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IC Academy Pillar 6: Coins Explained - 8-min read - Last reviewed June 23, 2026

What is Ethereum? Smart contracts, ETH, gas, and apps explained

Ethereum is a public blockchain for programmable transactions. Bitcoin mainly proved that digital money could work without a bank. Ethereum asked a bigger question: what if money and apps could run on the same open network? That idea made Ethereum the home base for smart contracts, DeFi, NFTs, stablecoins, and layer-2 networks.

TL;DR

Ethereum is a blockchain that runs smart contracts. ETH is the asset used to pay fees and help secure the network. Since The Merge in September 2022, Ethereum uses proof-of-stake rather than mining. Most everyday activity now happens through layer-2 networks that settle back to Ethereum.

Ethereum is a blockchain computer

Ethereum records transactions like Bitcoin, but it also runs code. Developers can deploy programs called smart contracts. Once live, those contracts can receive assets, send assets, enforce rules, and interact with other contracts.

This is why Ethereum became the base layer for many crypto applications. Stablecoins like USDC and USDT, decentralized exchanges, lending protocols, NFT marketplaces, and token launches have all used Ethereum or Ethereum-compatible networks.

Smart contracts are rules written in code

A smart contract is not smart in the human sense. It does not understand context. It follows instructions. If the code says funds move when certain conditions are met, the contract executes that rule.

This can remove middlemen, but it also creates new risks. Bugs can lock or drain funds. A bad approval can let a malicious contract move tokens from your wallet. Smart contracts are powerful, but they are not magic consumer protection.

ETH pays for gas and secures the network

ETH is Ethereum's native coin. You use it to pay gas fees, which are the costs of sending transactions or interacting with contracts. Gas exists because every transaction consumes network resources. Fees help prevent spam and pay validators.

Ethereum moved from proof-of-work mining to proof-of-stake in September 2022. Validators now lock ETH as stake and help finalize blocks. This dramatically reduced Ethereum's energy use, but it did not remove fees or smart-contract risk.

Why layer-2 networks matter

Ethereum's base layer is secure but limited. When many people use it at once, fees can rise. Layer-2 networks such as Arbitrum, Optimism, Base, and zkSync process transactions more cheaply, then post data or proofs back to Ethereum.

For users, this means the Ethereum ecosystem is no longer only one chain. You may hold ETH on Ethereum mainnet, Base, Arbitrum, or another network. That makes fees lower, but it also means you must check the network before sending funds.

Ethereum risks beginners should know

  • Gas fees can spike. A simple action may become expensive during congestion.
  • Smart contracts can fail. Code bugs and malicious approvals are real risks.
  • Network confusion is common. ETH on a layer 2 is not always withdrawable the same way as ETH on mainnet.
  • ETH is volatile. The technology can grow while the price still drops.

For the coin-versus-token difference, read coins vs tokens.

FAQ

Is Ethereum the same as ETH?

Ethereum is the network. ETH is the native coin used to pay fees and participate in staking. People often say Ethereum when they mean ETH, but technically they are different.

Does Ethereum still use mining?

No. Ethereum switched from proof-of-work mining to proof-of-stake during The Merge in September 2022. Validators, not miners, now help secure the network.

Why are Ethereum fees sometimes high?

Fees rise when demand for block space is high. Layer-2 networks reduce costs for many users, but the base layer can still become expensive during busy periods.