An Ethereum smart contract is code stored at its own address. Coin Bureau's guide says an externally owned account, controlled by a private key, has to call it first, and every participating node then runs the call. The caller pays gas for that work.
Key facts, per Coin Bureau and ethereum.org
- Account types: In the 2014 design, externally owned accounts were controlled by private keys, and contract accounts by their code.
- Who runs a call: Every participating node executes the requested computation to verify the result.
- Gas fee: Gas units consumed, multiplied by the gas price in gwei. One gwei is 10^-9 ETH (ether).
- Base fee: Burned out of Ethereum's supply on successful execution.
- Priority fee: A tip above the base fee, to incentivize validators to include the transaction in the next block.
- Block production: Since The Merge in 2022, proof-of-stake validators propose blocks. Mining no longer produces valid blocks.
How a call runs
According to Coin Bureau, a call starts with a transaction from an externally owned account. A contract account cannot start one on its own. Every participating node then runs the requested computation in the Ethereum Virtual Machine (EVM).
Mining is no longer the means of producing valid blocks. Instead, the proof-of-stake validators have adopted this role and are now responsible for processing the validity of all transactions and proposing blocks.
What a contract is
Coin Bureau says a deployed contract becomes a contract account with its own address that others can interact with. Ethereum's whitepaper calls contracts autonomous agents, not agreements that must be fulfilled or complied with. The original design built a programming language into the blockchain, which allowed anyone to write smart contracts and decentralized applications. In that design, the contract's code activates when its account receives a message. It reads and writes its own storage.
How contracts are written
Coin Bureau says contracts are written in Solidity, a programming language designed for the platform. In the 2014 design, contract code was low-level, stack-based bytecode, according to Ethereum's whitepaper. A university tutorial says a smart contract holds a decentralized application's business logic and reads from and writes to the Ethereum blockchain.
What the caller pays
Coin Bureau says a gas fee is the gas units a transaction uses, multiplied by the gas price in gwei. One gwei is 10^-9 ETH. Gas fees are paid to validators in ether, but the base fee is burned, as described below. The original design also required each transaction to set a limit on computational steps. That limit prevents accidental or hostile infinite loops.
Where the fee goes
Coin Bureau says the fee has two parts with different destinations. The base fee is burned out of Ethereum's supply on successful execution. The priority fee is a tip above the base fee, and users can add it to incentivize validators to include the transaction in the next block.
Where each part of a call's fee goes
Compare where each part of a call's fee goes and when it applies.
| Fee part | Where the money goes | When it applies | Source |
|---|---|---|---|
| Base fee | Burned out of Ethereum's supply | On successful execution | Source: What is Ethereum? A Comprehensive Guide for 2026 (coinbureau.com), accessed Oct 19, 2026 |
| Priority fee (tip) | Validators, to include the transaction in the next block | Optional, added above the base fee | Source: What is Ethereum? A Comprehensive Guide for 2026 (coinbureau.com), accessed Oct 19, 2026 |
| Failed call, original design | Caller still pays the fees | Funds or gas run out, and state changes revert | Source: Ethereum Whitepaper | ethereum.org (ethereum.org), accessed Oct 19, 2026 |
The last row describes the original design only.
Analysis: what the fee split means
Read together, these rules mean the base fee leaves the supply rather than reaching validators. The tip is the part a sender can add to encourage validators.
When a call fails
Under the original design, if a transfer fails for lack of funds, or the code runs out of gas, all state changes are reverted except the payment of the fees. Under that design, the caller still pays the fees. Current treatment of a failed call is not covered here.
What a contract cannot do
A contract cannot start itself, because an externally owned account must trigger it. An older Coin Bureau article says smart contracts on Ethereum cannot directly access information stored outside the Ethereum blockchain. It also says that once a contract is coded, changing it is practically impossible and potentially expensive.
What the sources leave out
Ethereum has changed since that whitepaper: it moved from proof-of-work to proof-of-stake in 2022. Later sections of the whitepaper, the longer Coin Bureau guide and the university tutorial are not covered here.
Next steps
A separate explainer covers how gas fees are set and split between the base fee and the tip. Check current fee levels before you budget a call.
Sources: What is Ethereum? A Comprehensive Guide for 2026 (coinbureau.com), accessed Oct 19, 2026 · Ethereum Whitepaper | ethereum.org (ethereum.org), accessed Oct 19, 2026 · The Merge | ethereum.org (ethereum.org), accessed Oct 17, 2026 · Smart Contract in Ethereum Blockchain (www3.ntu.edu.sg), accessed Oct 19, 2026 · Beginner's Guide to Smart Contracts: Everything You Need to Know (coinbureau.com), accessed Oct 19, 2026
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