Ethereum is the largest smart-contract platform in crypto, and for most of its life it has been the second-largest digital asset by market value behind Bitcoin. It launched in 2015, built by Vitalik Buterin and a small founding group, with a simple pitch that still defines it: a public blockchain that runs code, not just payments. That code, called a smart contract, executes the same way for everyone and cannot be quietly altered once deployed. Most of the activity people associate with crypto beyond holding coins, lending, trading, minting tokens, runs on Ethereum or on chains built to be compatible with it.
It helps to separate two things that share a name. Ethereum is the network, the shared computer that thousands of machines run in agreement. ETH (ether) is the asset that lives on it. ETH does double duty: traders hold and price it like any other coin, and the network requires it to pay for computation. Every action, sending ETH, swapping a token, deploying a contract, costs a fee called gas, paid in ETH. Gas is a live market. When demand for block space rises, fees rise with it, which is why a busy trading day can make a simple transfer cost real money and a quiet one makes it cheap.
For most of its first seven years Ethereum ran on proof of work, the same mining model as Bitcoin. That changed in September 2022, in an upgrade called The Merge, when the network switched to proof of stake. Instead of miners burning electricity to win blocks, validators lock up ETH as collateral and are chosen to confirm transactions, earning rewards for honest work and risking their stake if they cheat. The switch cut Ethereum's energy use by roughly 99 percent and is why ETH now carries a native yield. If you want the mechanics, see our explainer on what is staking.
The other half of the story is scaling. Ethereum's base layer is deliberately conservative and can get congested, so most cheap, fast activity has moved to layer 2 networks, rollups such as Arbitrum, Optimism, and Base, that process transactions off to the side and post compressed proofs back to Ethereum for final settlement. A 2024 upgrade made the data those rollups post far cheaper, pushing many layer-2 fees to fractions of a cent. The practical read for a markets watcher: Ethereum increasingly earns its keep as the settlement layer underneath a fan of faster chains, not as the place every transaction happens.
What is it all used for. Three things dominate. DeFi, lending, borrowing, and trading without a bank or broker in the middle. Stablecoins, dollar-pegged tokens that settle on Ethereum and its layer 2s in huge volume, the plumbing of crypto trading; we cover them under stablecoins. And staking, the yield-bearing role above. NFTs, digital ownership records, also live here, though their trading has cooled from the 2021 frenzy.
For investors, ETH is reachable two ways. You can hold it directly in a self-custody wallet such as MetaMask, which doubles as your door into DeFi, or you can get price exposure through a regulated fund. US spot Ethereum exchange-traded funds began trading in 2024, the same wrapper that earlier opened Bitcoin to retirement accounts and advisers; we track that market under crypto ETFs. One does not replace the other. A fund gives you the price and none of the on-chain utility; the wallet gives you both and all of the responsibility.