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Ethereum: The World Computer

10 min
beginner

A blockchain for running contracts

Bitcoin and Ethereum have different execution models. Bitcoin uses a restricted scripting system; Ethereum provides a virtual machine for general-purpose smart contracts.

In 2013, a 19-year-old programmer named Vitalik Buterin published a whitepaper asking: what if a blockchain could run any program, not just money transfers? Two years later, Ethereum launched. It is a blockchain with a built-in computer.

What Ethereum actually is

Ethereum is a network of thousands of computers that all run the same virtual machine. This machine is called the EVM (Ethereum Virtual Machine). Anyone can write a program, deploy it to the EVM, and it will run exactly the same way on every computer in the network.

Ethereum execution clients apply the same rules to transactions. Contract availability also depends on the network and the contract's own permissions, including any pause or upgrade controls.

Traditional App Your Code → Company's Server One server. Company controls it. They can change or shut it down. ⚠ Single point of failure Ethereum App Smart Contract → EVM EVM EVM EVM EVM EVM Thousands of computers. Nobody owns it. Code runs the same everywhere. ✓ No single point of failure

Ethereum vs Bitcoin

Both are blockchains. Both use cryptocurrency. But they serve different purposes.

Feature Bitcoin Ethereum
Launched 2009 2015
Purpose Digital money Programmable platform
Programming Very limited scripts Full smart contracts (Solidity)
Block time ~10 minutes ~12 seconds
Consensus Proof of Work Proof of Stake (since Sept 2022)
Native token BTC ETH
Main use Store and send value Run decentralized applications

ETH is used to pay Ethereum transaction fees and participate in proof-of-stake validation.

How smart contracts work on Ethereum

A smart contract stores code and state at an Ethereum address. Its deployed code is fixed, but a proxy or other indirection can allow an authorized party to change which implementation is used.

Here is what happens when you interact with one:

  1. You send a transaction to the contract's address (like calling a function)
  2. Every node on the network executes the contract code in their EVM
  3. All nodes arrive at the same result (because the EVM is deterministic)
  4. The result is recorded on the blockchain

Every operation the EVM performs costs gas. Simple operations (addition, comparison) cost a little gas. Complex operations (storing data on-chain) cost more. You pay for gas in ETH.

You Send tx + gas fee to contract address Smart Contract Code executes on every node's EVM Result State updated on blockchain

The token standards

Ethereum introduced token standards - templates for creating digital assets. The two most important ones:

ERC-20 is for fungible tokens (every token is identical). USDC, UNI, LINK, and thousands of other tokens use this standard. Think of them like currencies - one USDC is the same as any other USDC.

ERC-721 is for non-fungible tokens (NFTs). Each token is unique. A CryptoPunk NFT is different from every other CryptoPunk. Think of them like concert tickets - each one has a unique seat number.

Because these are standards, any ERC-20 token works with any wallet, any exchange, and any DeFi protocol. This interoperability is one of Ethereum's biggest strengths.

Ethereum's numbers

Network activity changes over time. Use an explorer for current transaction counts, validator activity, and fees. Ethereum schedules proposal slots at 12-second intervals; that does not guarantee inclusion or finality within 12 seconds.

What Ethereum cannot do (yet)

Ethereum has real limits:

Speed: 12 seconds per block, ~15-30 transactions per second on the main chain. Visa handles ~1,700 per second. This is why Layer 2 networks exist - they process transactions off the main chain and settle back to Ethereum periodically.

Cost: During busy periods, a simple token swap can cost $5-50 in gas fees. Layer 2 networks reduce this to pennies.

Storage: Storing data on-chain is expensive. That is why NFT images are usually stored on IPFS (a decentralized file system), not directly on Ethereum.

Key takeaways

  • Ethereum is a blockchain with a built-in computer (the EVM) that can run programs called smart contracts.
  • Contract behavior includes its permissions, dependencies, and any upgrade mechanism.
  • Every operation costs gas, paid in ETH.
  • ERC-20 (fungible tokens) and ERC-721 (NFTs) are the two main token standards.
  • Ethereum is slow and expensive on its own, which is why Layer 2 networks exist.

Quiz: Ethereum: The World Computer

1 / 5

What makes Ethereum different from Bitcoin?