Ethereum is a blockchain that runs programs, called smart contracts, rather than only recording payments. ETH is its native token, used to pay for computation and to secure the network through staking. Launched on 30 July 2015, it is the second-largest cryptocurrency by market cap, and roughly 39.7 million ETH, about 32% of supply, was staked by mid-2026.
What Ethereum does that Bitcoin does not
Where Bitcoin moves value, Ethereum runs code, and that distinction is the reason nearly every application built in crypto since 2015 has been built on Ethereum or something designed to work like it.
A smart contract is a program stored on the blockchain that executes automatically when its conditions are met, with no company or server administering it. That single capability is what most of crypto beyond Bitcoin is built on. Decentralized exchanges, lending protocols, stablecoins, NFTs, and tokenized assets all run on smart contracts. Most of them run on Ethereum or on networks that settle to it.
In a late 2013 whitepaper, Vitalik Buterin proposed the design. In 2015, eight co-founders launched the network.
How Ethereum works
Four pieces. Each essential.
The Ethereum Virtual Machine, or EVM, is the environment that runs smart contracts. Every node executes the same code and reaches the same result, which is what makes the outcome trustworthy.
Gas is the fee paid for computation, denominated in ETH. Since August 2021, part of every fee is burned rather than paid to validators, permanently removing ETH from circulation.
Validators propose and confirm blocks. Since September 2022 Ethereum has used Proof of Stake, where validators lock 32 ETH as collateral and earn rewards for honest work. Dishonest work triggers slashing.
Layer 2 networks handle most user transactions. Rollups such as Arbitrum, Base, and OP Mainnet process transactions cheaply and post the results back to Ethereum for settlement, inheriting its security.
Ethereum's upgrade history
| Upgrade | Date | What it did |
|---|---|---|
| The Merge | 15 September 2022 | Replaced mining with Proof of Stake, cutting energy use by roughly 99.95% |
| Shapella | 12 April 2023 | Enabled staked ETH withdrawals |
| Dencun | 13 March 2024 | Introduced blobs, cutting Layer 2 data costs by 80% to 90% |
| Pectra | 7 May 2025 | Raised the maximum stake per validator from 32 to 2,048 ETH and added account abstraction features |
| Fusaka | 3 December 2025 | Added PeerDAS, letting validators sample rollup data rather than download all of it |
| Glamsterdam | Targeted Q4 2026 | In development. Overhauls block production for higher throughput |
As testing continued, Glamsterdam's target slipped from mid-2026 to Q4 2026. Targeted for 2027, Hegotá is expected to bring native account abstraction.
ETH's supply, and why it is not fixed
Unlike Bitcoin's 21 million cap, ETH has no maximum supply. Issuance depends on network conditions.
New ETH is created as staking rewards and destroyed through the base fee burn. When network activity is high, the burn exceeds issuance and supply falls. When activity is low, issuance wins and supply grows.
After Dencun, that dynamic reversed. Moving Layer 2 data into blobs cut fees for users and cut the burn with them. Ethereum's supply grew by roughly 950,000 ETH into 2026, at an annual rate near 0.85% as of May 2026, according to ultrasound.money data.
What ETH is used for
- Paying gas on Ethereum and on Layer 2 networks that settle to it.
- Staking, which secures the network and earns rewards near 2.78% APR by mid-2026, with MEV rewards adding roughly 10% to 30% on top.
- Collateral across DeFi lending protocols.
- The base asset for most NFT and token markets.
- ETF exposure, since spot Ethereum ETFs launched in 2024 and staking-enabled versions followed in 2026.
Ethereum risks to understand
- Volatility. ETH fell more than 45% from its October 2025 high above $3,600 within five months.
- Supply is not capped. Whether ETH is inflationary or deflationary depends on usage, and usage moved to Layer 2.
- Staking concentration. Lido controls roughly a quarter of all staked ETH, and Pectra's higher stake ceiling lets large operators consolidate validators.
- Layer 2 dependency. Most activity now happens on rollups with their own centralization risks, including single sequencers and upgradeable contracts.
- Competition. Solana and others compete on throughput and cost, and the market has not settled which architecture wins.
- Upgrade risk. Hard forks change the protocol, and each one carries execution risk.
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Frequently asked questions
What is Ethereum used for?
Running smart contracts, which power decentralized exchanges, lending, stablecoins, NFTs, and tokenized assets. ETH pays for that computation and secures the network through staking.
How is Ethereum different from Bitcoin?
Where Bitcoin records payments, Ethereum runs programs. With a fixed 21 million supply, Bitcoin uses mining. With no fixed cap, Ethereum has used Proof of Stake since September 2022.
Does Ethereum have a maximum supply?
No. New ETH is issued as staking rewards and destroyed through fee burning. Supply falls when activity is high and rises when it is low, and it grew by roughly 950,000 ETH after the Dencun upgrade cut fees.
What is the Ethereum Merge?
The September 2022 upgrade that replaced mining with Proof of Stake, cutting Ethereum's energy consumption by roughly 99.95%.
What is a Layer 2 on Ethereum?
A network that processes transactions separately and posts results back to Ethereum for settlement. Rollups like Arbitrum and Base handle most user activity at a fraction of mainnet cost.
How much ETH is staked?
Roughly 39.7 million ETH by mid-June 2026, about 32% of circulating supply, secured by more than 1.24 million validators.
What is the next Ethereum upgrade?
Glamsterdam, targeted for Q4 2026, which overhauls block production. Hegotá follows in 2027 with native account abstraction expected.
Is Ethereum a security?
The March 2026 joint SEC-CFTC interpretation classified ether as a digital commodity, not a security, alongside 15 other major assets.
