Understanding Ethereum: What it Is and How it Functions

Whether you’ve heard of Ethereum in the context of NFTs, smart contracts or DeFi; you're on the right place. Let's break down what Ethereum actually is, how it works and the tech behind its magic.

📚 TL;DR

• Ethereum is a platform for decentralized apps powered by smart contracts.

• It uses a blockchain to store and verify everything transparently.

• Ethereum runs on a greener, faster system called Proof of Stake.

• This tech allows a trustless, secure and open internet future.

So, What is Ethereum?

A decentralized platform that lets developers build applications that don’t rely on a single server or authority. Think of it like the internet, but instead of apps running on someone else's server, they run on a global network of computers.

These apps are called dApps (decentralized applications) and they’re powered by smart contracts. Aka, little bits of code that automatically run when conditions are met. No middlemen, no paperwork.

Image an app that sends you money only if you complete a task, and it can verify that on its own. That’s a smart contract.

🔐 Ethereum = Trustless + Secure + Open

• Trustless: Don’t need to trust anyone; the code and network handle everything.

• Secure: Built on blockchain tech, meaning data is nearly impossible to tamper with.

• Open-source: Anyone can build, use or improve Ethereum apps.

The tech behind Ethereum

Ethereum runs on a blockchain, which is a public ledger. Think a giant notebook that records everything that happens on the network.

Each time something happens, like a transaction or smart contract execution, it’s recorded in a block and added to the chain. This way, the history of Ethereum is transparent and tamper-proof.

Smart Contracts

At the core of Ethereum are smart contracts: self-executing programs with the terms of the agreement directly written into the code. These contracts run on the blockchain, ensuring transparency, immutability, and trust without the need for intermediaries.

Ether (ETH)

Ether (ETH) is Ethereum’s native cryptocurrency. It’s used to pay transaction fees, also known as “gas and fees”, which are required to execute smart contracts and perform transactions on the network.

Gas and Fees

Every operation on Ethereum requires a certain amount of gas, a unit that measures the computational effort needed. Users pay gas in ETH to compensate the nodes that process and validate transactions. Gas fees can vary depending on network congestion and the complexity of the operation.

Ok, so smart contracts this and smart contracts that, but can we make it more easy to understand? Yes! A smart contract is a code stored on the Ethereum blockchain that runs automatically when triggered.

🔄 Ethereum's Consensus Mechanism: How decision are made on the blockchain?

For Ethereum to work, thousands of computers need to agree on what happened. This is where ₊⊹consensus mechanisms₊⊹ come in. It’s how the network agrees on “the truth".

But what is that? Consensus mechanisms? Well, since 2022, Ethereum uses Proof of Stake (PoS). Before that, it used Proof of Work (just like Bitcoin). Let’s deep dive on this.

1) Proof of Work (PoW) - The old model ⛏️

• Computers (aka miners) solved complex puzzles to validate transactions.

• First one to solve the puzzle got to add the next block and earn ETH.

• The problem? It used A LOT of energy, it wasn’t sustainable.

2) Proof of Stake (PoS) - The New and Greener Model 🌱

• Now, instead of mining, validators are chosen to propose and validate blocks.

• To become a validator, you stake (lock up) at least 32 ETH.

• You’re randomly chosen to validate a block.

• If you’re honest = you earn ETH, but if you cheat = you lose some or all of your stake.

The bright side? Energy efficient, more secure and easier to scale. PoS also opens the door for more people to participate through staking pools, making Ethereum more decentralized.

Ok, perfect everything clear as water for now. But, how it all comes together? So, when you interact with Ethereum, this happens:

1. You send a transaction (like sending ETH or interacting with a smart contract).

2. Validators confirm and add it to the blockchain.

3. The smart contract runs (if triggered).

4. The result is stored on the chain forever.

No bank, no company, no permission needed.

💡 Why should you care about this crazy digital transactions and smart contracts idea?

Because Ethereum isn’t just technology... It’s a new way to build and own the internet. Ethereum has enabled a wide range of real-world applications, including:

• Decentralized Finance (DeFi): Financial services without traditional intermediaries.

• Non-Fungible Tokens (NFTs): Digital ownership of art, music, and other unique assets.

• Decentralized Autonomous Organizations (DAOs): Organizations governed by rules written as smart contracts.

• Games and virtual worlds: Games like Axie Infinity and platforms like Decentraland.

And the best part? Anyone can build on Ethereum — even you.

Ethereum represents a major evolution in blockchain technology, expanding its use far beyond simple financial transactions to include complex decentralized applications, paving the way for a more open and accessible digital ecosystem.

👩‍💻 Ready to Go Deeper?

If you want to explore more:

• Ethereum: What is it?

• Consensus Mechanisms

• Run a Node or Stake ETH

🦄 BONUS: Learn by doing

Want to see Ethereum in action? Try interacting with a dApp like:

• Uniswap

• ENS Domains

Yes, you can click on the links above with no problem, I won’t steal your identity or hack you :) But since we’re learning about a decentralized ledger, it’s time to be careful about our digital identity and everything we “own” on the web/socials.

Since we’re starting on this world:

Whenever you want to try a dApp or explore something new, make sure to check it out on social media and always DYOR (Do Your Own Research):

Before interacting with any smart contract or signing anything with your wallet, double-check that you're using the verified account and a legitimate project.

Also, before clicking on any link, make sure it's the official one.

For example, here’s a screenshot of the real Uniswap page on X:
You’ll see the verified badge, profile picture and banner, “Joined April 2018”, a large follower count (looks legit), and the official link to the app: app.uniswap.org.

And now, a quick stranger danger reminder: Always verify everything.

Here’s a screenshot of a fake “Uniswap” page on X:
At first glance, it looks legit — it has the same profile picture and banner as the real one… but it’s not. The account handle is @glwwrmwa (completely unrelated to Uniswap), it says “Joined February 2023” (suspicious), and the app link looks shady: ap-uniswap (notice the typo?).

🛑 Always double-check the account name, creation date, and link before interacting.

🌍 Stay Curious, Stay Onchain

Ethereum is just the beginning.
If you're curious about the future of the internet, smart contracts, and all things Web3 — you're in the right place. I’ll be breaking down blockchain concepts in simple terms, sharing practical tools, degen experiments, and real stories from the onchain world.

👉 Follow me on X: @adyonchain for daily threads, beginner-friendly tips, and good onchain vibes.
✨ And keep exploring this blog — your journey into Web3 is just getting started.

Thanks for reading and for being here. Until next time!

– Ady 🌱

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