Ethereum: The Programmable Blockchain
Ethereum is a decentralized, open-source blockchain that features smart contract functionality. Launched in 2015 by Vitalik Buterin and co-founders, it expanded upon Bitcoin's concept of a distributed ledger by enabling developers to build and run decentralized applications (dApps) on its network.
I. Core Concepts & Architecture
1. Ethereum Virtual Machine (EVM)
The EVM is the brain of the Ethereum network. It is a decentralized, Turing-complete virtual machine that executes smart contract code (bytecode).
It ensures that every node in the network processes the same transaction with the same outcome, maintaining consensus and security.
The code is typically written in high-level languages like Solidity or Vyper and then compiled into EVM bytecode for execution.
2. Smart Contracts
Smart contracts are self-executing agreements with the terms of the agreement directly written into code. They are programs stored on the Ethereum blockchain.
Once deployed, they run exactly as programmed without any possibility of censorship, downtime, or third-party interference.
They are the foundational technology for all dApps.
Ether (ETH) is the native cryptocurrency of the Ethereum network. It serves two main purposes:
Payment: Used for transferring value between accounts.
Gas Fee: Used to pay for the computational resources required to execute transactions and smart contracts.
Gas is a unit that measures the computational effort needed to execute operations. Users pay for gas in ETH. This mechanism prevents infinite loops and resource abuse on the network.
⚙️ The Evolution: Ethereum 2.0 (The Merge & Beyond)
The original Ethereum network (Eth1) used a Proof-of-Work (PoW) consensus mechanism, similar to Bitcoin. This created issues with energy consumption and scalability. The multi-phase upgrade, collectively known as Ethereum 2.0 or Serenity, was designed to address these limitations.
Future Scaling: Sharding and Rollups
Sharding: The full implementation of sharding, which divides the network into 64 parallel chains, is a long-term goal for scaling.
Layer 2 Rollups: Before full sharding, Ethereum relies heavily on Layer 2 (L2) solutions like Optimistic Rollups and ZK-Rollups. These solutions process transactions off-chain and then submit a compressed proof back to the Ethereum mainnet (Layer 1), dramatically increasing throughput and reducing costs.
🌐 Ecosystem Dominance: DeFi and NFTs
Ethereum's programmability has made it the primary foundational layer for the majority of the decentralized web, forming the bedrock for multi-trillion dollar markets.
1. Decentralized Finance (DeFi)
Ethereum is the undisputed king of DeFi. It uses smart contracts to replicate and automate traditional financial services without intermediaries.
2. Non-Fungible Tokens (NFTs)
Ethereum's ERC-721 token standard is the primary format for NFTs, representing ownership of unique digital or physical items.
Marketplaces like OpenSea, SuperRare, and Foundation run on Ethereum.
NFTs are used for digital art, collectibles, gaming assets, tokenized real estate, and more.
3. Valuation Considerations
While traditional valuation models are often insufficient, many analysts use on-chain metrics (like Total Value Locked in DeFi, active addresses, and transaction fees) to assess Ethereum's value. Some recent models suggest its "fair value" may be significantly higher than its current market price, citing its vital role as the "settlement layer" for the Web3 economy.
📈 Technical Deep Dive: The EVM and State
The EVM maintains the Ethereum State, which includes:
Accounts: There are two types:
Externally Owned Accounts (EOAs): Controlled by private keys (users).
Contract Accounts: Controlled by their smart contract code.
Balance: The amount of ETH held by an account.
Storage: A persistent key-value store for each contract.
Code: The bytecode of a contract.
The Dencun upgrade (via EIP-4844) will introduce "blobs"—a cheaper, temporary data storage layer—to efficiently bundle data for L2 rollups, moving data storage off the expensive main chain and cementing L2 solutions as the primary scaling path
