Ethereum & Smart Contracts
7 key takeaways
- Ethereum (2015) added programmable contracts to the blockchain idea.
- A smart contract is code that runs exactly as written, without an operator.
- Gas is the fee paid to run computations; it rises with demand.
- Ethereum moved to Proof of Stake in 2022, cutting energy use ~99.9%.
- Stakers earn protocol yield; Lido and exchanges let you stake without 32 ETH.
- Layer-2 rollups (Arbitrum, Base, Optimism) make Ethereum apps cheap.
- Most DeFi, NFTs and stablecoin volume still settle on Ethereum.
From ledger to computer
Bitcoin records who owns what. Ethereum adds a virtual machine (the EVM) so the ledger can also store programs and their state. Anyone can deploy a program — a smart contract — and anyone can call it. Lending markets, exchanges, games and stablecoins are all just contracts.
Smart contracts, honestly
"Smart" means automatic, not intelligent. A contract does exactly what its code says, forever, whether or not that's what the author intended. That makes audits essential and explains why DeFi hacks happen: the code had a bug and the blockchain faithfully executed it.
Gas and fees
Every operation costs gas, priced in gwei (billionths of ETH). Since EIP-1559, a base fee is burned and a tip goes to validators, so heavy usage can make ETH deflationary. When the base layer is busy, fees spike — which is why apps moved to Layer-2 rollups that batch thousands of transactions and post them to Ethereum for a fraction of the cost.
Get the 7-in-7 Digest
Seven stories, seven minutes, every week. Plus the free 7-Step Starter Kit PDF.
Staking
Validators lock 32 ETH to propose and attest to blocks and earn 3–4% annually. Liquid staking (Lido's stETH, Rocket Pool's rETH) and exchange staking let you participate with any amount. Our staking calculator shows what compounding does over years.
Where to go next
Try a Layer-2: withdraw a small amount from Coinbase to Base or from Binance to Arbitrum, swap on Uniswap, and watch the fee be a few cents. Then read the Top 7 DeFi list before putting real money to work.
Watch
Smart contracts — Simply Explained
Frequently asked questions
Ethereum vs Bitcoin — do I need both?
They solve different problems: BTC is a scarce monetary asset; ETH is the fuel and collateral of an app platform. Many portfolios hold both.
What's an ERC-20 token?
A standard for fungible tokens on Ethereum. Stablecoins like USDC and most altcoins you see on exchanges are ERC-20s or equivalents on other chains.
Is ETH supply capped?
No hard cap, but issuance is low and fee burning can make net supply shrink in busy periods.