In this lesson
- find out what Ethereum is and how it differs from Bitcoin
- understand what the EVM virtual machine does
- learn what "world computer" means – and what it does not
Bitcoin is a calculator that does one thing very well: it keeps track of who sent how many bitcoins to whom. Ethereum wanted more. Not a calculator but a computer on which anyone can run their own program – and that program then runs on thousands of machines around the world at once. No boss, no off switch and no opening hours.
How it started#
Vitalik Buterin described the idea at the end of 2013, at the age of 19. The ether sale took place in 2014, at roughly 0.31 dollars per ETH. The network went live on 30 July 2015. Since then it has gone through many upgrades – the biggest one, the move to proof of stake, is the topic of the next lesson.
Accounts instead of coins#
Bitcoin keeps track of individual "coins" (unspent transaction outputs). Ethereum keeps track of accounts and their balances – much like a bank. There are two kinds of account:
| Account type | Controlled by | Example |
|---|---|---|
| ordinary account (EOA) | whoever holds the private key | your wallet |
| smart contract account | the code stored in it | an exchange, a lending app, a token |
The EVM: one computer made of thousands of copies#
At the heart of Ethereum is the EVM (Ethereum Virtual Machine), a virtual machine that runs smart contracts. Every node of the network has a copy and recalculates every transaction on its own. When they all agree on the result, it goes into a block. That is why neither the contract's author nor one big player can quietly change the result.
The price is performance: thousands of machines compute the same thing, so computing on Ethereum is expensive and slow compared with an ordinary server. Every step of the computation costs a fee – gas. The third lesson is about it.
What runs on Ethereum#
- Tokens – stablecoins like USDC or USDT, project tokens.
- DeFi – exchanges, loans and other financial services without a bank.
- NFTs – unique tokens, such as tickets or collectibles.
- Layer 2 networks – separate networks that rely on Ethereum for their security (module 3).
Ethereum vs. Bitcoin#
| Bitcoin | Ethereum | |
|---|---|---|
| main goal | digital money | a platform for programs |
| block | roughly every 10 minutes | every 12 seconds |
| supply | a fixed cap of 21 million | no cap, part of the fees is burned |
| agreeing on blocks | proof of work (mining) | proof of stake (since 2022) |
"Nobody can switch it off" does not mean "nothing can go wrong"
The network as a whole cannot be switched off. A single smart contract, though, can have a bug, can be paused or changed if its author allowed it – and the website in front of it can be a scam. A decentralised network is no guarantee of a safe app.
Common myths#
- "Ethereum is just another Bitcoin." Bitcoin is mainly money, Ethereum mainly a platform.
- "Ether and Ethereum are the same thing." Ethereum is the network, ether (ETH) is its currency – it pays the fees.
- "A smart contract is smart." It does exactly what the code says. Even when the author made a mistake.
Summary
- Ethereum is a network that runs programs – smart contracts. It went live on 30 July 2015.
- It keeps track of accounts and balances; an account is controlled either by a key or by code.
- The EVM runs the same code on thousands of nodes, so the result cannot be quietly changed.
- Every computation is paid for in ETH.