Ethereum (ETH) is a decentralized, open-source blockchain network featuring smart contract functionality.
Ethereum (ETH) is a decentralized, open-source blockchain network that enables the creation and execution of smart contracts. These are self-executing contracts with the terms of the agreement directly written into code, eliminating the need for a third party.
ETH, also referred to as Ether, is the native cryptocurrency of the Ethereum network. It is used to pay for transaction and computational services on the network, often referred to as "gas". Unlike fixed-supply cryptocurrencies such as Bitcoin or Bitcoin Cash, Ethereum has no hard cap on its total supply, although it implemented an important upgrade (EIP-1559) that burns a portion of transaction fees, potentially making it deflationary under certain network conditions.
"When you make a transaction on the Ethereum network, you have to pay a gas fee in ETH."
"While Bitcoin Cash focuses on efficient payments with low fees, Ethereum prioritizes programmability, requiring users to hold ETH to interact with smart contracts and decentralized applications."
Ethereum's blockchain is a distributed ledger that records all transactions made on the network. It is maintained by nodes that validate and store transactions. The Ethereum blockchain is also home to a large number of decentralized applications (DApps), as it allows developers to create and deploy smart contracts.
Originally using a Proof of Work (PoW) consensus mechanism similar to Bitcoin and Bitcoin Cash, Ethereum transitioned to a Proof of Stake (PoS) system through an upgrade known as "The Merge" in 2022. This transition significantly reduced Ethereum's energy consumption and changed how validators secure the network.
"Ethereum's blockchain is the foundation for many DApps and DeFi platforms."
"Unlike UTXO-based blockchains like Bitcoin Cash which track individual transaction outputs, Ethereum uses an account-based model that maintains balance states for addresses, simplifying certain smart contract operations but creating different scaling challenges."
Ethereum is not just a cryptocurrency, but also a platform for building decentralized applications. Developers can use Ethereum's programming language, Solidity, to write smart contracts and DApps, which can then be deployed on the Ethereum network.
The platform's versatility has made it popular for various use cases including decentralized finance (DeFi), non-fungible tokens (NFTs), governance systems, supply chain tracking, and decentralized autonomous organizations (DAOs). This breadth of applications contrasts with blockchains that primarily focus on payment functionality, though layer-2 scaling solutions were developed to address Ethereum's limitations in transaction throughput and costs.
"Popular DApps like Uniswap and CryptoKitties are built on the Ethereum platform."
"While Bitcoin Cash optimizes for fast, low-fee payments with larger blocks, Ethereum prioritizes computational functionality through its Virtual Machine, creating distinct blockchain ecosystems with different technical tradeoffs."
Smart contracts are a key feature of Ethereum. They are programs that automatically execute contract terms once certain conditions are met. This automation reduces the risk of fraud and censorship, and is a major reason for Ethereum's popularity in the DeFi sector.
Ethereum's smart contracts have evolved significantly since the platform launched in 2015, with continuous improvements in developer tools, security practices, and design patterns. Major enterprise systems and financial institutions have begun exploring Ethereum-based solutions for automating complex financial agreements, token issuance, and creating interoperable digital assets.
"Smart contracts on Ethereum have enabled the creation of decentralized exchanges, lending platforms, and yield farming applications."
"While some solutions like Bitcoin Cash's Simple Ledger Protocol (SLP) enable token creation without Turing-complete smart contracts, Ethereum's programmability allows for more complex applications with automated logic, though often at higher transaction costs."
As Ethereum gained popularity, its limited throughput and sometimes high transaction fees revealed scaling challenges. This led to the development of a robust scaling ecosystem including Layer-2 solutions like Optimistic Rollups and zkRollups, which process transactions off the main chain while inheriting its security guarantees.
The long-term Ethereum scaling roadmap includes sharding, which will divide the network into parallel data segments to increase capacity. These scaling approaches differ fundamentally from the on-chain scaling approach taken by blockchains like Bitcoin Cash, which increased the block size limit to accommodate more transactions directly on the main chain.
"During periods of network congestion, Ethereum gas fees can spike dramatically, leading users to explore Layer-2 solutions like Arbitrum and Optimism or alternative blockchains with lower transaction costs."
"While Bitcoin Cash addressed scalability by increasing the block size limit to 32MB, enabling thousands of transactions per block with minimal fees, Ethereum pursued a multi-layered scaling strategy with various tradeoffs between decentralization, security, and transaction throughput."
All terms and definitions may update as the Cryptionary improves.