confirmation
• Use gas trackers to find optimal times

ETH Tokenomics

Metric

Value

Current Supply	~120M ETH
Max Supply	No hard cap
Issuance	~0.5M/year (PoS)
Burn Rate	Variable (EIP-1559)
Net Issuance	Often negative (deflationary)

EIP-1559 and Burning

Since August 2021, base fees are burned:

• High activity = more ETH burned
• Can result in deflationary periods
• Over 4M ETH burned to date

Ethereum Roadmap

The Ethereum Foundation's development roadmap:

The Surge (Scaling)

• Danksharding for L2 data
• Target: 100,000+ TPS across L2s

The Scourge (Censorship Resistance)

• MEV mitigation
• Proposer-builder separation

The Verge (Verification)

• Verkle trees
• Stateless clients

The Purge (Simplification)

• Remove technical debt
• Expire old state

The Splurge (Improvements)

• Miscellaneous enhancements
• EVM improvements

Risks and Considerations

• Smart contract risk: Bugs can lead to losses
• Regulatory uncertainty: DeFi regulation evolving
• Competition: Alternative L1s compete for users
• Complexity: Steeper learning curve than Bitcoin
• Gas volatility: High demand = expensive transactions

Conclusion

Ethereum has established itself as the foundation of decentralized applications. From DeFi to NFTs to DAOs, most crypto innovation happens on Ethereum or EVM-compatible chains. Understanding Ethereum is essential for participating in Web3.

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