Ethereum is an open-source blockchain platform that allows developers to create and run decentralized applications (dApps). Unlike Bitcoin, which is designed solely as a means of storing value or exchange, Ethereum offers much more. It’s basically a complex digital ecosystem where users can run smart contracts, launch new projects and conduct secure transactions, all without intermediaries.
Ethereum benefits include:
- Decentralization – No central authority to control the network.
- Flexibility – Support for financial applications, games, NFTs and more.
- Security – Supported by blockchain technology, which is virtually impossible to tamper with.
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How does Ethereum work?
Ethereum uses a blockchain network, which is a digital ledger distributed among thousands of computers globally (called nodes). This network enables fully transparent and verifiable transactions.
- Ether (ETH)
Ether is the cryptocurrency native to the Ethereum network. It is used to pay transaction fees and power decentralized applications.
- Smart contracts
A smart contract is code that runs automatically on the blockchain when specified conditions are met. For example, a contract could send Ether automatically if a certain goal has been met.
- Execution time
Ethereum uses an Ethereum Virtual Machine (EVM) that runs the code on every node in the network, thus maintaining consistency and functionality.
Applications of Ethereum
Here are some of the most important and widespread apps built on Ethereum:
Decentralized Finance (DeFi)
DeFi is probably the most influential application of Ethereum, with a massive impact on the financial industry. It includes:
- Decentralized Exchanges (DEXs): platforms such as Uniswap or SushiSwap allow users to trade cryptocurrencies directly, without the need for a centralized intermediary.
- Lending and Borrowing Platforms: Services like Aave and Compound allow users to lend or borrow cryptocurrencies, often with collateral, eliminating traditional banks.
- Stablecoins: Cryptocurrencies such as USDC or DAI, whose value is linked to a stable asset (usually USD), facilitating stable transactions in the DeFi ecosystem.
- Decentralized Insurance: Solutions that provide coverage against cyber risks or other events, with policies and payments managed through smart contracts.
Non-Fungible Tokens (NFTs)
NFTs have revolutionized digital property. An NFT is a unique, non-interchangeable token that represents ownership of a digital or real asset. On Ethereum, the most common standards are ERC-721 and ERC-1155. Applications include:
- Digital Art and Collections: artworks, profile pictures (PFPs) such as CryptoPunks or Bored Ape Yacht Club.
- Objects in Games: Unique digital assets that players can own, trade and use in blockchain games.
- Music, Video and Other Media: Copyrights and ownership of digital content.
- Virtual Real Estate: Land and property in metaverses (virtual worlds).
Decentralized Autonomous Organizations (DAOs)
DAOs are those organizations governed by rules codified in smart contracts without a central authority. Decisions are made by a vote of token holders, promoting transparency and participation. They can be used for:
- Managing community funds.
- Decision making in blockchain projects.
- Investment collectives.
Gaming (GameFi)
Blockchain games allow players to actually own in-game assets in the form of NFTs and earn cryptocurrencies through play (Play-to-Earn).
- In-game assets: Weapons, skins, characters, which are NFTs and can be sold on marketplaces.
- In-game savings: Players can earn tokens that have real-world value.
Digital Identity Management
Ethereum enables the creation of self-sufvereign identities, where users have full control over their personal data and decide who and when they share it, reducing dependence on centralized entities.
Supply Chain Management
Ethereum blockchain can provide transparency and traceability of products along the entire supply chain, from producer to consumer. Every step can be recorded, reducing fraud and improving efficiency.
Prediction Markets
Platforms like Augur allow users to bet on the outcomes of future events (political, sports, economic), with rewards automatically distributed through smart contracts.
Real World Asset Tokenization (RWA)
Ethereum facilitates the digital representation (tokenization) of real-world assets, such as real estate, artwork, commodities or company shares, allowing for fractionalization of ownership and greater liquidity.
Payment Systems
While direct transactions with Ether (ETH) are one form of payment, smart contracts also allow for more complex payment systems, including automated payments or payments with specific conditions.
These are just a few examples, and the Ethereum ecosystem continues to innovate, with new applications and use cases constantly emerging. Its flexibility and programmability make it a powerful platform for developing new decentralized technologies.