Ethereum

3 min read

Pronunciation

[ih-theer-ee-uhm]

Analogy

Ethereum is like a global, decentralized computer that anyone can use and program. If is digital gold, Ethereum is digital oil—it powers an entire ecosystem of applications. Imagine a massive, shared computer that spans the globe, where anyone can upload programs (smart contracts) that automatically execute when certain conditions are met. It's as if you combined the internet's connectivity with a universal legal system and a built-in payment processor, all operating without any central authority controlling it.

Definition

Ethereum is a decentralized, open-source platform that enables developers to build and deploy smart contracts and decentralized applications (dApps). Created by Vitalik Buterin in 2015, Ethereum extends technology beyond simple value transfer to become a "world computer" capable of executing arbitrary computation in a trustless environment. It introduced the concept of programmable money and serves as the foundation for decentralized finance (DeFi), non-fungible tokens (NFTs), and Web3 applications.

Key Points Intro

Ethereum revolutionized technology by introducing and smart contracts to create a platform for decentralized applications.

Key Points

Smart Contract Platform: Ethereum enables self-executing contracts with code that automatically enforces agreements, eliminating intermediaries in complex transactions and enabling trustless automation.

Turing Complete: Unlike Bitcoin's limited scripting, Ethereum's programming languages (Solidity, Vyper) allow developers to create any computable program, enabling unlimited application possibilities.

Ecosystem Foundation: Ethereum hosts thousands of tokens (ERC-20), NFTs (ERC-721), DeFi protocols, DAOs, and dApps, representing hundreds of billions in total value locked (TVL).

Proof of Stake Consensus: Following The Merge in 2022, Ethereum transitioned from energy-intensive mining to staking, reducing energy consumption by 99.95% while maintaining security.

Example

A decentralized lending like Aave runs entirely on Ethereum. Users can deposit ETH or tokens as collateral through smart contracts, which automatically manage lending pools, interest rates, and liquidations. When Alice deposits 10 ETH, the mints her aTokens representing her deposit. Bob can then borrow against the pool by providing his own collateral. All interest calculations, risk parameters, and liquidations execute automatically according to the contract's code, without any bank or company controlling the process. The entire 's logic is transparent and verifiable on the .

Technical Deep Dive

Ethereum operates as a machine where each represents a transition. The (EVM) is a stack-based, Turing-complete that executes compiled from high-level languages like . Every runs the , ensuring computation is replicated across the network. The platform uses an account-based model with two types: Externally Owned Accounts (EOAs) controlled by private keys, and Contract Accounts containing code and storage. is maintained in a Modified Merkle Patricia Trie, enabling efficient proofs and light client support. Ethereum's model involves: - metering: Each opcode has a cost, preventing infinite loops and allocating resources - Storage: Persistent key-value store for contracts (SSTORE/SLOAD operations) - Memory: Temporary byte-array during - Stack: 1024 items maximum, 256-bit words The platform has undergone major upgrades: - The Merge (2022): Transition from to , implementing Gasper - EIP-1559 (2021): Fee market reform with burning - Berlin/London Upgrades: optimizations and fee structure improvements scaling solutions include: - (Arbitrum, ): Assume transactions are valid unless proven otherwise - (zkSync, ): Use zero-knowledge proofs for validity - Channels and : Earlier scaling attempts with limited adoption Ethereum's includes: - The Surge: Implementing sharding for 100,000+ TPS - The Scourge: Addressing MEV and censorship resistance - The Verge: and verkle trees - The Purge: Reducing historical data requirements - The Splurge: Additional improvements

Security Warning

vulnerabilities can lead to catastrophic losses—always audit code and use established security patterns. Be aware of common attacks: reentrancy, /underflow, front-running, and manipulation. Interact only with verified contracts and understand that code is law—bugs become features. MEV bots can extract value from your transactions through sandwich attacks. Use secure wallets, verify all details, and be cautious of sites mimicking popular dApps. estimation errors can cause transactions to fail while still consuming . Never approve unlimited spending for untrusted contracts.

Caveat

Ethereum faces significant challenges: limited (15-30 TPS on ) leads to high during congestion, pricing out smaller users. The complexity of smart contracts increases attack surfaces, with billions lost to hacks and exploits. bloat continues growing, making running full nodes increasingly difficult. Ethereum's rapid development creates fragmentation between different standards and implementations. The transition to raised centralization concerns with large services controlling significant percentages. Regulatory uncertainty persists, particularly around whether ETH is a security. Competition from alternative blockchains (Solana, , etc.) offers higher throughput at lower costs. The platform's success has led to MEV extraction, where sophisticated actors capture value from regular users' transactions.

Related Terms

Blockchain & Cryptocurrency Glossary

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