What Is Ethereum? How the Network, Ether and Smart Contracts Work

Ethereum is a decentralized blockchain network that runs programs called smart contracts. Its native currency is ether (ETH). ethereum.org calls it "a decentralized blockchain network and software development platform." You pay a fee in ETH to send ETH, move a token or call a smart contract. That fee goes to the validators who secure the network by staking ETH. No company runs Ethereum. ethereum.org says "there's no CEO, board, or central authority."

The latest network upgrade, Fusaka, went live on December 3, 2025. It gave layer 2 networks more room for data. The next one, Glamsterdam, is "in development and expected in Q4 2026," according to ethereum.org. Its upgrade history page does not give a date yet.

Ethereum in five facts

• Network: Thousands of independent computers, called nodes, run the same software and agree on one shared state (ethereum.org).
• Asset: ETH pays transaction fees (gas) and is staked to secure the network. Unlike bitcoin, it has no fixed supply cap (ethereum.org).
• Consensus: Proof of stake since The Merge on September 15, 2022. Running your own validator takes at least 32 ETH.
• Launch: The main network went live on July 30, 2015, when the genesis block was mined.
• Latest upgrade: Fusaka, December 3, 2025.

How a smart contract runs

A smart contract is a program stored on Ethereum. Every node runs the same code and gets the same result. The code runs in the Ethereum Virtual Machine (EVM), which ethereum.org describes as "a decentralized virtual environment that executes code consistently and securely across all Ethereum nodes." Ethereum works like a shared state machine. Each block updates account balances and contract storage according to EVM rules.

The original whitepaper proposed "a blockchain with a built-in fully fledged Turing-complete programming language." In other words, developers can write general-purpose logic, not just payments. That design is why tokens, lending apps, NFTs and onchain governance can all run on one network.

Gas fees: what a transaction costs

Gas measures the computing work an operation needs. Your fee is:

units of gas used × (base fee + priority fee)

• Base fee: Set by the protocol. It is burned, which takes it out of circulation. EIP-1559 introduced this fee model in the London upgrade on August 5, 2021.
• Priority fee (tip): Goes to the validator. You can raise it to get your transaction included sooner.
• Units: Fees are usually quoted in gwei. One gwei is 0.000000001 ETH.
• A plain ETH transfer needs a gas limit of 21,000 units. Here is a hypothetical example: at a combined fee of 2 gwei per unit, a transfer costs 42,000 gwei, or 0.000042 ETH. Real base fees change with demand from block to block.
• Failed transactions still cost money. ethereum.org: "The fee is paid regardless of whether a transaction succeeds or fails." If a transaction runs out of gas, the EVM reverts its changes, but the gas is still used up.

You need some ETH in your wallet before you can send anything on Ethereum, including other tokens.

Proof of stake: who keeps the network honest

Validators replaced miners at The Merge on September 15, 2022. ethereum.org says the switch cut energy use by about 99%.

How it works, per ethereum.org's proof-of-stake documentation:

• Time is split into slots of 12 seconds and epochs of 32 slots.
• In each slot, one validator is picked at random to propose a block. Others vote for it with attestations.
• A block becomes final once checkpoints get votes from at least two-thirds of all staked ETH. Reversing a finalized block would require destroying a large share of the stake through slashing.
• Slashing punishes provable misbehaviour, such as signing two conflicting blocks. If many validators are slashed at once, the penalty can reach 100% of a validator's stake.

Staking with more or less than 32 ETH

ethereum.org says your own validator "requires at least 32 ETH and can hold up to 2048 ETH." The higher limit came with the Pectra upgrade on May 7, 2025. Staking pools let people take part with less, and some accept as little as 0.01 ETH. ethereum.org lists the trade-offs. Solo validators are penalized for going offline. Pooled and delegated staking add counterparty risk, because you trust someone else with your funds or signing keys.

Layer 2 networks and the latest upgrades

Ethereum keeps its main chain conservative so that nodes can run on ordinary hardware. Much everyday activity happens on layer 2 networks instead. ethereum.org says networks that store their data on Ethereum "are often called 'rollups'." It also notes that each network's safety depends on its own technology, contract security and maturity.

Recent upgrades have mostly targeted this layer:

• Dencun, March 13, 2024: Added proto-danksharding (EIP-4844), a cheaper "blob" data space for layer 2s.
• Pectra, May 7, 2025: Raised the validator maximum to 2,048 ETH. Let regular accounts run smart-contract-like code.
• Fusaka, December 3, 2025: Added PeerDAS, which lets each node hold only part of the blob data. That allows a theoretical 8x scale-up. Fusaka also raised the default block gas limit from 45 million to 60 million. ethereum.org says the main focus is "lowering fees on layer 2" and that Fusaka "does not lower gas fees on L1, at least not directly."
• Glamsterdam: Expected in Q4 2026 per ethereum.org. No mainnet date is confirmed on its upgrade history page.

Ordinary holders did not need to do anything for any of these upgrades. ethereum.org warns that anyone telling you to "upgrade" your ETH is trying to scam you.

From idea to today

The two whitepaper dates come from different ethereum.org pages. The upgrade history page lists "Whitepaper released" on November 27, 2013. The whitepaper page says it "was published in 2014."

Who runs Ethereum

ethereum.org names eight co-founders: Vitalik Buterin, Gavin Wood, Joseph Lubin, Jeffrey Wilcke, Mihai Alisie, Anthony Di Lorio, Amir Chetrit and Charles Hoskinson. None of them controls the network. "No one person or organization can change Ethereum's rules or shut down the network on their own," the project's history page says. The non-profit Ethereum Foundation funds research, grants and events, but "it does not control the network."

Where the risks are

When you use a smart contract, you depend on its code. Validators, staking and slashing protect the chain's consensus. They do not protect you from a badly written or malicious contract. The DAO exploit in 2016 drained 3.6 million ETH from a single contract and led to a chain split. Before you approve a transaction, check that the app and contract address are the official ones. Read what the wallet asks you to sign, and keep in mind that failed transactions still cost gas.

Limitations: almost every fact here comes from ethereum.org, the project's own site. Glamsterdam's timing is a project expectation, not a fixed date.