Ethereum** is a decentralized blockchain platform designed to execute smart contracts and host decentralized applications (dApps). Here's a concise breakdown of its workings:
1. **Blockchain & Consensus**:
Ethereum operates on a decentralized network of nodes (computers) that maintain a shared ledger (blockchain). It uses **Proof of Stake (PoS)** for consensus, where validators stake Ether (ETH) to propose/validate blocks. This replaced energy-intensive Proof of Work in 2022 ("The Merge"), enhancing efficiency and security.
2. **Smart Contracts**:
These are self-executing programs stored on the blockchain. They automatically enforce terms when predefined conditions are met (e.g., releasing funds). Developers write them in languages like Solidity, and they run on the **Ethereum Virtual Machine (EVM)**, a global computational layer ensuring all nodes agree on outcomes.
3. **Gas Fees**:
Every transaction or contract execution requires "gas," paid in ETH. Gas prices fluctuate with network demand, compensating validators for computational work and preventing spam. Complex operations cost more gas.
4. **Decentralized Applications (dApps)**:
Ethereum hosts dApps—applications built on smart contracts for uses like DeFi (decentralized finance), NFTs (unique digital assets via ERC-721), and DAOs (decentralized organizations). Frontends resemble traditional apps, but backends run entirely on the blockchain.
5. **Ether (ETH)**:
Ethereum's native cryptocurrency fuels the network. It’s used for transactions, staking by validators, and as collateral in DeFi. ETH also serves as a store of value and governance token in some protocols.
