ETHEREUM & SMART CONTRACTS
Plain English
Ethereum is the second-largest cryptocurrency and the foundation of most crypto applications. Smart contracts are programs that live on the blockchain and execute automatically — like a vending machine, but for any kind of agreement.
Going deeper
Ethereum, launched in 2015 by Vitalik Buterin, introduced programmable money through smart contracts — self-executing code stored on the blockchain. These contracts automatically enforce agreements when conditions are met, with no intermediaries. Ethereum transitioned from Proof of Work to Proof of Stake in 'The Merge' (2022), reducing energy consumption by 99.95%. ETH is needed to pay 'gas fees' — the cost to execute operations on the network. Ethereum is the foundation for decentralized applications (dApps), DeFi protocols, NFTs, DAOs, and most of the Web3 ecosystem. Its programmability makes it far more versatile than Bitcoin.
Examples
Smart Contract in Action
You and a friend bet $100 on a sports game. Instead of trusting each other, you both send $100 to a smart contract. When the official result is reported on-chain, the contract automatically sends $200 to the winner — no bank, no arbiter needed.
Gas Fees
You want to swap tokens on Uniswap. The transaction requires 150,000 gas units. If gas price is 20 gwei and ETH is $3,000, the fee is: 150,000 × 20 × 10^-9 × $3,000 = $9. Complex DeFi operations cost more; simple ETH transfers cost less.