What is Ethereum, and how is it different from other cryptos?

What is Ethereum?

As a decentralised blockchain platform, Ethereum enables developers to build and run smart contracts and decentralised applications (dApps). These smart contracts are self-executing programmes that automatically complete transactions or tasks once specific conditions are met, without the need for any intermediaries in the middle.

Launched in 2015 by Canadian programmer Vitalik Buterin, Ethereum was designed to go beyond Bitcoin’s capabilities. While Bitcoin was created as a peer-to-peer payment system and store of value, Ethereum introduced a programmable layer that allowed for far more complex interactions between users and the blockchain.

Ether (ETH) is the native cryptocurrency of the Ethereum network. It’s used to pay for transactions, deploy applications, and cover the gas fees required to perform actions on the network.

What is Ethereum 2.0?

Ethereum 2.0, often called ETH2, is a major set of upgrades that shifted the network from Proof of Work (PoW) to Proof of Stake (PoS) to improve scalability, energy efficiency and security. This upgrade was completed in 2022 by merging the original Ethereum chain with the new Proof of Stake chain, so what you use today is effectively Ethereum 2.0, even though most people still just say “Ethereum”.​

Under Proof of Stake, you no longer need energy-intensive mining to secure the network. Instead, you can participate in Ethereum staking by locking up ETH as a validator or via a staking service, helping to process Ethereum transactions while earning rewards in ETH.​

These upgrades aim to support thousands of transactions per second over time and reduce congestion and gas fee spikes that were common in the past. For you, that means a smoother experience when you use DeFi apps, mint NFTs, or explore the broader future of Ethereum as more activity moves on chain.​

What are Smart contracts?

Smart contracts are pieces of code that run on Ethereum and automatically execute when preset conditions are met. Instead of relying on a bank, lawyer, or platform in the middle, the rules are written into the contract itself, so once you trigger it, the outcome is handled by the blockchain.​

You might use a smart contract to swap one token for another, borrow crypto against your holdings, or distribute royalties to creators every time an NFT changes hands. Each of these Ethereum transactions is recorded on the public ledger, giving you transparency and reducing the need to trust a single intermediary.​

Because smart contracts are programmable, developers can build an open ecosystem of apps that all plug into the same network. That shared foundation is what powers many of the most exciting Ethereum use cases, from stablecoins and DeFi to the creator economy and non-financial tools.​

What are some of Ethereum’s use cases?

Ethereum supports a wide range of financial and non-financial applications, making it more like a platform than a single-purpose coin. You can move value, access new financial services, create digital assets, and experiment with new business models using the same underlying network.​

As you explore what Ethereum is in practice, it helps to break down some of the most popular categories: stablecoins, decentralised finance, NFTs, the creator economy, and non-financial uses like identity and supply chains.​

Stablecoins

Stablecoins are digital tokens designed to track the value of a traditional currency, such as the US dollar, while moving on Ethereum’s rails. They give you a way to hold and transfer value with less day-to-day volatility than many other cryptos, which can be useful when the Ethereum price is moving quickly.​

On Ethereum, stablecoins are widely used as a base asset for trading pairs, for payments, and as collateral in lending and borrowing protocols. When you combine stablecoins with smart contracts, you can access financial tools that run 24/7, without needing a traditional bank account.​

Decentralised finance

Decentralised Finance (DeFi) is a collection of apps on Ethereum that recreate and extend financial services like lending, borrowing, trading and saving. Instead of going through a bank or broker, you interact directly with smart contracts that set the rules and automatically settle Ethereum transactions for you.​

In DeFi, you can earn yield on your holdings, tap liquidity without selling your assets, or use tools like decentralised exchanges to trade tokens directly from your wallet. Many people see DeFi as a glimpse into the future of Ethereum, where financial markets are more open, programmable, and globally accessible.​

Non-Fungible Tokens (NFTs)

Non-Fungible Tokens (NFTs) are unique digital tokens on Ethereum that represent ownership or authenticity of a specific item, such as art, music, in-game items or collectibles. Each NFT is distinct and cannot be swapped one-for-one like regular tokens, which makes them ideal for scarce digital assets.​

By minting NFTs on Ethereum, creators can sell directly to their audience, embed royalty rules into smart contracts, and track provenance on-chain. As someone exploring what ETH is used for, NFTs show how Ethereum goes beyond payments into culture, entertainment and ownership in the digital world.​

Creator economy

Ethereum underpins a growing creator economy where artists, musicians, writers and developers can monetise their work without handing control to a single platform. Smart contracts enable direct sales, programmable royalties, and community-based funding models that were difficult to achieve before.​

You might support a project by buying its token, joining a decentralised autonomous organisation (DAO), or collecting a creator’s NFTs. These experiments in ownership and participation are a key part of the future of Ethereum, where communities co-own and co-govern the platforms they use.​

Non-financial uses

Beyond finance, Ethereum can be used for digital identity, supply chain tracking, governance systems and data verification. For example, tokenised supply chains can improve traceability, while on-chain identity tools can help you prove credentials without oversharing personal data.​

These non-financial applications show how Ethereum’s general-purpose design can support services that rely on trust, transparency and auditability. As more organisations experiment with these tools, you are likely to see Ethereum integrated into everyday services behind the scenes.

What makes Ethereum valuable?

Ethereum’s value comes from a combination of its network effects, economic design, and flexibility as a programmable blockchain. Markets set the Ethereum price day-to-day, but underlying demand is driven by people using the network for payments, DeFi, NFTs, and a growing list of other applications.​

When you think about what is ETH beyond a tradeable asset, you are looking at a token that secures the network, pays for computation, and aligns incentives for everyone who builds on or uses Ethereum.​

Strength of public blockchain network

Ethereum is a public blockchain secured by thousands of validators who stake ETH and run the network’s software. This broad participation makes it harder for any single party to censor transactions or change the rules unilaterally.​

Because so many developers, users and projects rely on Ethereum, it benefits from powerful network effects. The more people who build and transact on Ethereum, the more useful ETH becomes, which can support long-term demand even as the short-term Ethereum price moves with market sentiment.​

Dynamically adjusting supply schedule

Unlike assets with a fixed cap, Ethereum has a dynamic supply that can increase or decrease depending on network conditions. Under the current fee structure, a portion of transaction fees is burned, and new ETH is issued as staking rewards, so net supply can sometimes be close to flat or even deflationary.​

This mechanism is designed to avoid uncontrolled inflation while still rewarding validators who secure the network. For you, that means ETH's economics are closely tied to real network usage, important context when deciding whether to buy Ethereum or participate in Ethereum staking.​

General-purpose technology

Ethereum is often described as general-purpose because it can support a wide variety of applications across finance, gaming, social media, identity and more. In this sense, it behaves less like a single product and more like an operating system or app store that other projects plug into.​

As new use cases emerge, developers do not need to build their own blockchain from scratch – they can deploy on Ethereum and tap into existing liquidity and users. This adaptability underpins many views on the future of Ethereum as a foundational technology, where ETH is the asset that powers, secures and coordinates an expanding on-chain economy.​

How does Ethereum work?

Across its network of nodes, Ethereum maintains consensus and records transactions. When users interact with smart contracts or initiate transfers, the system verifies these actions collectively.

A major shift in Ethereum’s design came in 2022 with its transition from the Proof of Work (PoW) consensus mechanism used to power the Bitcoin network to Proof of Stake (PoS). Known as “The Merge”, this upgrade significantly reduced the network’s energy use and paved the way for future improvements in speed and scalability.

Under the PoS model, validators, rather than miners, confirm transactions and add new blocks to the chain. To become a validator, users must stake ETH, which helps secure the network and aligns economic incentives.

Gas fees are another essential concept to grasp when using Ethereum. These are the costs paid in ETH to perform operations on the network, whether you're sending tokens or deploying a smart contract. Gas fees fluctuate and are based on the demand to use the Ethereum network. While gas fees can sometimes become prohibitively high usage, upgrades like “sharding” and Layer 2 solutions aim to reduce these costs and to provide increased gas price stability over time.

How Ethereum differs from other cryptos

More than a digital currency, Ethereum acts as a platform. From financial tools to NFT marketplaces, developers use it to build a wide range of decentralised apps. This flexibility is a key reason why Ethereum remains at the heart of Web3 innovation.

Ethereum’s shift to Proof of Stake has also made it more energy-efficient, while enabling features like staking and scalable infrastructure. Its developer community is one of the most active in the industry, continuously contributing new tools and protocols.

So, how does Ethereum really stack up against the competition?

Solana is like a high-speed train. It’s designed for speed and low fees using its unique Proof of History model. But that speed comes at the cost of decentralisation. Ethereum, meanwhile, takes a steadier approach, prioritising security and long-term resilience.

Cardano is known for its academic, peer-reviewed development model. It focuses heavily on formal verification to ensure smart contract safety. Ethereum, on the other hand, evolves through rapid innovation and wide community input.

Bitcoin is considered as digital gold, a store of value and a digital payments system. It doesn’t support smart contracts or dApps natively. Ethereum, by contrast, functions at its core as a programmable blockchain supporting a diverse set of use cases.

XRP is tailored for global payments and banking use. It primarily aims to streamline cross-border transactions within the banking system. Ethereum, meanwhile, serves a much broader role in decentralised finance, apps, and digital identity.

Explore live market data for these coins and beyond on BTC Markets.

How to buy and trade Ethereum with BTC Markets

Ready to buy your first ETH? Here’s how to get started with BTC Markets.

1. Sign up for a BTC Markets account.

2. Complete your identity verification (as required under Australian regulations).

3. Deposit AUD into your account using supported methods, such as PayID.

4. Head to the ETH/AUD market to buy, sell, or trade Ether.

Your ETH is stored securely, and if you ever have questions, our local support team is here to help.

Final thoughts

Ethereum is more than just another crypto. It’s the infrastructure powering much of the Web3 revolution. Its ability to support smart contracts, decentralised applications, and a wide array of blockchain use cases makes it a standout player in the digital asset space.

As you explore Ethereum and its role in the broader crypto ecosystem, platforms like BTC Markets offer a safe and compliant way to engage with this technology, right here in Australia.