What Is Ethereum? Smart Contracts, Gas, ETH Supply and Proof of Stake

Ethereum is a public blockchain that runs programs called smart contracts; ETH is its native coin, used to pay transaction fees and staked to secure the chain.

Ethereum was built to run general-purpose software on a shared ledger, so the same network carries payments, stablecoins, lending protocols and token exchanges. This page covers what a smart contract is, how fees (called gas) work and why part of every fee is destroyed, how the network moved from mining to staking in 2022, how ETH's supply differs from Bitcoin's, the upgrade timeline, and what Kresmion shows about ETH markets with live data. It is descriptive throughout.

Ethereum and ETH: one network, one coin

Ethereum is the network; ETH is the coin it runs on. People often say "the price of Ethereum" when they mean the price of ETH. ETH divides into very small units: the smallest is the wei, one quintillionth of an ETH (10 to the power of minus 18), and gas prices are usually quoted in gwei, one billionth of an ETH.

The network went live on 30 July 2015 with a first release called Frontier, according to the history page kept on ethereum.org, the project's community website.

Smart contracts: programs that live on the chain

A smart contract is a program stored on the blockchain at its own address. Anyone can send it a transaction, and every node runs the same code and agrees on the result, so the outcome does not depend on trusting one company's server. Tokens are the most common example: the dollar stablecoins USDT and USDC both exist on Ethereum as smart contracts that keep a balance for every holder (see what a stablecoin is). Exchanges that trade tokens directly from users' wallets, lending markets and many other applications are built the same way.

Running code costs the network computing work, and that is what gas measures.

Gas: how fees work, and why part is burned

Every operation in a transaction uses a set amount of gas, and the sender pays for that gas in ETH. Since the London upgrade of 5 August 2021, which introduced a change called EIP-1559, each fee has two parts.

• The base fee is set by the protocol from how full the previous block was against a target of half the block's gas limit. It rises by up to 12.5 percent when a block is more than half full and falls when it is less, and it is burned: removed from circulation for good.
• The priority fee, or tip, is chosen by the sender and goes to the validator that includes the transaction.

ethereum.org gives a worked example. Jordan sends Taylor 1 ETH. The account is charged 1.000252 ETH, Taylor receives 1.0000 ETH, the validator receives a tip of 0.000042 ETH, and the base fee of 0.00021 ETH is burned.

From mining to staking: the Merge

Ethereum launched with proof of work, the mining system Bitcoin uses (see what Bitcoin is). On 15 September 2022 at 06:42 UTC, at block 15,537,394, an upgrade known as the Merge switched it to proof of stake.

Under proof of stake, blocks are produced by validators who lock up ETH as collateral. Time is cut into 12-second slots, grouped into epochs of 32 slots, and in each slot one validator is picked at random to propose a block while a committee of others votes on it. A validator needs at least 32 ETH to run on its own, and since the Pectra upgrade of 7 May 2025 a single validator set up for compounding can hold up to 2,048 ETH. Validators earn rewards for honest work and lose part of their stake for provable misbehavior, which is covered in what staking is.

Supply: no fixed cap

Unlike Bitcoin, ETH has no maximum supply written into the protocol. New ETH is issued to validators as rewards, and ETH is destroyed through the base-fee burn on every transaction. Whether the total grows or shrinks over a period depends on the balance between issuance, which rises with the amount staked, and the burn, which rises and falls with how busy the network is. Tips and other income validators receive come from ETH already in circulation, not from new issuance.

The upgrade timeline

Ethereum changes through scheduled upgrades, each named and dated on ethereum.org.

ETH in markets, and what Kresmion shows

Spot funds. On 23 May 2024 the SEC approved rule changes letting the Nasdaq, NYSE Arca and Cboe BZX exchanges list and trade shares of spot ETH exchange-traded products. Kresmion's free research page for ETHA, BlackRock's iShares Ethereum Trust ETF, lists that fund's SEC filings and the Form 13F positions reported by the institutional managers Kresmion tracks. A newer fund also stakes part of the ETH it holds, which is the worked example in what staking is.

Perpetual futures. Kresmion's derivatives feed records ETH perpetual futures across four major exchanges on its crypto derivatives pages, which open with a free account (see what a perpetual futures contract is). At 10:56 UTC on 1 October 2026:

The liquidation figures appear on Kresmion's crypto overview desk, also behind a free account, and come from one exchange, so they are a sample, not a market total (see what a crypto liquidation is).

Large transfers. Kresmion's whale transfer feed records transfers of ETH and of dollar stablecoins (mostly USDT and USDC) worth $100,000 or more on Ethereum moving into or out of tracked exchange wallets. That feed, like the full exchange flow tracker, needs a free account. Without one, the public exchange flow page shows only the Solana leg of exchange flows, not Ethereum. How to read these flows, and why an exchange shuffling coins between its own wallets is filtered out, is covered in what exchange netflow is.

Honest limitations

Upgrade dates and the fee example come from ethereum.org, a community site, rather than from a single authority, though each upgrade is also recorded on the chain at the block ethereum.org lists for it. The supply section describes the mechanism, not a current issuance or burn figure, which Kresmion does not track. The derivatives figures cover four venues and the liquidation figures one, and both describe one moment that has already changed. The whale feed reads a curated list of exchange wallets and only their recent transactions on each pass, so it misses transfers and is a sample, not a census.

Key takeaways

Frequently asked questions

Is Ethereum the same as ETH?

Not quite. Ethereum is the network and ETH is the coin used on it, much as a toll road and the coins that pay its tolls are different things. In everyday use the two names are often swapped, and price quotes for "Ethereum" refer to ETH.

Does Ethereum have a supply cap?

No. There is no maximum written into the protocol. New ETH is issued to validators and some is burned with every transaction, so the supply can grow or shrink over a period depending on network activity.

What did the Merge change?

It replaced mining with staking on 15 September 2022. Blocks are now proposed and confirmed by validators who lock up ETH rather than by miners using computing power, and the way new ETH is issued changed with it.

What is gas?

Gas is the unit that measures the computing work a transaction needs. The sender pays for it in ETH, made up of a base fee that is burned and an optional tip that goes to the validator.

Does the ETH funding rate predict the price?

No. A positive funding rate shows that holders of long perpetual positions were paying to keep them open at that moment. It describes the cost of positioning, not where the price goes next.

This page is information, not investment advice.

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Source: ethereum.org, Timeline of all Ethereum forks (upgrade names, dates and block numbers), https://ethereum.org/ethereum-forks/ ; ethereum.org developer docs, introduction to ETH (denominations, issuance, burning), https://ethereum.org/en/developers/docs/intro-to-ether/ ; ethereum.org, Gas and fees (EIP-1559 and the worked example), https://ethereum.org/en/developers/docs/gas/ ; ethereum.org, Proof-of-stake (slots and epochs), https://ethereum.org/en/developers/docs/consensus-mechanisms/pos/ ; ethereum.org, Staking (32 ETH minimum, 2,048 ETH maximum), https://ethereum.org/en/staking/ ; US Securities and Exchange Commission, Release No. 34-100224, order granting accelerated approval of exchange rule changes, 23 May 2024, https://www.sec.gov/files/rules/sro/nysearca/2024/34-100224.pdf ; Kresmion derivatives feed (perpetual open interest and open-interest-weighted funding across four major exchanges), 1 October 2026 at 10:56 UTC ; Kresmion liquidation feed (one exchange), 24 hours to 10:00 UTC on 1 October 2026 ; Kresmion ETHA research page, https://kresmion.com/research/ETHA.

Kresmion Research.