Ethereum, which launched in 2015, is the second-biggest cryptocurrency by market cap after Bitcoin. But unlike Bitcoin, it wasn’t created to be digital money. Instead, Ethereum’s founders set out to build a new kind of global, decentralized computing platform that takes the security and openness of blockchains and extends those attributes to a vast range of applications.
Everything from financial tools and games to complex databases are already running on the Ethereum blockchain. And its future potential is only limited by developers’ imaginations. As the nonprofit Ethereum Foundation puts it: “Ethereum can be used to codify, decentralize, secure and trade just about anything.”
Ethereum has become a popular investment vehicle and store of wealth (and can be used, like Bitcoin, to send or receive value without an intermediary).
The Ethereum blockchain allows developers to build and run a huge variety of applications: everything from games and advanced databases to complex decentralized financial instruments — meaning that they don’t require a bank or any other institution in the middle.
Ethereum-based apps are built using “smart contracts.” Smart contracts, like regular paper contracts, establish the terms of an arrangement between parties. But unlike an old-fashioned contract, smart contracts automatically execute when the terms are met without the need for either participating party to know who is on the other side of the deal — and without the need for any kind of intermediary.
Ethereum, like Bitcoin, is an open source project that is not owned or operated by a single individual. Anyone with an internet connection can run an Ethereum node or interact with the network.
Much like Bitcoin’s decentralized blockchain allows any two strangers, anywhere in the world, to send or receive money without a bank in the middle, smart contracts running on Ethereum’s decentralized blockchain allow developers to build complex applications that should run exactly as programmed without downtime, censorship, fraud, or third-party interference.
Popular Ethereum-based innovations include stablecoins (like DAI, which has its value pegged to the dollar by smart contract), decentralized finance apps (collectively known as DeFi), and other decentralized apps (or Dapps).