What is Ethereum?

Vitalik Buterin introduced the world to Ethereum in a 2014 whitepaper. A year later, he and Joe Lubin launched the Ethereum blockchain. The decentralized, open-source blockchain is best known for its smart contract functionality, which eventually led to its popularity for NFTs.

As a reminder, a blockchain is a digitally distributed ledger that facilitates the process of recording transactions and information across a network. While there are many blockchains, Ethereum’s defining feature is that it was created to build applications that run on top of it. 

On the subject, in a 2018 interview, Buterin said, “This idea of a blockchain with a built-in programming language as…what I thought was the simplest and…most logical way to actually build a platform that can be used for many more kinds of applications.”

His early issue with Bitcoin was its limited functionality, which inspired him to create something that would increase the power of the existing blockchain system.

Ethereum is now the second-largest cryptocurrency by market cap, and it boasts the largest volume of NFTs.

How is Ethereum different from Ether (ETH)?

Ethereum’s native currency is Ether, which is commonly abbreviated to ETH. Ethereum is the blockchain itself, like Polygon, Optimism, and Solana, while Ether (ETH) is the currency used to make transactions on the Ethereum blockchain. ETH is a cryptocurrency like Polygon’s currency MATIC, Solana’s currency SOL, and Avalanche’s currency AVAX.

How does Ethereum work?

Ethereum is a Layer 1 (often abbreviated as “L1”) blockchain, which means it executes and validates transactions independently without assistance. Ethereum facilitates everything from the buying, selling, and storing of NFTs to Decentralized Finance (also called “DeFi”). 

You can think of Ethereum as the foundation of a home. As an L1 chain, Ethereum functions as the base layer that Layer 2 chains like Optimism and Arbitrum use. Layer 2 chains process transactions on their chain and then store a summary of the completed actions on the Layer 1 chain. 

What are smart contracts?

Smart contracts are the foundational element of applications that run on Ethereum’s blockchain. They are automated systems that execute on a rule once a set of criteria is met and powers NFTs, dApps, and DAOs. Buying and selling NFTs using OpenSea is powered by smart contract protocol, Seaport.

Specific consensus mechanisms validate the smart contracts and decentralized applications that are “hosted” on Ethereum’s system. 

Is Ethereum’s consensus mechanism Proof-of-Work or Proof-of-Stake?

All blockchain transactions go through a consensus process to ensure that only verified blocks are added to a chain. This process helps guarantee a blockchain’s decentralized, secure, and public nature. The two dominant consensus systems are the Proof-of-Work method and the Proof-of-Stake method. 

When it first launched in 2015, Ethereum operated on the Proof-of-Work method but converted to Proof-of-Stake in 2022 in a migration known as “The Merge.” Proof-of-Work blockchains generally require much more energy to validate transactions compared to Proof-of-Stake. Ethereum’s update to Proof-of-Stake reduced its energy consumption by ~99.95%.

The Ethereum Foundation has been developing this consensus mechanism since 2020 on a blockchain known as “The Beacon Chain.” 

Although Ethereum's consensus mechanism changed in The Merge, the underlying blockchain technology did not. Think of it like a software update on your phone— your phone might have better features and work faster, but it's still the same phone.

In Ethereum’s case, the consensus mechanism was updated from solving complex math problems to staking a large amount of Ether tokens (ETH).

What are Ethereum’s main uses?

Ethereum facilitates the buying, selling, and storing of NFTs (non-fungible tokens), DAOs (decentralized autonomous organizations), and DeFi (decentralized finance). 

NFTs

An NFT (non-fungible token) is a unique digital item stored on a blockchain. OpenSea supports both minting of NFTs on Ethereum’s blockchain, as well as buying an NFT with a compatible crypto wallet. NFTs can represent almost anything. The Ethereum blockchain serves as a digital record of ownership.

DAOs

DAOs — decentralized autonomous organizations — are organizations without sole leadership. Instead, they’re governed by the group of users who comprise the organization. Often, the users within a DAO will create proposals that are voted on to enact changes. DAOs use tokens that allow users to prove membership and vote. DAOs can have a wide range of purposes — anything from charitable giving to business networking to education.

DeFi

Decentralized Finance, often shortened to simply “DeFi,” is the term used to describe all financial services that operate on blockchain technology. Common services include earning interest, borrowing, lending, and trading. DeFi enables trustless, permissionless, and fast transactions.

What are Ethereum NFTs?

Ethereum NFTs are NFTs that have been minted onto the Ethereum blockchain. Because Ethereum was created to support dApps that rely on smart contracts, NFTs (which also rely on smart contracts) have flourished on this blockchain. It’s currently the most popular blockchain for NFTs.

How do I buy, store, and use Ethereum? 

How do I buy ETH?

Ethereum is a blockchain, while Ether (ETH) is the currency used to make transactions on the blockchain. No one person can own or run Ethereum, the blockchain. 

To buy, sell, and store ETH, you will need an Ethereum-compatible crypto wallet. You can buy ETH directly from an exchange like Coinbase or deposit it into your wallet. Some wallets even support the use of credit cards.

What can I store on Ethereum?

Once you have set up an Ethereum-compatible crypto wallet, you can use it to access cryptocurrencies, NFTs, and access DApps, and DAOs.  MetaMask and Coinbase Wallet are two popular wallets that support Ethereum. Not all ETH-compatible crypto wallets support NFTs, so make sure you double-check if you plan to use your ETH to buy and sell NFTs.

Will I pay gas fees when using ETH?

When using Ethereum, like any blockchain, there will be times you’ll need to pay gas fees. In web3, the term “gas fee” refers to the payment needed to execute transactions on the blockchain. These payments compensate the node operators who keep the blockchain functioning. This validation helps ensure the blockchain has a permanent, immutable record. 

Is OpenSea compatible with Ethereum?

Yes! OpenSea supports Ethereum-compatible wallets and Ethereum-based NFTs. You can buy, sell, transfer, and mint Ethereum NFTs all using OpenSea. You can explore Ethereum NFTs on OpenSea by using tools like our Trending chart and filtering for Ethereum.