Ethereum FAQ

Ethereum is a programmable blockchain launched in 2015 that runs smart contracts — self-executing code — in addition to handling payments. It is the foundation for most DeFi, NFTs, and stablecoins, and its native coin, Ether (ETH), pays for transactions and computation on the network.

Ether, or ETH, is the native cryptocurrency of the Ethereum network, used to pay gas fees for transactions and smart-contract execution. It is the second-largest cryptocurrency by market cap after Bitcoin and also serves as collateral throughout Ethereum's DeFi ecosystem.

Ethereum is the blockchain network and platform, while Ether (ETH) is the coin that powers it. People often say Ethereum to mean both, but strictly speaking you hold and spend Ether, and you build and transact on Ethereum.

Ethereum was proposed by Vitalik Buterin in 2013 and launched in 2015 by a founding team that also included Gavin Wood and Joseph Lubin, among others. Buterin remains its most public figure, though the network is developed by many independent contributors worldwide.

A smart contract is code stored on Ethereum that runs automatically when its conditions are met, without a middleman. It powers applications like token swaps, lending, and NFTs, but because it executes exactly as written, any bug can be exploited and the results are usually irreversible.

Gas fees are payments in ETH made to process transactions and run smart contracts on Ethereum, compensating the validators who secure the network. Fees rise when the network is busy, since users compete for limited space in each block, and complex operations cost more gas than simple transfers.

Ethereum gas fees spike when demand for block space outstrips supply, such as during popular token launches or busy DeFi activity, forcing users to bid higher to get included. Layer 2 networks and past upgrades aim to ease this, but base-layer fees still vary with demand.

The Merge was Ethereum's September 2022 upgrade that switched the network from energy-intensive proof-of-work mining to proof-of-stake validation. It cut Ethereum's energy use by over 99% and replaced miners with validators who stake ETH to secure the chain.

Ethereum staking involves locking up ETH to help validate transactions and secure the network, earning rewards in return. Running your own validator requires 32 ETH, but staking pools and exchanges let people stake smaller amounts, sharing both the rewards and the responsibilities.

An ERC-20 token is a cryptocurrency built on Ethereum that follows a common technical standard, letting wallets and exchanges support it easily. Most well-known tokens and stablecoins, such as USDT and USDC on Ethereum, are ERC-20 tokens rather than coins with their own chains.

An ERC-721 token is the Ethereum standard for non-fungible tokens (NFTs), where each token is unique and not interchangeable. It is what lets a specific digital artwork or collectible be individually owned and tracked on-chain, unlike interchangeable ERC-20 tokens.

The Ethereum Virtual Machine, or EVM, is the runtime environment that executes smart contracts across every Ethereum node identically. Its design has become an industry standard, so many other blockchains are EVM-compatible, meaning Ethereum apps can run on them with little modification.

A Layer 2 is a separate network built on top of Ethereum that processes transactions off the main chain and then settles them back to it, cutting fees and increasing speed. Examples include Arbitrum, Optimism, and Base, which inherit Ethereum's security while easing congestion.

Gwei is a small denomination of Ether used to price gas fees, equal to one-billionth of an ETH. Because gas costs are tiny fractions of a coin, quoting them in gwei is far more practical than using whole ETH.

DeFi, or decentralized finance, is a set of Ethereum applications that recreate financial services like lending, borrowing, and trading using smart contracts instead of banks. Ethereum hosts the largest DeFi ecosystem, though users take on smart-contract and market risks directly.

No. Unlike Bitcoin, Ethereum has no fixed maximum supply. Instead, new ETH is issued to stakers while a portion of fees is burned, so net supply can rise or fall depending on network activity, sometimes making ETH mildly deflationary during busy periods.

EIP-1559 was a 2021 upgrade that changed how Ethereum fees work, introducing a base fee that is burned — permanently removed from supply — plus an optional tip to validators. It made fees more predictable and tied ETH's supply partly to how heavily the network is used.

Burning ETH means permanently destroying coins by sending them to an address no one can access, reducing total supply. Since EIP-1559, part of every transaction fee is burned, which can offset new issuance and, during heavy use, shrink the overall ETH supply.

A validator is a participant who stakes ETH to propose and confirm new blocks, replacing miners after The Merge. Validators earn rewards for honest work and can lose part of their stake, a penalty called slashing, if they act maliciously or stay offline.

Slashing is a penalty in proof-of-stake where a validator loses a portion of its staked ETH for breaking the rules, such as trying to confirm conflicting blocks. It exists to make attacking or neglecting the network financially painful, keeping validators honest.

Gas optimization is writing or timing transactions to use as little gas as possible, lowering costs. Developers optimize contract code, and users can save by transacting when the network is quiet or by using Layer 2 networks where fees are a fraction of the main chain's.

A dApp, or decentralized application, is software whose backend runs on smart contracts on a blockchain like Ethereum rather than on a company's servers. Users interact with it directly from their wallets, and no single party can unilaterally shut it down or alter its rules.

Ethereum processes a bit more transactions per second on its base layer than Bitcoin, but both are limited. Ethereum's scaling strategy focuses on Layer 2 networks that batch many transactions and settle them on the main chain, greatly increasing total throughput.

Staking yield is the annual reward rate stakers earn for helping secure Ethereum, typically a few percent, paid in ETH. The rate varies with how much total ETH is staked — more stakers means the reward is spread thinner across all of them.

A liquid staking token is a token you receive when you stake ETH through a service, representing your staked position while remaining tradable. It lets you earn staking rewards without locking your funds away, though it adds reliance on the issuing protocol's smart contracts.

An Ethereum wallet is software or hardware that stores the private keys controlling your ETH and tokens and lets you interact with dApps. Popular options include MetaMask for everyday use and hardware wallets for securely holding larger amounts offline.

A gas war happens when many users rush to transact at the same moment — often during a hot NFT mint or token launch — bidding fees ever higher to get in first. It can push gas costs to extreme levels for a short window until demand subsides.

The Ethereum Foundation is a non-profit that supports Ethereum's research and development but does not control the network. It funds core work and coordinates upgrades, while the protocol itself is run by independent validators, developers, and users worldwide.

An Ethereum upgrade is a coordinated change to the network's rules, historically delivered through hard forks with names like London and Shanghai. Because the community upgrades together, these usually improve the same chain rather than splitting it into a new coin.

Proof of stake is the system Ethereum uses to secure its blockchain, where validators lock up ETH as collateral rather than spending electricity on mining. Validators are selected to confirm blocks partly by how much they stake, and misbehavior can cost them part of that stake.

An Ethereum testnet is a copy of the network used to test applications with valueless coins before deploying to the real chain. Testnets like Sepolia let developers find bugs safely, since mistakes there cost nothing, unlike on the live mainnet.

Ethereum apps carry smart-contract risk from bugs or exploits, market risk from volatile prices, and user risk from phishing or signing malicious transactions. Because transactions are irreversible, a single mistake or a flawed contract can lead to permanent loss of funds.

An NFT, or non-fungible token, is a unique token on Ethereum that certifies ownership of a specific item such as digital art, using the ERC-721 standard. Unlike interchangeable coins, each NFT is one of a kind, though ownership of a token doesn't always include copyright.

Sharding is a scaling technique that splits a blockchain's workload across many partitions so it can process more in parallel. Ethereum's roadmap uses a form of it to support Layer 2 networks with cheaper data, rather than splitting execution the way early plans described.

Account abstraction lets Ethereum wallets behave more flexibly, enabling features like paying fees in tokens other than ETH, social recovery, and batching actions. It aims to make wallets easier and safer for ordinary users without changing the underlying network's security.

The block gas limit caps how much total computation Ethereum will include in a single block, which in turn limits how many transactions fit. When demand exceeds that limit, fees rise as users compete for the constrained space.

A rollup is a Layer 2 that bundles many transactions together, processes them off-chain, and posts compressed proof or data back to Ethereum. This spreads the base-layer cost across many users, making each transaction far cheaper while still relying on Ethereum for security.

Optimistic rollups assume transactions are valid and allow a challenge period to dispute fraud, while ZK rollups use cryptographic proofs to verify validity instantly. ZK rollups can settle faster with stronger guarantees, whereas optimistic rollups have historically been simpler to build.

Yes. You can lose ETH through slashing penalties for validator errors, through the risks of third-party staking services, and through ETH's own price falling while your funds are locked. Staking rewards are not guaranteed and this is general information, not financial advice.

MetaMask is a widely used Ethereum wallet available as a browser extension and mobile app that stores your keys and connects you to dApps. It is convenient for everyday DeFi and NFT use, but as a hot wallet it is best paired with a hardware wallet for large balances.

Gas estimation is a wallet's prediction of how much gas a transaction will need and what fee to attach so it confirms promptly. Estimates can be off during volatile network conditions, which is why transactions sometimes fail or cost more than expected.

Ethereum's roadmap is a set of planned upgrades — often summarized as stages like the Merge, Surge, and beyond — aimed at improving scalability, security, and efficiency. Its central theme is scaling through Layer 2 rollups while keeping the base layer secure and decentralized.

Whether Ethereum suits you depends on your own goals and risk tolerance, since ETH is volatile and its future is uncertain despite its large ecosystem. This is general information only, not financial advice — never invest more than you can afford to lose.

Wrapped ETH, or WETH, is an ERC-20 version of Ether that behaves like a standard token, letting ETH interact smoothly with contracts that expect tokens. It trades one-to-one with ETH and can be unwrapped back at any time; it exists purely for technical compatibility.

Bitcoin is built primarily to store and transfer value with a capped supply, while Ethereum is a programmable platform for smart contracts and applications with no supply cap. Bitcoin emphasizes being sound money; Ethereum emphasizes being a world computer for decentralized apps.