Definition
Ethereum is a blockchain platform that maintains shared application state and executes smart contracts. Ether, identified by ETH, is the network’s native cryptocurrency. Ethereum and ETH are related but different: one is the network and execution environment, while the other is an asset used within it.
How It Works
Users submit signed transactions to transfer ETH or interact with contracts. Nodes execute the instructions under Ethereum’s rules, and proof-of-stake validators propose and attest to blocks. Computation is measured in gas, with transaction fees paid in ETH. A smart contract can manage tokens, lending rules or other application logic without requiring every action to be approved manually by its developer.
Uses and Limitations
Ethereum supports applications including decentralized exchanges, stablecoins and NFTs. Layer 2 networks can handle activity separately while using Ethereum for settlement or security, depending on their design. Programmability does not eliminate risk: contracts may contain bugs or administrative powers, fees change with demand, and ETH’s price can fluctuate. Using an application also involves risks beyond those of Ethereum itself.