Ethereum is the largest smart-contract platform in crypto and home to most of the industry’s real activity: stablecoins, decentralised finance, NFTs, and thousands of applications. ETH, its native asset, is unusual because it is both money and a productive, yield-bearing asset you can stake. This review covers what Ethereum is, how its supply actually works, why Layer-2 networks matter, and how to buy, store, and stake ETH safely.
What is Ethereum?
Ethereum is a decentralised computing platform launched in 2015 by Vitalik Buterin and a founding team. Where Bitcoin is primarily money, Ethereum is programmable. Developers deploy smart contracts, which are self-executing programs, that power decentralised finance (DeFi), stablecoins, NFTs, games, and more.
ETH is the network’s native asset. It pays transaction fees, known as gas, and secures the chain through staking. Ethereum is the second-largest cryptocurrency by market capitalisation and the settlement layer for the majority of on-chain economic activity.
Bitcoin vs Ethereum: a quick comparison
These two are not really competitors. They do different jobs.
| Property | Bitcoin | Ethereum |
|---|---|---|
| Core purpose | Store of value, digital gold | Programmable platform for apps |
| Supply | Fixed at 21 million | No hard cap, offset by fee burn |
| Consensus | Proof-of-Work mining | Proof-of-Stake staking |
| Native yield | None | Staking rewards |
| Main strength | Security and scarcity | Flexibility and ecosystem |
Many investors hold both: Bitcoin for hard-money scarcity, Ethereum for exposure to the on-chain economy. For the full case on BTC, see our Bitcoin review.
How Ethereum’s tokenomics work
Ethereum does not have a fixed supply cap. Instead, issuance and burning interact to make net supply dynamic.
- The Merge (2022) moved Ethereum from proof-of-work mining to proof-of-stake, cutting energy use by about 99 percent and replacing miner rewards with staking rewards paid to validators.
- EIP-1559 (2021) burns a portion of every transaction fee. When the network is busy, more ETH is burned than issued, making ETH net deflationary during those periods.
| Property | Detail |
|---|---|
| Supply model | No hard cap, issuance offset by fee burn |
| Consensus | Proof-of-Stake |
| Staking | Validators stake ETH to secure the chain and earn yield |
| Fee mechanism | EIP-1559 base fee is burned |
| Energy use | Cut roughly 99 percent at the Merge |
The result is sometimes called “ultrasound money”: a supply that can actually shrink when the network is in heavy demand.
Layer-2 and scaling
Ethereum’s base layer prioritises security and decentralisation over raw speed, which historically made fees expensive during busy periods. The ecosystem’s answer is Layer-2 rollups.
Networks such as Arbitrum, Optimism, and Base process transactions off-chain and settle back to Ethereum, offering far lower fees while inheriting Ethereum’s security. In 2026, most everyday Ethereum activity happens on these L2s, with the base layer acting as the secure settlement foundation beneath them.
This matters for ETH holders because activity across the L2 ecosystem still ultimately pays fees and consumes block space on Ethereum, supporting the burn.
ETH as a productive asset
Unlike Bitcoin, ETH can earn a yield through staking. There are three common routes.
- Solo staking. Run your own validator with 32 ETH. Maximum control and rewards, but it requires technical setup and reliable uptime.
- Liquid staking. Use a service like Lido to stake any amount and receive a tradeable token representing your staked ETH. Convenient, but it adds smart-contract and centralisation considerations.
- Exchange staking. Let a major exchange stake on your behalf. The easiest option, but you give up custody and trust the platform.
Staking rewards vary with the total amount of ETH staked and network activity. Our staking guide walks through the trade-offs in detail.
Pros and cons
Strengths
- The largest smart-contract ecosystem, with the deepest developer talent and liquidity.
- Proof-of-stake makes ETH a yield-bearing asset.
- Fee burn can make ETH deflationary under real demand.
- A clear scaling path through Layer-2 rollups.
Risks
- More complex than Bitcoin, with a larger smart-contract attack surface.
- No supply cap means the hard-money case is weaker than Bitcoin’s.
- Competes with faster Layer-1s for some use cases.
- Staking adds its own risks, including slashing and lock-up considerations.
Where to buy and how to store ETH
ETH is available on virtually every major exchange, including Binance, Coinbase, and Kraken. The buying process mirrors any other coin: verify your account, deposit funds, and place an order. New to this? Start with our how to buy crypto guide.
After buying, you have three broad paths:
- Self-custody. Withdraw to a hardware wallet for safekeeping. See our wallets guide.
- Stake. Earn protocol rewards through one of the routes above.
- Use it in DeFi. Supply it to lending markets or liquidity pools, with the extra risks that involves. Our DeFi guide explains how.
Frequently asked questions
Is Ethereum better than Bitcoin? They serve different purposes. Bitcoin is optimised as a store of value, while Ethereum is a programmable platform. Many investors hold both for different reasons rather than choosing one.
Can I earn yield on Ethereum? Yes. Staking ETH earns protocol rewards. Returns vary with the total amount staked and network activity, and staking carries its own risks such as slashing and lock-up periods.
Why are Ethereum fees sometimes high? Base-layer block space is limited, so fees rise during demand spikes. Using Layer-2 networks like Arbitrum, Optimism, or Base is the standard way to transact cheaply.
Is ETH deflationary? It can be. EIP-1559 burns part of every transaction fee. When the network is busy enough that burning exceeds new issuance, the total supply shrinks. In quieter periods it grows slightly.
Do I need 32 ETH to stake? Only for solo staking with your own validator. Liquid staking services and exchanges let you stake any amount, though each adds its own trust and risk considerations.