Ethereum (ETH)

What Ethereum does and how people use it

Ethereum isn't just a payment ledger. It’s a programmable blockchain. Launched by Vitalik Buterin and co-founders in 2015, it runs a wide range of code, not just simple transfers, and its coin, ether (ETH), fuels every action taken on the network. You can always see the current price up top, quoted per coin.

That code runs as something called a smart contract. These smart contracts are programs locked on the Ethereum chain at specific addresses and do exactly what they’re designed to do whenever someone interacts with them. So you get things like decentralized exchanges (where you trade tokens without an account), lending tools, NFTs, and stablecoins such as the Ethereum-based version of Tether. Those tokens follow shared standards. For you, that means your wallet or app can handle thousands of supported coins with no extra setup.

When you buy ETH, you’ll use it in two main ways: it covers network fees (“gas”) for every app or transaction, and you can also hold, or stake, it if you want ongoing exposure to the chain. If you're interested in background and context, take a look at our What is Ethereum guide. And for those who know Bitcoin, you'll notice that Ethereum was built to do more than just money transfers.

How Ethereum functions under the hood

Ethereum has run on proof of stake since September 2022. Previously miners with the most computing muscle gathered most rewards, just as they still do on Bitcoin, but the new system works differently. Now, validators set aside ETH as collateral, propose blocks in turn, and risk losing part of that stake if they try to cheat. If you want to operate your own validator, you'll need 32 ETH, more than most buyers want to commit, though most people participate through pooled platforms or exchanges. New blocks show up about every 12 seconds on average.

Its supply rules stand apart from Bitcoin. There's no absolute maximum like Bitcoin's fixed 21 million. Ethereum pays out fresh ETH to validators, but a piece of every transaction fee is permanently burned (removed from circulation) since the London update back in 2021. So whether the total supply is growing or shrinking at any moment just depends on network traffic.

Network congestion means expensive activity. If you're in a rush during busy times, gas prices climb, and moving even a small token can get pricey compared to quieter spells. Most everyday activity for apps has drifted to layer 2 networks lately, where transactions are bundled and only the result goes back onto Ethereum, cutting costs. If you’re planning to actually interact with apps, read our page about how Ethereum gas fees work before making your first transfer.

What influences Ethereum's price

Ethereum's price is known for moving up and down sharply. In the past month it’s changed by -16.80%, over twelve months by -42.92%, and across five years, by -44.06%. Over the last year alone, you saw ETH hit a high of 3,905.34 USD and a low of 1,566.01 USD. Moves that wide are standard for this coin, so think carefully about what you’re willing to put in.

Several forces affect the price you pay or receive. First up is the broader crypto market, ETH often tracks Bitcoin’s moves, sometimes amplifying them. Also, there's network demand: more activity in apps means more fees, more ETH burned, less supply. Slow periods pull in the opposite direction. Software upgrades, shifts in staking, and big news about regulation can all cause spikes or dips. And if traders use leverage, forced sales can quickly exaggerate an ordinary drop into a sharper move.

You can't forecast future prices from this. Neither do we. But this is the context behind the chart at the top of this page. If you’re wondering where we get and check all the numbers, our How we compare page describes the approach.

Buying ETH and understanding the real cost

Here’s what happens when you want to buy ETH. You create an account on an exchange, complete the identity checks, deposit through bank or card, and put in your order. When you choose a market order, it buys instantly at whatever price is available. Or you can set a limit order and let it wait until ETH reaches your chosen price. Buying a fraction of a coin is entirely normal, no need to get a whole ETH.

But watch out: the sticker price isn't the entire story. First you’ll pay a trading fee, which is a slice per order. There's also the spread; that's the difference between buy and sell prices, and many platforms working on “zero fee” simply move the profit here. Deposit costs depend on the route you pick. Bank transfers are the cheapest almost everywhere; cards tend to cost a fair bit more. If you take coins off the platform, you’ll pay a withdrawal fee in ETH. Our exchange fees guide spells out where these numbers turn up.

You can check options like Kraken, Coinbase and Bitvavo. Kraken and Coinbase work in a lot of countries and let you place advanced orders if you need them, while Bitvavo fits those depositing euros in Europe. If you want an exchange-by-exchange comparison, use Kraken vs Coinbase. The table further up gives what you’d actually spend or receive for your own amount, so check it for your purchase, especially since fixed fees matter much more on a small order.

Safely storing your ETH

Your ETH will be held in your exchange account after you buy it. That’s convenient, especially if you’re planning to trade or sell it soon. Still, the keys are with the exchange, meaning your funds depend on the company’s stability. If withdrawals are paused or the company folds, you could end up waiting to access your coins with all the other users.

If you want full control, use a self-custody wallet. You set up the wallet yourself, carefully write down its recovery phrase (on paper, away from any online device), and store it safely. Whoever has that phrase controls your coins, and there is no reset option if you lose it. For extra security, a hardware wallet keeps your keys on a separate physical device that can sign transactions but won’t expose the keys to your computer. Our guide comparing custodial and non-custodial wallets can help you decide which fits you best.

Some simple habits go a long way. Always copy and double-check your addresses, Ethereum addresses start with 0x, and one wrong character sends coins elsewhere. When moving funds to a new wallet, try a tiny test transfer first. Use the exact same network on both ends; mistakes here usually can’t be reversed. Finally, withdrawals use ETH for gas, so leave a little behind in the account to pay for it.

Potential losses, scams and tax

If you glance at the price chart above, you’ll see ETH can drop steeply in a short time. That’s not the only risk. Sometimes smart contracts contain coding errors, and funds can be drained from lending or swap apps that haven’t been reviewed well. Scammers are active, too. Some make fake wallets, lure with “airdrop” offers, or ask you to verify your recovery phrase. Legitimate platforms do not ask for your recovery phrase. If you decide to stake coins, remember they might be locked for a while, and validators face penalties for anything against the rules. Only invest funds you’re prepared to leave untouched longer than you expect.

Tax rules are different everywhere, so take this as information, not advice. Most countries classify crypto as property or an asset. You may create taxable gains or losses when you sell ETH or spend it on something. Swapping ETH for another token might count as a sale too, depending on where you are. Staking rewards often count as income as soon as you receive them. Hold on to your transaction records, purchase confirmations, statements, and wallet logs, and check with a local tax expert to see what rules apply to your situation.