Technical Definition

Ethereum

A blockchain designed to run programs, called smart contracts, with ETH as the currency that pays for the computation.

By Crypto University Editorial
BlockchainTransactionWallet

✦ Key Insight

Most of the tokens, exchanges and apps a trader touches are built on Ethereum or on chains copying its design, so ETH fees and congestion affect your costs directly.

✕ Common Misconceptions

Sending ETH to an exchange deposit address on the wrong network — a Layer 2 or a different chain — which can make funds unrecoverable. Also forgetting to keep a small ETH balance for gas.

Detailed Explanation

Where Bitcoin mainly moves value, Ethereum executes code. Developers deploy contracts that run exactly as written, which is what makes DeFi, NFTs and most tokens possible. ETH pays the gas fees for every action on the network.

In Practice

“Swapping USDC for ETH on a decentralised exchange calls a smart contract, and you pay a gas fee in ETH for the network to process it.”

Dig Deeper

Wallet

Software or hardware that stores your private keys and lets you sign transactions.

Token

An asset created by a smart contract on an existing blockchain rather than being that blockchain's native currency.

Blockchain

A shared, append-only record of transactions maintained by many independent computers at once.

Transaction

A blockchain transaction is a signed or authorized instruction that changes blockchain state or transfers value when accepted by the network.