What is Ethereum — a clear explanation for beginners in 2025
Beginners are often confused about what Ethereum is — a blockchain, a coin, or something else? Let’s break it down in 5 minutes without technical jargon.
Ethereum is a global internet computer for creating money-enabled applications.
Basics
Ethereum is a network of computers that works like a big public supermarket. Anyone can come in, pick a service off the shelf, and pay at the checkout.
How it works
Node — a participant’s computer that stores data and verifies operations
Validator — a participant who confirms blocks of transactions for rewards
Smart contract — a program that executes deal conditions automatically, without intermediaries
Imagine a coffee machine: insert coins — get your drink. That’s how smart contracts work: once payment is made, the product is delivered automatically. Ethereum Foundation calls it a “world computer.”
Example: to become a validator, you need to stake 32 ETH (around $100,000 as of January 2025). A validator earns ~2–4% annually (up to ~5–6% with MEV‑Boost) in ETH for confirming blocks.
Key takeaway: Ethereum is not just a cryptocurrency, but a platform for applications.
Fees
Gas is the fee for the work of network computers, like paying a courier for delivery. The more complex the operation, the higher the cost.
How gas is calculated
Simple ETH transfer — 21,000 units of gas
Token swap — 50,000–150,000 units
Price per unit of gas ranges from 10 to 200 gwei (1 gwei = 0.000000001 ETH)
Example: an ETH transfer with gas at 50 gwei costs 21,000 × 50 = 1,050,000 gwei = 0.00105 ETH ≈ $3.4 (at ETH ≈ $3,236 on January 26, 2025).
Layer‑2 solutions like Arbitrum and Polygon are “express checkouts” next to the main queue. Transactions there usually cost ~$0.01–0.20 versus ~$0.5–10 on the mainnet (higher at peak times). The Dencun upgrade of March 13, 2024 significantly reduced layer‑2 fees (by 50–95% depending on the network), reports CoinDesk.
Saving on gas
Make transfers at night UTC (fees 2–3 times lower)
Use layer‑2 for amounts up to $1000
Bundle multiple operations into one transaction
Check gas prices at Etherscan Gas Tracker
Key takeaway: gas is not a tax but a fee for computation.
Wallets
A wallet is an app for managing your Ethereum account, like a banking app. But your money is stored on the blockchain, not in the app.
Types of wallets
Hot (online) — MetaMask, Trust Wallet, convenient for frequent use
Cold (offline) — Ledger, Trezor, secure for large amounts
Mobile — built into your phone, suitable for small spending
Seed phrase — a set of 12–24 words to restore a wallet, like a master key. Lost your phone? Recover access with these words.
Comparison table
Wallet type | Best for | Pros | Risks | Cost |
|---|---|---|---|---|
MetaMask | Beginners, DeFi | Free, simple | Browser hack | $0 |
Ledger | Amounts from $5000 | Maximum protection | Device loss | $79–149 |
Trust Wallet | Mobile use | Convenient on the go | Phone loss | $0 |
Security rules
Write down your seed phrase on paper, not on your phone
Never enter it on “support” websites
Test with $5–10 transfers before sending large sums
Use different wallets for trading and storing
Common mistakes
Photographing the seed phrase — hackers steal it via the cloud
Keeping large amounts in hot wallets — like carrying your salary in cash
Not checking the recipient’s address — transactions are irreversible
Key takeaway: a wallet is a key, not a vault.
Tokens
A token is a digital app voucher, like a store loyalty card. ETH is the fuel of the network, tokens are the goods within it.
Token standards
ERC‑20 — fungible tokens (USDC, LINK, UNI)
ERC‑721 — unique NFT tokens
ERC‑1155 — mixed standard for games
Example: USDC is a dollar token. 1 USDC = $1, but you need ETH for gas to transfer it. Like shipping a package: the item itself is free, but you pay for delivery.
According to DefiLlama, in early 2025 more than $100B was locked in Ethereum DeFi protocols (about $86B by September 2025).
Popular tokens
USDC, USDT — stablecoins pegged to the dollar
WETH — “wrapped” ETH for DeFi compatibility
UNI — token of decentralized exchange Uniswap
LINK — token of Chainlink oracles
Common mistakes
Confusing ETH and tokens — these are different assets with different addresses
Sending tokens to an exchange without specifying the network — funds are lost
Buying tokens without researching the project — many lose value over time; study tokenomics and risks first
Key takeaway: ETH is the fuel, tokens are the vehicles.
Security
Ethereum is software code, and vulnerabilities are inevitable. The main risks come from user mistakes, not the network.
Main threats
Phishing sites — fake copies of popular services
Malicious tokens — infected contracts that steal assets
Rug pulls — project creators vanish with investors’ money
Example: in 2022 hackers stole ~$100M from the Harmony protocol due to compromised validator keys, reports The Block.
Protection rules
Check URLs — bookmark only official addresses
Revoke token approvals via Revoke.cash
Never connect your wallet to unknown sites
Use multisig for sums over $10,000
Split wallets: main + trading + experimental
Project red flags
Anonymous team without public profiles
Promises of 100% annual returns
No smart contract audit from CertiK or ConsenSys
Withdrawal blocking under the pretext of “maintenance”
Key takeaway: in Ethereum you are your own bank — you take full responsibility.
Development
Ethereum evolves constantly, like an operating system. In 2022 it switched to Proof‑of‑Stake, cutting energy use by about 99.95%.
Key upgrades
The Merge (September 2022) — switch to PoS
Dencun (March 2024) — reduced L2 fees
Pectra (2025) — EIP‑7251 raises max effective validator balance from 32 to 2048 ETH
Ethereum competitors
Solana — fast but less decentralized
BNB Chain — cheap but controlled by Binance
Polygon — layer‑2 for Ethereum with ~$0.01 fees
According to L2Beat, Ethereum’s L2s process ~14× more transactions than L1 (average 09/24/2024–09/24/2025).
Future of Ethereum
Sharding — splitting the network for speed
Account Abstraction — wallets as smart contracts
Quantum resistance — preparing for quantum computers
Key takeaway: Ethereum evolves slowly but steadily.
Ethereum is a digital platform for creating money-enabled apps without intermediaries. Start by installing MetaMask, buy $50–100 in ETH, and try simple operations on layer‑2 Arbitrum to explore the ecosystem without high fees.
