Ethereum is a shared computer network that anyone can use to run small programs, and ether is the money that pays for running them. Bitcoin was built to be money. Ethereum was built to be programmable.
That one difference explains almost everything else about the two networks. Bitcoin keeps its rules simple and rarely changes them, which is why people describe it as “digital gold” or “digital money.” Ethereum keeps adding features, which is why its fans call it “a world computer.”
Ether versus Ethereum
Ethereum is the network. Ether, ticker ETH, is the coin that runs on it. In everyday speech people say “I bought some Ethereum,” and everyone knows what they mean, but strictly speaking you buy ether.
Ether does two jobs. It is an asset you can hold and trade, and it is the fuel you spend every time you ask the network to do something. Bitcoin’s coin also pays transaction fees, but on Ethereum the fuel role is much bigger because the network does far more kinds of work.
Where it came from
Ethereum was proposed in late 2013 by Vitalik Buterin, a 19-year-old programmer and writer who had been covering Bitcoin for a magazine. His argument was that Bitcoin’s design was deliberately limited, and that a blockchain with a built-in programming language could do much more than move coins.
A team formed around the idea, raised money by pre-selling ether in 2014, and launched the live network on July 30, 2015. Unlike Bitcoin, whose creator vanished, Ethereum has a known founder, a nonprofit (the Ethereum Foundation), and a public group of developers who steer its upgrades.
Smart contracts, explained with a vending machine
A smart contract is a program stored on the Ethereum network that runs exactly as written, for anyone, without a company in the middle. The classic comparison is a vending machine: put in the right coins, press B4, and the machine hands over the snack. No clerk decides whether to honor the deal.
Here is a plain example. Two friends bet on a football game. They each send 0.1 ETH to a smart contract, and the contract is written to pay the whole 0.2 ETH to whoever picked the winning team, based on a score feed it reads after the game. Neither friend can back out, and neither needs to trust the other to pay up.
Real smart contracts do that kind of thing at scale: they hold funds, enforce rules, and hand out results automatically. The catch is that “runs exactly as written” cuts both ways. If the code has a bug, the bug runs too, and the history of Ethereum includes some expensive ones.
What actually runs on Ethereum
Stablecoins
A stablecoin is a token designed to stay worth one dollar, backed by dollars and Treasury bills held by the issuer. The two biggest, Tether’s USDT and Circle’s USDC, live on Ethereum among other networks, and moving dollars this way has become the most-used thing on the whole system. We cover them in Other Coins.
DeFi
DeFi, short for decentralized finance, is a set of smart contracts that do bank-like jobs, such as lending, borrowing, and swapping one token for another, with no bank. You deposit into a contract, and the code sets the interest rate and enforces the terms. It is clever, and it is also where many of the worst hacks have happened.
NFTs
An NFT, or non-fungible token, is a token that represents one unique item rather than an interchangeable unit of money. The 2021 boom was mostly digital art and collectibles, and prices for most of those have since collapsed. The underlying idea, a public record of who owns a specific thing, still gets used for tickets, memberships, and game items.
Tokens
Anyone can create a new coin on Ethereum in minutes by deploying a standard token contract. That is how thousands of projects, from serious ones to outright scams, got their coins without building a network of their own. If a coin “runs on Ethereum,” it is one of these tokens, not a separate blockchain.
Proof of stake and the Merge
Bitcoin secures its ledger with mining, called proof of work: computers race to solve puzzles, burning electricity, and the winner adds the next block. Ethereum started the same way. On September 15, 2022, in an upgrade called the Merge, it switched to proof of stake.
Under proof of stake, people who want to help run the network lock up 32 ETH as a deposit, called a stake, and take turns proposing and checking blocks. Cheating gets your deposit destroyed. The Ethereum Foundation estimates the switch cut the network’s energy use by more than 99.9 percent.
Upgrades have kept coming roughly twice a year. Shapella (April 2023) let stakers withdraw their deposits. Dencun (March 2024) added cheap data space for layer 2 networks. Pectra (May 7, 2025) improved staking and wallet features. Fusaka (December 3, 2025) let the network verify samples of data instead of every byte. As of September 2026, the next one, called Glamsterdam, is on public test networks with a mainnet target of late 2026, and a further upgrade named Hegota is already planned after it.
Gas fees and layer 2s
What gas is
Every action on Ethereum costs a fee, called gas, paid in ether. Simple transfers cost less; complicated smart-contract actions cost more. When the network is busy, gas prices rise, and at the 2021 peak a single swap could cost more than $100. Since 2021 a portion of every fee is burned, meaning destroyed, which partly offsets the new ether paid to stakers.
Layer 2s: Arbitrum, Optimism, and Base
A layer 2 is a separate network that processes transactions cheaply in bulk, then posts a compressed summary back to Ethereum for security. Think of Ethereum as the courthouse where final records are kept and a layer 2 as the busy office next door. Arbitrum, Optimism, and Base (launched by the exchange Coinbase in 2023) are the largest.
Since the Dencun and Fusaka upgrades, fees on these networks are often a few cents. The trade-off is added complexity: your ether has to be “bridged” to the layer 2, each one has its own quirks, and several still have a company able to pause or upgrade the system.
How to buy ether
Buying ether works the same way as buying bitcoin, and the process in How to Buy Bitcoin applies step for step. Every general exchange we review sells ETH; the bitcoin-only apps do not. See our exchange comparison for which is which.
One extra decision: if you move ether off the exchange, make sure your wallet and the network you send on match. Sending ETH to an address on the wrong network is a common and often unrecoverable mistake.
Risks, and the honest comparison to bitcoin
Supply policy. Bitcoin’s supply is capped at 21 million coins by a rule that has never changed. Ether has no cap. Roughly 120 million ETH exist as of 2026, and whether the supply grows or shrinks in a given year depends on how much gets burned in fees versus paid to stakers. Recently it has been close to flat. Bitcoin’s policy is a promise; Ethereum’s is a dial that developers can, and do, adjust.
Complexity. More features mean more ways to lose money: buggy contracts, fake tokens, bridge hacks, and wallet prompts that grant a scammer permission to drain your funds. Bitcoin has fewer things to click on, and that is part of its appeal.
Centralization debates. Ethereum has a known founder, a foundation, and a small group of core developers who set the upgrade schedule. A large share of staked ether sits with a few exchanges and staking pools. Supporters say this lets the network improve quickly; critics say it means someone is in charge in a way that no one is in charge of Bitcoin. Both points are true, and how much they matter is up to you.
Key point: Bitcoin tries to be the best possible money by staying simple and predictable. Ethereum tries to be a platform for programs, which makes it more useful and more complicated. They are not really competing for the same job. This page is education, not financial advice.