Ethereum Overview

Smart Contract Capability: Permissionless Access & Deployment Of Smart Contracts

Consensus Method: Proof of Stake (PoS)

Accessibility: Open Source Public Network

Underlying Cryptocurrency: Ether (ETH)

Ethereum is a blockchain network that first went live in July 2015. It operates through internet-connected pieces of software called nodes, which are run by participants in the network, come in different forms, and are usually (but not always) paired with dedicated hardware.

Ether (ETH) is the underlying cryptocurrency of the Ethereum network and is used both to pay for transactions and to secure the network.

Smart Contract Capability

The Ethereum network contains a built in emulated computer system that executes transactions on the network, called the “Ethereum Virtual Machine” (EVM). This system allows for programs to be built on top of the network that will automatically execute when certain conditions are met. These programs are called ‘Smart Contracts’ and they are the basis for ERC-20 Cryptocurrencies and NFTs.

Creating and installing smart contracts on Ethereum (called ‘deploying’) is a permissionless procedure. Anyone with the technical capability can do it.

Consensus Method

Ethereum began its life using a Proof of Work consensus method - where participants secure the network using increasingly powerful and numerous computer systems to solve increasingly complex math problems. As the network grew, so too did the energy needed to secure it. The scaling energy usage led to the rise of concerns about the impact on the environment - both immediate and in the future.

The solution was a multi-year process to transition the network from Proof of Work (PoW) to Proof of Stake (PoS). This consensus method would reduce the energy usage by using a much smaller subset of computers to secure the network - but gating them behind collateral and incentivizing good behavior while punishing bad behavior. Ethereum successfully transitioned to Proof of Stake in September 2022, reducing the power consumption of securing the network by over 99%.

Accessibility

Ethereum is a public blockchain that is fully permissionless - anyone that has access to the internet can access the blockchain anonymously and without the permission of any entity, government or otherwise. This does not mean Ethereum protects your identity in any way - simply that the underlying infrastructure doesn’t act as either an enforcer or a gatekeeper.

Increasingly, countries are requiring crypto companies to implement Know Your Customer (KYC) laws - giving governing bodies real world identities to pair with blockchain wallets. Whether this is a stance you agree with or not, this is not a function of Ethereum - it is one of government. It applies regardless of the blockchain.