Ethereum (ETH)
Definition
The second-largest cryptocurrency and the leading smart contract platform, enabling decentralized applications, DeFi, NFTs, and programmable money on a proof-of-stake blockchain.
Ethereum, launched in 2015 by Vitalik Buterin and others, extended Bitcoin's concept by adding programmability. While Bitcoin enables sending and receiving value, Ethereum enables executing arbitrary code on the blockchain through smart contracts. This created the foundation for decentralized finance (DeFi), NFTs, DAOs, and thousands of decentralized applications.
Ethereum's native currency, Ether (ETH), serves two purposes: it's used as money (for payments and store of value) and as "gas" to pay for computation on the network. Every smart contract execution, token transfer, or DeFi transaction requires ETH for gas fees.
The Merge in September 2022 transitioned Ethereum from proof-of-work to proof-of-stake, reducing energy consumption by 99.95% and enabling ETH holders to earn staking yields (typically 3-5% APY). Combined with EIP-1559's fee burning mechanism, ETH can be deflationary during periods of high network activity — more ETH is burned in fees than created through staking rewards.
Ethereum's ecosystem is by far the largest in crypto. Most major DeFi protocols (Uniswap, Aave, Lido, MakerDAO), stablecoin issuances (USDC, USDT, DAI), and NFT platforms operate on Ethereum or its Layer 2 networks. This creates a network effect where developers build on Ethereum because users are there, and users come because applications are there.
For investors, Ethereum offers exposure to the broader crypto ecosystem's growth. Tracking ETH and ERC-20 tokens across mainnet, Layer 2s, and multiple wallets requires comprehensive portfolio tracking that understands these different layers.
Where this appears in Clarity
Clarity automatically tracks and calculates these concepts across your connected accounts.
Related Terms
Frequently Asked Questions
Is Ethereum a good investment?
Ethereum is the leading smart contract platform with the largest developer ecosystem in crypto. Its proof-of-stake transition, staking yield, and fee burn mechanism create favorable tokenomics. However, it faces competition from faster/cheaper chains and regulatory uncertainty. All crypto investments carry significant risk.
What's the difference between Ethereum and Bitcoin?
Bitcoin is primarily a store of value with a fixed supply and proof-of-work. Ethereum is a programmable platform that enables smart contracts, DeFi, and dApps. ETH uses proof-of-stake, has no fixed supply cap (but can be deflationary), and has broader utility beyond value transfer.