Ethereum is a blockchain-based software platform that is primarily used to support the world’s second-largest cryptocurrency by market capitalization after Bitcoin. Like other cryptocurrencies, Ethereum operates on a decentralized computer network, or distributed ledger called a blockchain, which manages and tracks the currency. It can be useful to think of a blockchain as a running receipt of every transaction that’s ever taken place in the cryptocurrency.
While the whole field is referred to in terms of currency, it may be more useful to think of crypto as a token that can be spent for a specific purpose enabled by the Ethereum platform. For example, sending money or buying and selling goods are functions enabled by the coin. But Ethereum can do a lot more, and it can also form the basis for smart contracts and other apps.
Ethereum can power a number of applications offering a wide range of functions:
- Currency: With a cryptocurrency wallet, you can send and receive ether or pay for goods and services, if the digital currency is accepted as payment
- Smart contracts: Smart contracts are a kind of permission-less app that automatically executes when the contract’s conditions have been met
- Digital apps (dApps): Ethereum powers digital apps that allow users to play games, invest, send money, track an investment portfolio, follow social media and more
- Non-fungible tokens (NFTs): These tokens can be powered by Ethereum and can allow artists or others to sell art or other items directly to sellers using smart contracts
- Decentralized finance (DeFi): By using Ethereum, some people may be able to avoid centralized (government) control over the movement of money or other assets
Think of Ethereum as a token that powers various apps rather than as merely a cryptocurrency that allows users to send money to each other.