Ethereum and Smart Contracts: A Practical Guide to the World Computer

If Bitcoin is digital money, Ethereum is a global, programmable computer. Launched in 2015 by Vitalik Buterin and a team of co-founders, Ethereum extended blockchain technology beyond simple payments to support smart contracts — self-executing programs that run exactly as written, without intermediaries.

What is a smart contract?

A smart contract is code stored on the blockchain that automatically enforces an agreement. Send the right input, and the contract delivers the agreed output — releasing funds, minting a token, or recording ownership — with no lawyer, broker, or bank in the loop. Because the code is public and the blockchain is tamper-resistant, all parties can trust the outcome.

The world computer in practice

Smart contracts power most of what people call “Web3” today:

• DeFi: lending, borrowing, and trading without a bank.
• NFTs: verifiable ownership of digital art, collectibles, and game items.
• Stablecoins: tokens pegged to the dollar that settle in seconds.
• DAOs: internet-native organizations governed by code and token holders.

ETH, gas, and staking

Ether (ETH) is the network’s native asset. Every action costs a small fee called “gas,” paid in ETH, which compensates the validators who process transactions. In 2022 Ethereum completed “the Merge,” switching from energy-intensive mining to proof-of-stake. Today anyone can help secure the network by staking ETH and earning rewards in return.

Scaling with Layer 2

As demand grew, fees rose. The answer has been Layer 2 networks — rollups like Arbitrum, Optimism, and Base — that bundle thousands of transactions off-chain and settle them on Ethereum, cutting costs dramatically while inheriting its security.

Ethereum is the second-largest cryptocurrency by market value and the settlement layer for a vast share of on-chain activity. To follow its price and network health, see our live markets page.