Glossary · E
Ethereum
The second-largest cryptocurrency by market capitalisation and the dominant blockchain for DeFi. Ethereum's programmability (via smart contracts) enabled the creation of DeFi applications. Ethereum transitioned from Proof of Work to Proof of Stake in September 2022 ('The Merge'), reducing energy consumption by ~99.95%.
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How Ethereum works in practice
Ethereum is the general-purpose smart contract platform where most DeFi activity happens. Its value to DeFi is not speed but settlement assurance and the depth of composable protocols already deployed on it.
Worked example
A single transaction can route through several protocols atomically — swap, deposit, borrow — and either all of it succeeds or none of it does. That guarantee is why complex strategies are possible at all.
Figures are illustrative and chosen to be checkable, not live market data.
The mistake that costs people money
Block space is scarce, so fees rise with demand and can make small transactions uneconomic. Layer 2 networks exist to address that, at the cost of introducing their own bridging and sequencer assumptions.
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Ethereum: common questions
- What is Ethereum?
- The second-largest cryptocurrency by market capitalisation and the dominant blockchain for DeFi. Ethereum's programmability (via smart contracts) enabled the creation of DeFi applications. Ethereum transitioned from Proof of Work to Proof of Stake in September 2022 ('The Merge'), reducing energy consumption by ~99.95%.
- How does Ethereum work in practice?
- Ethereum is the general-purpose smart contract platform where most DeFi activity happens. Its value to DeFi is not speed but settlement assurance and the depth of composable protocols already deployed on it.
- Can you give an example of Ethereum?
- A single transaction can route through several protocols atomically — swap, deposit, borrow — and either all of it succeeds or none of it does. That guarantee is why complex strategies are possible at all.
- What do people get wrong about Ethereum?
- Block space is scarce, so fees rise with demand and can make small transactions uneconomic. Layer 2 networks exist to address that, at the cost of introducing their own bridging and sequencer assumptions.