Question 1

What's the latest ETH news?

Accepted Answer

### Top Story
1.4 million ETH have been withdrawn from exchanges since June, suggesting that investors may be moving assets to self-custody and reducing immediate selling pressure. This trend could be interpreted as a sign of growing confidence in Ethereum's long-term prospects or a shift in trading behavior.

### Other Highlights
- Ethereum's price faced rejection at the $2,500 level, with analysts evaluating where support may emerge in the near term.
- Market recaps point to ongoing forecasts for Ethereum, with attention on its performance relative to other leading cryptocurrencies like Solana.
- No major regulatory or protocol upgrade developments were reported for Ethereum in this period.

### Market Context
ETH gained 0.97% in the last 24 hours, moving mostly in line with the CD20 index, which rose 1.03%. The lack of significant divergence suggests Ethereum's price action is tracking broader crypto market sentiment. No major macroeconomic headlines directly affected ETH during this window.

### What’s Next?
With substantial ETH outflows from exchanges and technical resistance at $2,500, market participants may watch for new support levels and signals of renewed accumulation. Will exchange withdrawals continue to support ETH's price stability in the coming sessions?

Question 2

What is Ethereum?

Accepted Answer

Ethereum is a decentralised blockchain platform that provides a framework for creating and executing [smart contracts](https://www.coindesk.com/learn/how-do-ethereum-smart-contracts-work) and [decentralised applications (dapps)](https://www.coindesk.com/learn/what-is-a-dapp-decentralized-apps-explained). Conceived by [Vitalik Buterin](https://www.coindesk.com/consensus-magazine/2023/06/02/coindesk-turns-10-2015-vitalik-buterin-and-the-birth-of-ethereum) in 2013 and [launched in 2015](https://www.coindesk.com/markets/2015/07/30/ethereum-launches-long-awaited-decentralized-app-network), Ethereum was developed to extend the functionality of blockchain technology beyond simple value transfers by introducing programmability.

At the heart of Ethereum is the [Ethereum Virtual Machine (EVM)](https://www.coindesk.com/markets/2018/09/16/evm-20-inside-the-race-to-replace-the-heart-of-ethereum), an execution environment that processes smart contracts, ensuring that code runs exactly as written without central oversight. This design enables developers to build applications that operate in a trustless and transparent manner, serving use cases in areas such as finance, digital identity, and supply chain management.

[Ether (ETH)](https://www.coindesk.com/learn/what-is-ether), the native cryptocurrency of the platform, is used to pay for network operations like gas fees and to support the incentives that maintain the network's security. By facilitating these essential functions, Ether underpins both routine transactions and the broader engagement of participants within the ecosystem. ETH also serves as a key trading asset on cryptocurrency exchanges, enabling users to trade or invest in various digital assets and participate actively in [decentralized finance (DeFi) markets](https://www.coindesk.com/learn/what-is-defi).

Ethereum’s [open-source](https://www.coindesk.com/learn/open-source-what-it-is-and-why-its-critical-for-bitcoin-and-crypto) nature and its active global development community drive ongoing protocol improvements. This continuous evolution supports a wide range of applications and positions Ethereum as a key platform in the landscape of decentralised technology.

Question 3

How Ethereum works

Accepted Answer

Ethereum operates by recording a continuous series of transactions in blocks that update the network's overall state. Each block includes transactions that either transfer Ether between accounts or execute [smart contracts](https://www.coindesk.com/learn/how-do-ethereum-smart-contracts-work), with the Ethereum Virtual Machine (EVM) ensuring that every instruction is carried out precisely as written.

The network utilizes a dual account model: externally owned accounts (controlled by [private keys](https://www.coindesk.com/learn/a-crypto-must-know-public-vs-private-keys)) and contract accounts (governed by code). However, following the [Pectra upgrade](https://www.coindesk.com/tech/2025/05/07/ethereum-activates-pectra-upgrade-raising-max-stake-to-2048-eth) in 2025, regular accounts gained the ability to temporarily function as smart contracts during transactions. This "Smart Account" functionality enables advanced features like transaction batching and sponsored gas fees directly from standard wallets.

A core component of Ethereum’s functionality is its [Proof of Stake](https://www.coindesk.com/learn/what-is-proof-of-stake) consensus mechanism. In this model, validators stake Ether to propose and confirm new blocks. While the minimum stake to run a solo validator remains 32 ETH, recent upgrades have raised the maximum effective balance to 2,048 ETH, allowing large operators to consolidate their stake and reduce network strain. Consensus is achieved when the majority of validators agree on the state of the blockchain, securing the network against attacks.

Transactions incur gas fees to prioritize operations, but the cost structure has evolved to support Layer 2 scaling. [The Dencun upgrade](https://www.coindesk.com/tech/2024/03/13/ethereum-activates-dencun-upgrade-in-landmark-move-to-reduce-data-fees) (2024) introduced "blobs"—temporary data storage that drastically reduced costs for Layer 2 networks (like Arbitrum and Base). This allows users to transact cheaply on Layer 2 while relying on Ethereum's mainnet for final security.

Ethereum’s protocol is continuously refined. Recent major milestones include Dencun, which enabled the "rollup-centric" roadmap, and Pectra, which enhanced wallet usability and staking efficiency. These enhancements ensure the network remains scalable and user-friendly as it prepares for future upgrades focused on speed and privacy.

Question 4

What is Ether (ETH)?

Accepted Answer

Ether (ETH) is the native cryptocurrency of the Ethereum platform. It serves as both a medium of exchange and a utility token within the Ethereum ecosystem. Primarily, Ether is used to pay for transaction fees—known as [gas fees](https://www.coindesk.com/learn/what-are-ethereum-gas-fees)—which are required to execute smart contracts and interact with decentralised applications (dapps).

Gas fees, paid in Ether, compensate network validators for processing transactions and help prevent the overuse of network resources. This fee structure is a fundamental part of Ethereum’s design, ensuring that computational tasks are prioritised and that the system remains secure and efficient.

In addition to covering gas fees, Ether functions as an incentive mechanism in Ethereum’s consensus process. Following the network’s transition from Proof of Work to Proof of Stake, Ether is staked by validators as collateral to secure the network. This staking process supports the decentralisation and security of the blockchain while aligning economic incentives among participants.

The issuance of Ether is determined by the protocol’s rules. Although there is no fixed supply, changes in [issuance rates and burn mechanisms](https://www.coindesk.com/tech/2021/10/27/the-evolution-of-ethereums-monetary-policy) introduced through network upgrades aim to balance the token’s long-term utility with economic sustainability.

Question 5

What is Ether (ETH) used for?

Accepted Answer

Ether (ETH) is integral to the Ethereum ecosystem, serving not only as a means of transferring value but also as the fuel for the network's operations and innovations. As the native cryptocurrency, Ether underpins a range of functions that are essential to both routine transactions and the development of new applications on the platform.

**Paying for Network Operations**: Ether is used to pay for gas fees, which are required to execute transactions and smart contracts on the Ethereum network. These fees remunerate validators for processing and confirming transactions, while also regulating resource usage. This mechanism ensures that every network action incurs a tangible cost, helping maintain order and security.

**Staking and Network Security**: With Ethereum’s transition to a Proof of Stake consensus mechanism, [Ether is staked](https://www.coindesk.com/learn/how-does-ethereum-staking-work) by validators as collateral to secure the network. Validators lock up a minimum amount of Ether to participate in the block validation process and earn rewards for proposing and confirming new blocks. This staking process not only reinforces network security but also aligns economic incentives among participants.

**Supporting Decentralised Finance (DeFi)**: Ether plays a pivotal role in [decentralised finance](https://www.coindesk.com/tech/2022/01/20/understanding-defi-and-its-importance-in-the-crypto-economy). In various DeFi protocols, Ether is used as collateral for loans, to provide liquidity, and to facilitate financial transactions outside traditional banking systems. This creates an accessible financial framework that empowers users on a global scale.

**Enabling Non-Fungible Tokens (NFTs)**: Many [NFTs](https://www.coindesk.com/learn/what-are-nfts-and-how-do-they-work)—which represent ownership of unique digital assets such as art, collectibles, or property titles—are issued and traded on the Ethereum blockchain. Ether is used to pay for the gas fees associated with minting, buying, and selling these tokens, ensuring secure and efficient transfer of ownership.

**Facilitating DAOs and Decentralised Applications (dapps)**: Ether supports the operation of [decentralised autonomous organisations (DAOs)](https://www.coindesk.com/learn/what-is-a-dao) and decentralised applications (dapps) on Ethereum. It is used for transactions, governance participation, and funding initiatives within these digital communities, enabling peer-to-peer interactions without central oversight.

**Powering Emerging Use Cases** – Beyond these established functions, Ether is instrumental in enabling a range of emerging applications on Ethereum, including:  
- **[Decentralised Identity](https://www.coindesk.com/learn/what-is-decentralized-identity)**: Facilitating secure, self-sovereign identity systems.  
- **[Decentralised Social Networks](https://www.coindesk.com/consensus-magazine/2023/12/04/the-year-of-decentralized-social-media)**: Supporting platforms that operate without centralised control.  
- **[Decentralised Science (DeSci)](https://www.coindesk.com/opinion/2024/07/02/decentralized-science-a-better-way-to-fund-and-grow-breakthrough-ideas)**: Promoting open collaboration in research and innovation.  
- **[Play-to-Earn Games:](https://www.coindesk.com/learn/what-is-gamefi-and-how-does-it-work)** Providing economic incentives in gaming ecosystems.  
- **[Fundraising via Quadratic Funding](https://www.coindesk.com/opinion/2024/07/09/why-crypto-donations-are-surging-in-2024#:~:text=to%20charitable%20giving.-,Quadratic%20Funding,-We%E2%80%99ve%20always%20said)**: Enabling innovative, community-driven funding models.  
- **[Supply Chain Management](https://www.coindesk.com/policy/2021/11/15/why-blockchain-benefits-the-supply-chain)**: Enhancing transparency and efficiency in logistics.

Question 6

Ether Price History and Tokenomics

Accepted Answer

In August 2014, Ethereum launched its native token via an [initial coin offering (ICO)](https://www.coindesk.com/learn/what-is-an-ico) in which approximately 50 million ETH were sold at roughly $0.31 each, raising over $16 million. During its early months, after its official launch in 2015, Ether’s price was modest – initially recorded at around $2.77 on launch day and then trading below $1 as the network searched for stability. As early adopters began to take notice, the price in early 2016 slowly edged upward, closing the beginning of the year at about $1, then rising to over $2, reaching $4, and trading above $10 in March. Despite a brief surge above $14 in September 2016, Ether ultimately closed 2016 at around $8 – representing an impressive 754% gain for that year.

The period from 2017 to 2019 saw Ethereum enter mainstream awareness. In 2017, amid a booming crypto market, Ether’s price soared from under $10 to over $300 by mid-year, with peaks of around $414 in June and an all-time high near $1,418 in January 2018. However, the exuberance of 2017 led to a steep correction in 2018, when Ether lost approximately 82% of its value by year-end—a harsh downturn that mirrored the broader crypto winter. In 2019, after a brief rebound peaking around $338 in June, the price gradually trended downward, reflecting persistent market uncertainty.

Between 2020 and 2023, Ether experienced another dramatic phase of growth and volatility driven by macroeconomic factors and key protocol upgrades. Although the COVID-19 pandemic triggered a significant crash in March 2020, expansive monetary easing and low interest rates fueled a recovery that saw Ether rise from around $130 at the start of 2020 to finish the year near $737.

Early 2021 broke new ground as Ether surpassed $1,000, doubled to $2,000 by April, and reached a peak of over $4,800 in November. Later in 2021, as regulatory concerns and shifting economic outlooks emerged, the price moderated—closing the year just below $3,700.

In 2022, amid rising interest rates and market turbulence—including the historic [Ethereum Merge](https://www.coindesk.com/learn/what-is-the-merge-and-why-has-it-taken-so-long) that transitioned the network from proof-of-work to proof-of-stake—Ether’s price fell by about 67%, closing around $1,196. A strong rebound in 2023 lifted Ether by 91%, with the price ending near $2,300.

In 2024, institutional adoption deepened. The [SEC’s approval of Ethereum spot ETFs](https://www.coindesk.com/business/2024/07/22/sec-approves-spot-ethereum-etfs) in May (followed by their trading launch in July) marked a regulatory watershed. While prices chopped sideways in Q3, the [Dencun upgrade](https://www.coindesk.com/tech/2024/03/13/ethereum-activates-dencun-upgrade-in-landmark-move-to-reduce-data-fees) in March successfully lowered [Layer 2 costs](https://www.coindesk.com/markets/2025/01/23/ethereum-layer-2-protocols-achieve-record-transaction-throughput), driving record usage. Late-year momentum, correlated with Bitcoin's rally, saw Ether break past $4,000 in December. The rally extended into 2025, culminating in a new all-time high above $6,000 in October 2025, before stabilizing near $4,800 in early 2026."We've now fully entered the ETF era of crypto. Investors can now access more than 70% of the liquid crypto asset market through low-cost ETPs." said [Matt Hougan, Chief Investment Officer at Bitwise](https://www.coindesk.com/business/2024/07/22/sec-approves-spot-ethereum-etfs).

On the tokenomics side, Ether is designed with an unbounded supply, unlike Bitcoin’s hard cap of 21 million coins. Instead, Ether’s issuance is managed through periodic protocol adjustments. Block rewards were initially set at 5 ETH per block, reduced to 3 ETH (EIP-649), and further reduced to 2 ETH (EIP-1234).

A pivotal change came with [EIP-1559](https://www.coindesk.com/podcasts/the-breakdown-with-nlw-episode/with-eip-1559-has-eth-become-ultra-sound-money) (2021), which burns a portion of transaction fees. For several years, this burn mechanism offset issuance, often making Ether deflationary. However, the Dencun upgrade (2024) introduced "blobs," which drastically reduced the fees paid by Layer 2 networks. As a result, the amount of ETH burned decreased significantly, and the network returned to a state of mild inflation (approx. 0.5% - 0.7% annually) throughout 2024 and 2025. While no longer strictly deflationary, the issuance rate remains far lower than during the Proof-of-Work era.

Question 7

What was The Merge?

Accepted Answer

The Merge was a landmark upgrade that transitioned Ethereum from its original proof-of-work (PoW) system to a proof-of-stake (PoS) consensus mechanism. This upgrade merged the existing Ethereum Mainnet—with its full transactional history, smart contracts, accounts, and balances—with the Beacon Chain, a separate PoS blockchain that had been operating in parallel since December 2020.

**Key points of The Merge:**

• **Transition to Proof-of-Stake:** Instead of miners expending energy to solve complex puzzles, validators now secure the network by staking ETH. This change reduced Ethereum’s energy consumption by approximately 99.95%, as the need for energy-intensive mining was eliminated.

• **Unification of the Execution and Consensus Layers:** Before The Merge, the Ethereum Mainnet handled transaction execution while the Beacon Chain managed consensus using PoS. The upgrade combined these functions into a single, unified blockchain, with all historical data and network state preserved.

• **User and Developer Impact:** The transition was designed to be seamless for ETH holders and dapp users. There was no need for any user to upgrade wallets or move funds—ETH remained the same asset on one blockchain, without any division into “old ETH” and “new ETH.”

• **Foundation for Future Scalability Improvements:** By adopting PoS, Ethereum set the stage for further upgrades such as sharding and improved data availability. Subsequent upgrades (for example, the [Shanghai/Capella upgrade](https://www.coindesk.com/tech/2023/03/02/shanghai-capella-shapella-how-ethereum-devs-now-refer-to-upcoming-upgrade)) enabled staking withdrawals, while future scalability enhancements aim to increase transaction throughput without compromising security.

• **Changes to Ethereum’s Economic Model:** The move to PoS reduced the rate at which new ETH is issued and, when combined with fee-burning mechanisms (as seen with [EIP-1559](https://www.coindesk.com/reports/eip-1559-ethereums-fee-market-upgrade-explained)), altered the monetary policy of the network. This arguably contributed to a lower net issuance and laid the groundwork for a more sustainable long-term supply dynamic.

The Merge transformed Ethereum by significantly reducing its environmental impact, unifying its operational layers, and providing a robust foundation for further technical improvements—all while maintaining the integrity of its historical data and ensuring a seamless experience for users and developers alike.

Question 8

What is the Beacon Chain?

Accepted Answer

The [Beacon Chain was introduced](https://www.coindesk.com/tech/2020/12/01/ethereum-20-beacon-chain-goes-live-as-world-computer-begins-long-awaited-overhaul) on December 1, 2020 as Ethereum’s first dedicated proof-of-stake (PoS) blockchain. Its primary purpose was to test and formalise the PoS consensus mechanism before integrating it into the existing network. Running in parallel with Ethereum Mainnet—which originally used proof-of-work (PoW)—the Beacon Chain provided a separate ledger to manage validator registration, block proposal assignments, attestations, and the distribution of rewards and penalties.

As detailed in the 'What was The Merge?' section, on September 15, 2022, the Beacon Chain was integrated with the Mainnet’s execution layer to replace energy-intensive mining with staking, establishing PoS as the sole consensus mechanism. As a result, Ethereum’s overall energy consumption dropped by nearly 99.95%.

Key functions of the Beacon Chain include:  
• **Validator Coordination:** It maintains a registry of validators who secure the network by staking ETH, replacing the need for PoW mining.  
• **Consensus Logic:** It runs the block gossip protocol and fork choice algorithm, ensuring that all validators agree on the canonical chain.  
• **Layer Separation:** While the Beacon Chain handles consensus, it does not process transaction data or execute smart contracts. These tasks continue to be managed by the execution layer, with both layers communicating through the Engine API.  
• **Foundation for Scalability:** By establishing a reliable and efficient PoS consensus, the Beacon Chain sets the stage for future scalability improvements such as sharding.

Overall, the Beacon Chain played a crucial role in transforming Ethereum into a more sustainable, secure, and scalable blockchain by enabling the seamless transition from PoW to PoS without altering the network’s history or user experience.

Question 9

What is Ethereum 2.0 and how is it evolving?

Accepted Answer

Ethereum 2.0, also known as “Serenity,” is a multi-phase upgrade designed to enhance scalability, security, and efficiency by transitioning Ethereum from a [proof-of-work (PoW) to a proof-of-stake (PoS)](https://www.coindesk.com/learn/proof-of-work-vs-proof-of-stake-what-is-the-difference) consensus mechanism. The deployment is split into several phases—an approach originally outlined by Vitalik Buterin in 2020 and refined as the ecosystem has evolved.

**Phase 0 – Beacon Chain**:

The Beacon Chain launched on December 1, 2020, bringing proof-of-stake (PoS) to Ethereum for the first time. Users became validators by depositing ETH through a special contract on the original Ethereum chain. Once 16,384 validators joined, the Beacon Chain started creating blocks, but these blocks initially only included deposit information and consensus data—not regular transactions. This stage set the groundwork for Ethereum’s new consensus rules (Casper) without changing existing user transactions or smart contracts.

**Phase 1 – Shard Chains as a Data Layer**

In Phase 1, Ethereum introduced shard chains, which are smaller chains that run alongside the main blockchain. These shard chains were mainly used to store data, not to process transactions. Their job was to make storing, sharing, and verifying data quicker and easier. This step prepared Ethereum for the future, when shard chains will also be able to handle transactions directly.

**Phase 1.5 – The Merge**

Often referred to as Phase 1.5, The Merge—detailed in the 'What was The Merge?' section—took place on September 15, 2022, merging the Ethereum Mainnet with the Beacon Chain’s PoS consensus layer, decommissioning PoW mining, and reducing energy consumption by nearly 99.95%. Post-Merge, the network now operates with two distinct but intercommunicating client types: execution clients and consensus clients (via the Engine API).

**Phase 2 – Full Shard Execution**

After the Merge, Phase 2 will focus on making each shard able to handle transactions and manage its own data independently. Each shard will have its own environment (such as eWASM) to run smart contracts and decentralized apps. By splitting transactions across many shards, Ethereum can process transactions in parallel, making the network faster and cheaper to use.

A key part of this phase is Proto-Danksharding, introduced in upgrades like Cancun-Deneb (March 2024), which lowers data costs, especially for layer-2 solutions.

**Phase 3+ (Ethereum 2.x) – Ongoing Improvements**

After the first few deployment phases, Ethereum will keep improving through smaller upgrades, often called Phase 3+ or Ethereum 2.x. These upgrades focus on:

* **Better Security:** Improving validator privacy and fine-tuning penalties for misbehavior or inactivity.  
* **Increased Efficiency:** Making signature verification faster and reducing transaction delays.  
* **Improved Scalability:** Expanding Danksharding to handle more data, reducing transaction fees, and making communication between shards smoother.

Recent updates, like the [Prague-Electra ("Pectra")](https://www.coindesk.com/tech/2024/04/11/ethereums-next-upgrade-pectra-could-include-relief-for-institutional-stakers-wallet-ux-improvements) upgrade in 2025, added features to make staking more flexible, improve the efficiency of staked funds, and increase functionality for user accounts.

Question 10

How Staking Works on Ethereum

Accepted Answer

Staking is how Ethereum secures its network. Instead of using energy-intensive mining, it uses a system called [Proof of Stake](https://www.coindesk.com/business/2022/08/14/the-investors-definitive-guide-to-proof-of-work-and-proof-of-stake-abridged). In a Proof of Stake system, validators lock up their own ETH as a guarantee that they will follow the rules. If they do their job well, they earn rewards. If they try to cheat, they lose their money.

*   **The Job of a Validator:**
    
    *   Validators are the workers of the Ethereum network. Every 12 seconds, one validator is chosen to create a new block of transactions.
        
    *   All the other validators then "vote" to confirm that the block is valid. Once enough votes are cast, the block is finalized and added to the blockchain permanently.
        
*   **Getting Started (The 32 ETH Rule):**
    
    *   To run your own validator from home, you need to deposit a minimum of 32 ETH.
        
    *   In the past, 32 ETH was also the maximum. However, a 2025 upgrade (called [Pectra](https://www.coindesk.com/tech/2025/05/07/ethereum-activates-pectra-upgrade-raising-max-stake-to-2048-eth)) changed this. Now, large stakers can put up to 2,048 ETH into a single validator. This makes the network more efficient by reducing the number of individual "workers" the system has to manage. 
        
        *   [CoinDesk technical analysis](https://www.coindesk.com/tech/2025/01/17/ethereum-developers-finally-schedule-pectra-upgrade) at the time noted, “The change addresses a massive nuisance faced by the validators who stake ETH to keep the chain running today: Those who want to invest more than 32 ETH with the network must split their stake between dozens — or sometimes, hundreds — of separate nodes. This isn't just burdensome. It has also resulted in weeks-long lines for setting up new nodes.”
            
*   **Rewards and Penalties:**
    
    *   Validators earn interest on their staked ETH plus a share of the transaction fees users pay.
        
    *   If a validator goes offline too often, their rewards are docked. If they try to attack the network or process fake transactions, they face [slashing](https://www.coindesk.com/podcasts/mapping-out-eth-2-0/keep-it-simple-prevent-your-eth-20-from-being-slashed)—a heavy fine where they lose some or all of their deposited ETH.
        
*   **Options for Regular Users (Liquid Staking & Restaking):**
    
    *   Pooling: Most people don't have 32 ETH. Instead, they use [staking pools](https://www.coindesk.com/tech/2021/06/16/valid-points-the-challenge-of-decentralized-staking-pools-on-eth-20). These services combine small amounts of ETH from many users to reach the 32 ETH requirement. In return, you get a "receipt" token you can use elsewhere.
        
    *   [Restaking](https://www.coindesk.com/tech/2021/06/16/valid-points-the-challenge-of-decentralized-staking-pools-on-eth-20): A newer trend allows you to take your staked ETH and "restake" it to secure other applications on top of Ethereum. 
        
*   **Operational Rules:**
    
    *   The network has strict speed limits (churn limits) on how many validators can join or leave at once. This prevents the system from becoming unstable if there is a sudden rush of activity.
        
    *   Recent upgrades have also made wallets smarter, allowing standard accounts to handle complex staking tasks more easily.

Question 11

What are Ethereum Smart Contracts?

Accepted Answer

Ethereum [smart contracts](https://www.coindesk.com/markets/2022/05/04/what-is-so-smart-about-smart-contract-platforms) are self-executing programs stored on the blockchain that automatically carry out predefined rules without requiring a central authority or intermediary. Traditionally, contracts rely on third parties like banks, lawyers, or escrow services to enforce agreements.

However, Ethereum smart contracts replace these intermediaries by executing code that ensures the terms are met. They run on the Ethereum Virtual Machine (EVM), a decentralized computing system where all network participants process the same contract code. This ensures consistency, security, and trust, as no single entity can alter or control the execution.

**Core Characteristics:**    
- **Autonomy and Self-Execution:** Once deployed, these contracts execute their code automatically when the specified conditions are met.    
- **Immutability:** After deployment, the contract code cannot be altered, ensuring that its terms remain consistent and tamper-resistant.    
- **Transparency and Verifiability:** The contract’s code and state are public, allowing anyone to review and verify its operations.    
- **Deterministic Outcomes:** Given identical inputs, the execution produces the same output on every node, which is critical for network consensus.

Smart contracts are written in special coding languages like Solidity or Vyper and then converted into a format that computers can understand. Each smart contract gets its own unique address on the blockchain. When someone interacts with that address, the Ethereum network runs the contract’s instructions. To make sure the system isn’t overloaded, every action requires a small fee called 'gas,' which helps manage resources and prevent misuse.

**Underlying Architecture:**    
- **Ethereum Virtual Machine (EVM):** The EVM acts as a decentralized runtime environment that processes the smart contract code. It operates as a state transition function, taking the current state and a transaction as inputs to produce a new state.    
- **State Management:** The overall state of Ethereum is maintained in a modified Merkle Patricia Trie, a data structure that securely links all accounts and contract data, with a single root hash stored on the blockchain.

**Use Cases:**    
- **[Decentralized Finance (DeFi)](https://www.coindesk.com/learn/what-is-defi):** Enabling lending, borrowing, trading, and yield farming without intermediaries.    
- **[Non-Fungible Tokens (NFTs)](https://www.coindesk.com/learn/what-are-nfts-and-how-do-they-work):** Managing unique digital assets, from artwork to digital collectibles.    
- **[Decentralized Autonomous Organizations (DAOs)](https://www.coindesk.com/learn/what-is-a-dao):** Facilitating automated governance and decision-making processes.    
- **[Supply Chain Management](https://www.coindesk.com/business/2021/06/14/the-age-of-autonomous-supply-chains):** Ensuring transparent, immutable tracking of goods and transactions.

Question 12

What is the Ethereum Virtual Machine (EVM)?

Accepted Answer

The Ethereum Virtual Machine (EVM) is the system that runs smart contracts on the Ethereum blockchain. It is a decentralized “computer” that runs on every Ethereum node, ensuring that smart contracts behave in a deterministic and consistent way across the entire network.

• **Execution Environment:** The EVM is a stack-based virtual machine that interprets and executes compiled bytecode. All Ethereum nodes run an instance of the EVM, which means every node processes transactions and smart contracts using the same rules. This guarantees that, given the same input, all nodes produce the same output.

• **Instruction Set and Architecture:** The EVM uses a low-level, Turing-complete instruction set made up of opcodes. Each opcode performs a basic operation—such as arithmetic, logic, or memory manipulation. The EVM operates on 256-bit words and utilizes a stack with a maximum depth (commonly 1024 items) for holding temporary values during execution.

• **Memory and Storage:** During execution, the EVM maintains a temporary memory array that is cleared after each transaction. In contrast, each smart contract has its own persistent storage, organized as a key-value store implemented via a Merkle Patricia Trie. This trie structure ties all contract states together with a single root hash stored on the blockchain.

• **Gas and Resource Management:** Every operation executed by the EVM consumes “gas,” a unit that measures computational work. Gas fees are paid by transaction senders to compensate validators for the work of executing contract code and to limit resource consumption, thereby protecting the network from abuse. The gas model ensures that no single contract or transaction can monopolize network resources.

• **Determinism and Consensus:** Because the EVM is designed to be deterministic, the same transaction processed by every node will always result in the same state changes. This determinism is critical for consensus, as it allows all nodes to agree on the outcome of contract executions and the overall state of the blockchain.

• **Development and Implementations:** The EVM specification is outlined in the [Ethereum Yellow Paper](https://ethereum.github.io/yellowpaper/paper.pdf) and is maintained by the Ethereum community. Multiple implementations exist in various programming languages (such as evmone in C++, ethereumjs-vm in JavaScript, Py-EVM in Python, and revm in Rust), all of which adhere to the same core standards to ensure compatibility across the network.

Question 13

What is Gas on Ethereum?

Accepted Answer

[Gas](https://www.coindesk.com/learn/what-are-ethereum-gas-fees) is the unit that measures the computational effort required to execute operations on the Ethereum network. It serves as a pricing mechanism to allocate resources and prevent abuse, ensuring that each action performed on the network incurs a cost proportional to its complexity.

**How Gas Works:**

• **Gas Cost:**    
  - Each operation executed by the Ethereum Virtual Machine (EVM) has a fixed gas cost determined by its computational complexity.    
  - More complex operations (e.g. loops, storage modifications) require more gas compared to simpler ones (e.g. basic arithmetic).

• **Gas Price:**    
  - The gas price is the amount of Ether (typically measured in gwei, where 1 gwei = 0.000000001 ETH) that a user is willing to pay per unit of gas.    
  - Users set their own gas price when sending transactions, and it fluctuates based on network demand.

**Calculating Gas Fees:**    
The total fee for an operation is calculated as: **Total Fee = Gas Cost × Gas Price**    
Users specify a gas limit—the maximum gas they are willing to spend—and any unused gas is refunded after the operation completes.

**Purpose and Impact:**    
• Gas ensures that every transaction and contract execution contributes fairly to network resource consumption.    
• It helps prioritise transactions during high network demand, as higher gas prices can lead to faster processing.    
• This mechanism also deters malicious activity by making it costly to perform operations that would overload the network.

Understanding gas is fundamental to interacting with Ethereum, as it underpins the economic model that secures the network and ensures efficient resource allocation.

Question 14

What are Ethereum Token Standards and why are they important?

Accepted Answer

Ethereum tokens are digital assets created and managed on the Ethereum blockchain. They represent various things, such as currencies, ownership rights, access to services, or even unique digital items. These tokens follow specific standards to ensure compatibility with wallets, exchanges, and applications.

Ethereum token standards are established protocols that define a set of rules for creating, issuing, and managing tokens on the Ethereum blockchain. These standards ensure that tokens—whether fungible, non-fungible, or semi-fungible—operate in a predictable and interoperable manner across the entire ecosystem.

• **Interoperability and Composability:**    
  By following a standard, tokens can be seamlessly integrated into wallets, exchanges, decentralized applications, and other services without requiring custom adaptations. This uniformity helps maintain a composable environment where new projects can easily build on existing protocols.

• **Fungible vs. Non-Fungible Tokens:**    
  - **ERC-20:** Defines a [standard interface for fungible tokens](https://www.coindesk.com/tech/2021/02/09/what-is-the-erc-20-ethereum-token-standard), which are identical and interchangeable, much like traditional currencies or utility tokens.    
  - **ERC-721:** Specifies the requirements for [non-fungible tokens (NFTs)](https://www.coindesk.com/learn/what-are-nfts-and-how-do-they-work), where each token is unique and can represent distinct assets such as digital art or collectibles.    
  - **ERC-1155:** Provides a multi-token standard that supports both [fungible and non-fungible tokens](https://www.coindesk.com/tech/2021/08/17/what-is-a-semi-fungible-crypto-token), optimizing batch transfers and reducing transaction costs.

• **Standards Development Process:**    
  Token standards are typically proposed through Ethereum Improvement Proposals (EIPs)—a process detailed in the 'Ethereum Improvement Proposals (EIPs): What They Are and Why They Matter' section—ensuring extensive community review, testing, and refinement before adoption. This collaborative process helps ensure that the standards remain secure, efficient, and broadly applicable.

• **Other Notable Standards:**    
  Additional proposals such as ERC-223, ERC-777, and ERC-4626 address specific use cases—ranging from enhanced token transfer handling to standardized approaches for tokenized vaults—further expanding the versatility of tokens on Ethereum.

Adhering to these standards is essential for maintaining compatibility among various projects and ensuring that the ecosystem remains modular and efficient. As Ethereum continues to evolve, these guidelines serve as the foundation for innovation in areas like decentralized finance, non-fungible assets, and beyond.

Question 15

Ethereum Improvement Proposals (EIPs): What They Are and Why They Matter

Accepted Answer

Ethereum Improvement Proposals (EIPs) are technical documents that describe potential new features, changes, or processes for the Ethereum platform. They serve as the official “source of truth” for developers and the community when discussing upgrades and standards.

• **Purpose and Function:**    
  EIPs provide a clear and concise technical specification for proposed changes. They outline how a change would work, the motivation behind it, and any alternative approaches. By following a standard process, EIPs help ensure that upgrades are well-documented and broadly understood.

• **Development Process:**    
  - Anyone in the Ethereum community can draft an EIP, although authors are typically experienced developers.    
  - Guidelines for drafting an EIP are detailed in EIP-1, which explains the formatting, content, and review process.    
  - Once submitted, an EIP is discussed on community forums and through GitHub, where EIP editors review it for technical soundness, clarity, and adherence to the guidelines.    
  - EIPs can go through several states—from Draft and Review to Last Call and Final—depending on community consensus and the scope of the change.

• **Types of EIPs:**    
  EIPs are categorized by their impact and purpose:    
  - **Standards Track EIPs:** These describe changes that affect most or all Ethereum implementations. This category is subdivided into:  
    - *Core:* Changes that require a consensus fork.  
    - *Networking:* Enhancements related to network protocols.  
    - *Interface:* Updates to client APIs and related specifications.  
    - *ERC:* Application-level standards, such as those for tokens (e.g., ERC-20, ERC-721, ERC-1155).  
  - **Meta EIPs:** These focus on the processes and procedures surrounding Ethereum’s development rather than on changes to the protocol itself.  
  - **Informational EIPs:** These provide guidelines or background information and are not intended to become official standards.

• **Role in Governance and Network Upgrades:**    
  EIPs are central to Ethereum’s decentralized governance. All network upgrades and changes require the adoption of one or more EIPs. Client developers and other stakeholders review and implement these proposals to ensure that everyone remains in consensus. Core EIPs, which affect fundamental protocol rules, demand a broader consensus than application-level standards.

• **Historical Context:**    
  The EIP process was modeled on improvement proposals from other communities (like Bitcoin’s BIPs and Python’s PEPs) and has been active since October 2015. Over time, the process has evolved to handle the increasing complexity of Ethereum’s ecosystem, and a diverse group of editors now oversees EIP submissions and revisions.

EIPs are the mechanism through which Ethereum evolves. They document changes ranging from protocol-level upgrades to application standards, ensuring that proposed modifications are transparent, well-reviewed, and implemented consistently across the network.

Question 16

What is The Verge, The Surge, The Scourge and the others

Accepted Answer

Vitalik Buterin once described Ethereum’s future development in categories named for their impact on the network’s architecture. Although Ethereum.org has since moved toward simpler, user-centric language, these phases remain relevant to understanding the broader vision. They include:

- **The Merge**: Focuses on Ethereum’s switch from proof-of-work to proof-of-stake, consolidating the Beacon Chain with Mainnet.    
- **The Surge**: Introduces scaling solutions through rollups and data sharding, aiming to increase throughput and reduce transaction fees.    
- **The Scourge**: Addresses censorship resistance and decentralisation, mitigating potential protocol risks from Maximal Extractable Value (MEV).    
- **The Verge**: Improves block verification and simplifies node operations, reducing hardware requirements and further decentralising validation.    
- **The Purge**: Streamlines the protocol by removing historical baggage and lowering the computational costs of running nodes.    
- **The Splurge**: Collects miscellaneous upgrades that do not fit neatly into the previous categories but still enhance Ethereum’s capabilities.

While these names are no longer used officially, the core goals—ranging from scaling and censorship resistance to protocol simplification—still inform Ethereum’s ongoing evolution. The user-centric roadmap retains the same vision, ensuring that each upgrade contributes to Ethereum’s overall security, efficiency, and sustainability.

Question 17

Ethereum Founding History: The Beginning

Accepted Answer

Ethereum’s journey began when a young [Vitalik Buterin](https://www.coindesk.com/learn/who-created-ethereum), at just 19 years old, published the [Ethereum white paper](https://resources.cryptocompare.com/asset-management/2/1660950884484.pdf) in November 2013. This technical document outlined a vision for a blockchain platform that could run decentralized applications and smart contracts.

Soon after, Buterin invited Amir Chetrit, an Israeli-American developer with whom he had previously worked on a project related to early NFT concepts, to join the initiative. This early collaboration helped set the stage for the project’s expansion.

While attending a Bitcoin conference in Miami, Buterin connected with several developers and investors who became early co-founders. Among these were Mihai Alisie, Anthony Di Iorio, and Charles Hoskinson. Later, Joseph Lubin, Jeffrey Wilcke, and Gavin Wood also joined the team. Together, they established the Ethereum Foundation—a Switzerland-based nonprofit organization dedicated to supporting Ethereum’s development.

A dispute regarding whether Ethereum should operate as a for-profit entity led to Charles Hoskinson’s departure. Over time, most of the original co-founders gradually stepped back or reduced their involvement, leaving Vitalik Buterin as the primary active figure in Ethereum’s evolution.

The Ethereum protocol officially launched in 2015 and quickly grew, eventually becoming the world’s second-largest cryptocurrency by market value.

Question 18

Major Ethereum Events and Key Proposals: A Chronological Overview

Accepted Answer

In 2013, Ethereum’s journey began when Vitalik Buterin published the [Ethereum whitepaper](https://resources.cryptocompare.com/asset-management/2/1660950884484.pdf). This foundational document outlined a vision for a decentralized platform capable of executing smart contracts, setting the stage for what would become one of the most influential blockchain projects.

In 2014, the project secured funding through a public Ether sale that ran for 42 days, providing the capital needed for development. Shortly thereafter, the [Yellow Paper](https://ethereum.github.io/yellowpaper/paper.pdf) was released by Dr. Gavin Wood, offering the first formal technical specification of the Ethereum protocol and the Ethereum Virtual Machine (EVM).

The [Ethereum network started its early phase](https://www.coindesk.com/markets/2015/07/30/ethereum-launches-long-awaited-decentralized-app-network) in 2015. In September of that year, an update called the 'Frontier thawing fork' adjusted transaction costs and limits, making it easier for more people to use the system. This was soon followed by the first official version of Ethereum, called 'Frontier,' which gave developers and early users a chance to test and explore the platform.

In the world of blockchain, a 'fork' is an upgrade or change to the network’s rules. Some forks make small adjustments, like improving efficiency, while others introduce major updates that can split the network into different versions. These changes help Ethereum evolve by fixing issues, adding new features, or improving security.

By 2016, Ethereum faced significant challenges and responded with a series of upgrades. The Tangerine Whistle fork (October 2016) increased gas costs to mitigate spam attacks, while the [Spurious Dragon fork](https://www.coindesk.com/markets/2016/11/22/ethereums-fourth-fork-so-far-so-good) (November 2016) refined opcode pricing and state management to address denial-of-service risks. The DAO fork, initiated in July 2016 after a [major hack of a decentralized autonomous organization](https://www.coindesk.com/learn/understanding-the-dao-attack), resulted in a contentious split that led to the formation of Ethereum Classic. The [Homestead upgrade](https://www.coindesk.com/markets/2016/03/14/ethereum-blockchain-project-launches-first-production-release) (March 2016) then provided the network with its first stable release, setting a solid foundation for future enhancements.

In 2017, the [Byzantium fork](https://www.coindesk.com/markets/2017/10/16/ethereums-byzantium-hard-fork-is-running-smoothly-developers-say) (October 2017) brought important changes including a reduction in block rewards and delays to the [difficulty bomb](https://www.coindesk.com/video/ethereum-co-founder-on-ethereums-difficulty-bomb), as well as the introduction of new opcodes and cryptographic functions to support emerging scaling solutions.

The '[difficulty bomb](https://www.coindesk.com/layer2/2022/06/22/ethereums-gray-glacier-or-how-i-learned-to-stop-worrying-and-love-the-difficulty-bomb)' is a mechanism built into Ethereum that gradually makes mining more difficult over time. This is designed to encourage the transition to major upgrades, such as shifting from proof-of-work (mining-based) to proof-of-stake (a more energy-efficient system). By delaying the difficulty bomb, the update ensured that mining could continue smoothly while Ethereum developers worked on the next phases of the network.

The year 2019 was marked by further refinements with the [Istanbul upgrade](https://www.coindesk.com/tech/2019/12/08/ethereums-istanbul-hard-fork-is-now-live) (December 2019), which optimized gas costs, improved security, and enhanced compatibility with Layer 2 solutions. Shortly thereafter, the Constantinople fork (February 2019) reduced block rewards and introduced additional improvements, laying the groundwork for the transition to a proof-of-stake model.

A major transformation occurred in 2020 with the launch of the Beacon Chain on December 1. This event, known as Phase 0 of Ethereum 2.0, introduced the proof-of-stake (PoS) mechanism by enabling validators to deposit 32 ETH and secure the network through staking—without altering the execution layer on Ethereum Mainnet.

In 2021, the network continued to evolve. The [Altair upgrade](https://www.coindesk.com/tech/2021/10/05/altair-upgrade-set-to-activate-on-ethereum-mainnet-this-month) (October 2021) improved the Beacon Chain by adding sync committees for light client support and adjusting validator penalties. The [London upgrade](https://www.coindesk.com/tech/2021/08/05/ethereums-hotly-anticipated-london-hard-fork-is-now-live) (August 2021) was pivotal in reforming the transaction fee market through [EIP-1559](https://www.coindesk.com/reports/eip-1559-ethereums-fee-market-upgrade-explained), while the [Berlin upgrade](https://www.coindesk.com/tech/2021/04/15/berlin-hard-fork-is-now-live-on-ethereum) (April 2021) further optimized gas costs and broadened support for various transaction types.

The historic transition to PoS was completed in 2022 with the Paris upgrade (September 15, 2022), commonly referred to as The Merge. This upgrade merged Ethereum Mainnet with the Beacon Chain, ending proof-of-work mining. Accompanying upgrades like [Bellatrix](https://www.coindesk.com/tech/2022/09/06/the-final-countdown-to-the-ethereum-merge-has-officially-begun) and Gray Glacier refined consensus rules and adjusted the difficulty bomb to ensure a smooth transition.

In 2023, the [Shanghai-Capella upgrade](https://www.coindesk.com/tech/2023/04/12/ethereums-shanghai-upgrade-activates-starting-new-era-of-staking-withdrawals)—known as Shapella—enabled staking withdrawals by updating both the execution layer (Shanghai) and the consensus layer (Capella). This allowed validators to retrieve their staked ETH and rewards in a controlled manner, reinforcing the economic incentives of the network.

The focus on scalability continued in 2024 with the Cancun-Deneb upgrade. [Cancun](https://www.coindesk.com/tech/2024/03/12/ethereum-blockchain-counts-down-to-dencun-upgrade-set-to-reduce-fees) introduced [Proto-Danksharding](https://www.coindesk.com/tech/2024/03/13/ethereum-activates-dencun-upgrade-in-landmark-move-to-reduce-data-fees#:~:text=What%20is%20proto%2Ddanksharding%3F,introduction%20of%20the%20data%20blobs.) (EIP-4844), which reduced data storage costs for Layer 2 rollups by using temporary data “blobs,” while Deneb improved consensus-layer performance by fine-tuning validator churn and issuance limits.

Most recently, in 2025, the [Prague-Electra](https://www.coindesk.com/tech/2025/02/06/ethereum-s-pectra-upgrade-to-hit-testnets-in-february-and-march) (or "Pectra") upgrade has been introduced. This upgrade further refines the staking experience and user functionalities, including features like compounding validator accounts and enhanced control over staked funds. Proposals such as EIP-7702, which extend smart contract-like capabilities to externally owned accounts, and EIP-7251, which increases the maximum effective balance per validator, underscore the ongoing efforts to improve Ethereum’s efficiency and user experience.

This chronological progression—from the whitepaper in 2013, through multiple critical forks and upgrades, to the latest improvements in 2025—demonstrates Ethereum’s iterative development process driven by community consensus and a rigorous proposal (EIP - Ethereum Improvement Proposal) system.

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About Ethereum

Frequently Asked Questions

What's the latest ETH news?

What is Ethereum?

How Ethereum works

What is Ether (ETH)?

What is Ether (ETH) used for?

Ether Price History and Tokenomics

What was The Merge?

What is the Beacon Chain?

What is Ethereum 2.0 and how is it evolving?

How Staking Works on Ethereum

What are Ethereum Smart Contracts?

What is the Ethereum Virtual Machine (EVM)?

What is Gas on Ethereum?

What are Ethereum Token Standards and why are they important?

Ethereum Improvement Proposals (EIPs): What They Are and Why They Matter

What is The Verge, The Surge, The Scourge and the others

Ethereum Founding History: The Beginning

Major Ethereum Events and Key Proposals: A Chronological Overview

Ethereum

Key Stats

Ethereum Information

Ethereum Price Converter

Latest Ethereum News

Research Reports

Digital Assets: Quarterly Review and Outlook Q2

Risk-On Returns: Binance Leads the Flows Pickup

Join thousands of readers who rely on CoinDesk for data-driven insights on the latest digital asset trends.

Ethereum Markets

Related Stocks

About Ethereum

Frequently Asked Questions

What's the latest ETH news?

What is Ethereum?

How Ethereum works

What is Ether (ETH)?

What is Ether (ETH) used for?

Ether Price History and Tokenomics

What was The Merge?

What is the Beacon Chain?

What is Ethereum 2.0 and how is it evolving?

How Staking Works on Ethereum

What are Ethereum Smart Contracts?

What is the Ethereum Virtual Machine (EVM)?

What is Gas on Ethereum?

What are Ethereum Token Standards and why are they important?

Ethereum Improvement Proposals (EIPs): What They Are and Why They Matter

What is The Verge, The Surge, The Scourge and the others

Ethereum Founding History: The Beginning

Major Ethereum Events and Key Proposals: A Chronological Overview