What is Ethereum?
Ethereum is a leading programmable blockchain. Its native cryptocurrency is ETH, and the network's core function is to execute smart contracts: self-executing code that powers decentralized applications (dApps), tokens, and other blockchain-based utilities.
This article explains Ethereum's technology, its evolution, and the practical considerations for holding and using Ethereum with a Trezor device.
The native currency of Ethereum is Ether (ETH). Ethereum has no fixed maximum supply, and its monetary policy is dynamic. New ETH is issued to validators, while part of every transaction fee is permanently burned.
The smallest unit is a wei (10⁻¹⁸ ETH). Fees (called ) are usually measured in gwei (10⁻⁹ ETH).
What is Ethereum?
Ethereum is a decentralized, open-source blockchain system featuring smart contract functionality. Launched in 2015, its core innovation is the Ethereum Virtual Machine (EVM), a runtime environment that executes code exactly as programmed on thousands of computers worldwide.
These programs are called smart contracts. They are immutable and power everything from tokens to complex financial applications.
All activity on the Ethereum network requires computational effort, paid for with transaction fees known as gas. Gas must always be paid in ETH, even when transferring tokens.
Technology and purpose
Ethereum was designed to be a world computer. It moves beyond simple payments to enable a new class of decentralized applications (dApps), including:
- Decentralized Finance (DeFi) protocols
- Stablecoins and tokenized assets
- Decentralized autonomous organizations (DAOs)
History and key upgrades
Ethereum’s history is defined by major upgrades that have shaped its evolution.
Origins and launch (2013–2015)
Vitalik Buterin proposed Ethereum in a 2013 whitepaper. To fund development, a crowdsale was held in 2014 where early contributors purchased ETH.
This initial distribution allocated roughly 60 million ETH to public sale participants and 12 million ETH to the development foundation and early contributors.
The Ethereum mainnet launched in July 2015.
The DAO and the hard fork (2016)
In 2016, a major smart contract exploit drained millions in ETH. The community elected to execute a hard fork at block 1,920,000 to return the funds.
This event created two chains: the new main Ethereum (ETH) chain and the original chain, now called Ethereum Classic (ETC).
The Merge: Proof-of-Stake (2022)
Ethereum initially used energy-intensive Proof-of-Work (PoW). On September 15, 2022, it successfully transitioned to Proof-of-Stake (PoS) in an update called The Merge. This changed how new ETH is created and the network is secured.
Validators now stake ETH instead of miners using physical hardware.
Learn more about the differences between Proof-of-Work and Proof-of-Stake.
Ethereum's monetary policy
Ethereum employs a dynamic monetary policy that can be updated through coordinated network upgrades and community consensus.
- Issuance: New ETH is created as rewards for stakers. The issuance rate has been reduced multiple times through upgrades.
- Burning: The EIP-1559 upgrade introduced a fee-burning mechanism. A base fee from every transaction is permanently destroyed.
- Net Supply: The daily supply of ETH is variable. The net supply increases (is inflationary) when issuance exceeds burning, and decreases (is deflationary) when burning exceeds issuance.
The blockchain trilemma and decentralization
Ethereum’s design aims to balance the blockchain trilemma: the challenge of achieving optimal decentralization, security, and scalability simultaneously.
You can learn more about this fundamental challenge in our article on the blockchain trilemma.
Holding Ethereum assets safely
Understanding Networks: Mainnet vs. Layer 2
- Ethereum Mainnet is the primary, highly secure base layer.
- Layer 2 networks (e.g., Arbitrum, Optimism) are separate networks that process transactions off-chain before settling final proofs on Mainnet. They usually offer lower fees than the main Ethereum chain. For more information, visit What is a layer 2?
- Other EVM chains: Separate blockchains like BNB Smart Chain, Polygon, and Base that use the same address format.
Your Ethereum address is the same across all networks, but the networks themselves are separate. For instance, ETH on Arbitrum is not the same as ETH on Ethereum Mainnet.
Ethereum and Trezor
Your Trezor hardware wallet provides self-custody for your Ethereum assets. It secures the private keys for your addresses on Ethereum Mainnet and any compatible Layer 2 network.
- You can view and manage your ETH and ERC-20 tokens on the Ethereum network and many other EVM networks directly in Trezor Suite
- To interact with dApps on more networks, you can connect your Trezor to third-party interfaces like MetaMask or Rabby Wallet. Your keys remain secure on your device, which must physically approve every transaction.
For more information on how to use Ethereum with Trezor, please visit our articles Managing Ethereum & ERC-20 Tokens in Trezor Suite and Staking Ethereum (ETH) in Trezor Suite.
Key takeaways
- Ethereum is a programmable blockchain that powers smart contracts and dApps.
- Its history includes significant, community-led changes like the DAO fork and The Merge to Proof-of-Stake.
- Its monetary policy is dynamic, with no hard cap on ETH supply.
- Understanding the difference between Mainnet and Layer 2 networks is critical for security.
- Trezor keeps your keys secure, giving you true ownership over your ETH and tokens on any Ethereum-based network.