What is Ethereum? How it differs from bitcoin

Ethereum: a blockchain for code and currency

Ethereum is a kind of blockchain network you can use to record payments or to run code. That code is called a smart contract. Ether, or ETH, is its own coin, and it has to be paid whenever you want the network to do work for you. A smart contract is just a program saved onto the blockchain, where it runs when certain rules are hit. For instance, you might have a contract that hands over a token once it sees proof you've paid. People build all sorts of things on Ethereum, lending apps, trading tools, digital property records, and a lot more.

The idea for Ethereum was set out back in 2013, and it went live in 2015. Developers, people running nodes, and anyone who uses it are still improving the whole system.

Ether and bitcoin: how the designs set them apart

Bitcoin was created to transfer value, nothing fancy, just payments and a few special features built-in. Ethereum, on the other hand, was set up from start to allow code to run right on the blockchain, including complex smart contracts. Each network uses its own currency to pay transaction costs. With Ethereum, this payment is called gas (we cover gas in more detail in our article on Ethereum gas fees).

Their security is handled differently too. Bitcoin sticks with proof of work, where miners try to win a race using their hardware. In September 2022, Ethereum switched to proof of stake. This means validators must put ether at risk as a bond and can lose some if they break the rules. Both systems affect how much power the networks use, and what risks they face; but those details are available in other analyses.

Important details for anyone sending or holding ether

If you send ether, you pay a network fee, and how busy Ethereum is will change that fee amount. Sending tokens (these are built using smart contracts) usually costs more than a regular ETH transfer, since a code execution happens in every token transfer. Our token standards guide explains this difference between networks and why rules change.

Ether and bitcoin both swing in price a lot. There’s a real risk of losing money if you trade or keep your funds in either. Smart contracts have their own risks too, bugs or attacks can happen, which means the code can fail or be misused. So, using ETH isn’t just about price risks but technical ones as well.

Always send ETH over the Ethereum network to a wallet or exchange that’s set up to handle it. Some other blockchains use addresses that look similar, which means a transfer to the wrong one might not be recovered.

Frequently asked questions

Is ethereum the same as ether?

They aren't. Ethereum refers to the software and network itself. Ether (ETH) is the actual coin that pays for transactions and computing work on that network. Many people do say "ethereum" when they mean ether, but they're distinct. Tokens used on Ethereum are different again; see our coin vs token guide for more details.

Can I use ethereum for everyday payments?

You can send ether, and yes, some businesses will take it. But daily usage is limited. The coin’s price moves a lot, and fees jump around with network traffic. For that reason, most people hold ETH, trade it, or use it in apps instead of paying for groceries. Before you pay for something, check what it costs, and look at the rules from your payment service. Fees and acceptance can change fast.