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Ethereum, often referred to as the "world's computer," is an open-source, globally decentralized computing infrastructure where programs known as smart contracts can be executed. Ethereum usesEthereum, often referred to as the "world's computer," is an open-source, globally decentralized computing infrastructure where programs known as smart contracts can be executed. Ethereum uses

Learn/Cryptocurrency Knowledge/Basic Concepts/What is Ethereum?

What is Ethereum?

Author: MEXC

Jul 16, 2025MEXC

#Basic #Industry Buzz #Beginners #Ethereum #Basic Concepts

Ethereum, often referred to as the "world's computer," is an open-source, globally decentralized computing infrastructure where programs known as smart contracts can be executed.

Ethereum uses blockchain to synchronize and store the system's state, leveraging Ether (ETH) to measure and allocate the resources consumed during program execution.

Ethereum provides developers with a secure platform to construct decentralized applications (DApps) and incorporates economic functionality. While offering features like high availability, auditability, transparency, and neutrality, Ethereum also reduces or eliminates censorship, third-party involvement, and counterparty risks.

1. The Birth of Ethereum

In late 2013, Vitalik Buterin, originally a Bitcoin enthusiast, released the Ethereum whitepaper (also referred to as the Yellow Paper). Subsequently, Gavin Wood (now the founder of Polkadot) joined as a co-founder of Ethereum.

The founders of Ethereum envisioned it as a versatile computing platform that offers other developers a secure and programmable environment. With Ethereum, developers no longer needed to construct consensus algorithms, peer-to-peer networks, and foundational algorithms. Instead, they could directly build the decentralized applications they desired on the Ethereum platform.

The Ethereum founding team dedicated over a year to turning Ethereum from theory into reality. On July 30, 2015, the first Ethereum block was successfully mined, marking the successful launch of Ethereum and the commencement of its journey to becoming the world's computer.

2. Components of Ethereum

Peer-to-Peer (P2P) Network: A decentralized internet system where users exchange information. Its purpose is to reduce the number of network nodes in traditional transmission to lower the risk of data loss. Ethereum operates on the Ethereum mainnet.

Consensus Rules: Block validation rules that every full node must adhere to in order to maintain consistency with other nodes.

Transactions: Ethereum transactions are network messages containing information such as the sender, recipient, value, and data payload.

State Machine: Ethereum's state is a large data structure that not only stores all accounts and balances but also maintains a state machine. It can change between different blocks based on predefined rules and execute arbitrary machine code. Ethereum's state transitions are processed by the Ethereum Virtual Machine (EVM).

Consensus Algorithm: In its early days, Ethereum used Bitcoin's consensus model, employing PoW (Proof of Work) with weighted importance to determine the longest chain. Ethereum has now transitioned to a PoS (Proof of Stake) weighted voting system.

Data Structure: Ethereum's blockchain is stored on each node like a database, containing transactions and the system's state. Hashed data is stored within the Merkle Patricia Tree (MPT) data structure.

Economic Security: Ethereum currently employs a PoS (Proof of Stake) algorithm for economic security.

3. Ether (ETH)

ETH is the native cryptocurrency of the Ethereum network. The purpose of ETH is to enable the marketization of computation, providing participants with economic incentives for verifying and executing transaction requests, thereby contributing computational resources to the network.

Apart from serving as an economic incentive to encourage validators to execute transaction requests, ETH also acts as a safeguard against malicious entities attempting to congest the Ethereum network by executing infinite computations or other resource-intensive scripts. This ensures network security as participants are required to pay a certain fee for utilizing computational resources.

4. Smart Contracts

We can think of smart contracts on Ethereum as immutable programs that run in a deterministic manner on the Ethereum Virtual Machine. Once a smart contract is successfully deployed, its code cannot be altered.

Smart contracts are only executed when called by transactions. Outside of transaction calls, they remain dormant without any automatic background execution.

Any individual can create a smart contract. Through smart contracts, developers build complex decentralized applications that provide services to users, such as decentralized exchanges (DEX), trading platforms, games, social tools, and more.

5. Ethereum Ecosystem

Following the ups and downs of the market, the Ethereum ecosystem has firmly secured its position as the clear leader, significantly outpacing other public chains. Many of the public chains once dubbed as "Ethereum killers" have now faded into obscurity. Within the Ethereum network ecosystem, domains like DeFi, NFT, DAO, and GameFi have witnessed the emergence of numerous pioneering projects.

To combat congestion and high fees within the Ethereum network, the implementation of Layer 2 networks and scaling solutions has finally begun after years of discussion. The Layer 2 ecosystem is also showing promising signs. With time, it is evident that a thriving ecosystem is just on the horizon.

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