Ethereum runs programs, Bitcoin moves value
In short
- Ethereum is a network that runs programs called smart contracts, which execute themselves once the conditions in the code are met.
- Every action costs gas, paid in ETH. The base part of the fee is burned and the tip goes to the validator.
- Since 15 September 2022 Ethereum uses proof of stake. According to stakefish, more than 30 percent of all ETH is now locked in staking.
- Bitcoin has a cap of 21 million coins and a simple scripting language. The ETH supply is dynamic, and stakefish counts more than 158 billion dollars of stablecoins on Ethereum.
Bitcoin was made to move value. Ethereum was made to run programs. That one difference explains almost everything you hear about the two.
I explain how Ethereum works, what it costs, what staking is and what is happening on the network now. No price story, just the mechanics.
What a smart contract is
A smart contract is a computer program that lives on the blockchain. It works on "if this, then that". When the conditions in the code are met, it executes itself. Nobody has to judge or negotiate.
Ethereum.org gives examples such as money that is only released after a certain date, a currency exchange that runs automatically and an insurance policy that pays out by itself. Stablecoins and NFTs are smart contracts too.
The downside is stated plainly. Once a contract is running, its code cannot be changed, so a mistake stays. And raw transaction data is unreadable for people. As a result users sometimes sign transactions without knowing what they do, which is called blind signing.
What gas is
Every action on Ethereum costs computing power. That computing power is called gas and you pay for it in ETH, usually quoted in gwei, a billionth of an ETH.
The formula is short: the gas you use times (base fee plus tip). The protocol sets the base fee itself, depending on how full the previous block was. It can rise or fall by at most 12.5 percent per block. The base fee is burned, so it disappears from circulation. The tip goes to the validator who includes your transaction.
An example from ethereum.org: a plain ETH transfer costs 21,000 gas. With a base fee of 10 gwei and a tip of 2 gwei that comes to 0.000252 ETH, of which 0.00021 ETH is burned.
How it differs from Bitcoin
- Purpose. Bitcoin has a deliberately simple scripting language and is about moving value. Ethereum runs complete programs.
- Supply. There will never be more than 21 million bitcoin. The ETH supply is dynamic: validators receive new ETH, and part of it is burned with every transaction.
- Security. Bitcoin uses mining and a lot of electricity. On 15 September 2022 Ethereum moved to proof of stake, known as the Merge. According to ethereum.org, energy use dropped by about 99.95 percent.
What staking is, briefly
With proof of stake, validators lock up ETH as collateral. Running your own validator takes at least 32 ETH. With pools it can be done with far less.
Stakers earn rewards for honest work. If things go wrong, it costs them. A validator that provably cheats, for example by signing two conflicting blocks, loses part of its stake. That is called slashing. With a pool or a custodian you also carry counterparty risk and the risk of bugs in the code.
According to stakefish (21 April 2026), about 37 million ETH was staked at that point, more than 30 percent of the supply. The yearly yield was around 2.8 to 3.3 percent, against more than 5 percent in early 2023. The queue to become a validator peaked at 71 days in February 2026. These figures come from one source and they keep moving.
What the ecosystem does now
A lot of use is moving to so called layer 2 networks, such as Arbitrum, Optimism and Base. They process transactions off the main chain and post the data to Ethereum. Ethereum.org cites an average transaction cost of 0.0021 dollars on those networks, against 0.13 dollars on Ethereum itself. The Fusaka upgrade in early December 2025 made that data traffic cheaper with a technique called PeerDAS.
According to stakefish (April 2026), more than 37 billion dollars sat on over 50 layer 2 networks. Stablecoins on Ethereum came to more than 158 billion dollars. Stablecoins are smart contracts themselves, so that fits our article on stablecoins. These are figures from one source without a fixed measurement date.
Large financial players also work with this network, but more on that in our article on the tokenization of markets.
What is coming
The next big package is called Glamsterdam. According to a report dated 27 September 2026, the test version arrives in October and the Ethereum Foundation is aiming for the fourth quarter of 2026 for the live network. That can slip if problems show up in testing.
These are plans from developers, not commitments and not a forecast from BitFox.
What it is not
A lot of activity on the network says nothing about the price of ETH, and a smart contract is only as reliable as the code inside it. This article explains how it works. It is not advice to buy, stake or sell ETH.
