Ethereum

Ethereum is the second-largest cryptocurrency by market capitalization, and was proposed in a 2013 white paper by programmer Vitalik Buterin before launching in 2015. Unlike Bitcoin, which was designed primarily as a peer-to-peer payment system, Ethereum was built as a general-purpose blockchain platform capable of running "smart contracts" — self-executing code that powers decentralized applications ranging from financial services to digital collectibles.

In September 2022, in an upgrade widely referred to as "the Merge," Ethereum transitioned its consensus mechanism from proof-of-work (energy-intensive mining, the same model Bitcoin still uses) to proof-of-stake, in which network validators lock up ("stake") ETH as collateral to earn the right to validate transactions. The switch cut the network's energy consumption by an estimated 99%+ and was one of the largest live upgrades ever performed on a major blockchain without stopping the network.

Ethereum's smart-contract functionality has made it the primary settlement layer for decentralized finance (DeFi) applications — lending, trading, and derivatives protocols that run without a traditional financial intermediary — as well as for most NFT (non-fungible token) activity and a large share of newer blockchain projects, many of which are built as "layer-2" networks that settle back to Ethereum for security.

Unlike Bitcoin, Ethereum does not have a fixed maximum supply; instead, since a 2021 upgrade (EIP-1559), a portion of every transaction fee is permanently destroyed ("burned") rather than paid entirely to validators, which can make ETH's net issuance rate negative during periods of high network activity.

Every action on Ethereum — sending funds, executing a smart contract, minting an NFT — requires paying a "gas fee" in ETH, priced dynamically based on how congested the network is at that moment. High gas fees during periods of heavy demand were a major driver behind the rise of "layer-2" networks such as Arbitrum, Optimism, and Base, which process transactions more cheaply off Ethereum's main chain and then periodically settle a summary of that activity back to it for security.

Validators secure the network by staking ETH — the current protocol requires 32 ETH to run a solo validator, though staking pools and liquid-staking services let holders participate with smaller amounts by pooling funds with others. As with Bitcoin, U.S. regulators approved spot Ethereum ETFs in 2024, giving traditional investors direct price exposure without needing to manage a wallet or staking infrastructure themselves.