Complete Guide to Ethereum: The Best Blockchain?

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By Max
Estimated reading: 18mins
Complete Guide to Ethereum: The Best Blockchain?

Ethereum is the first open-source, public blockchain with smart contract functionality. The developer community uses ETH to build its own blockchains and apps. Ethereum is part of practically every innovation in blockchain.

What Is Ethereum?

If Bitcoin is digital gold, Ethereum could be compared to digital silver. Both coins dominate nearly 50% of the entire cryptocurrency market. Some believe Ethereum might flip Bitcoin’s market cap someday, hence why many hold this currency as a long-term investment.

But make no mistake. ETH is NOT a store of value. It’s a utility token, andwhat makes it valuable is the work you can do with it.

More like digital oil.

Formally, ETHis a virtual, decentralized, and autonomous computer network. This means:

  • Nobody owns Ethereum. It’s peer-to-peer, user-to-user.
  • Anyone with an online computer can connect to Ethereum to receive or give computing power.
  • The more computers use ETH around the world, the harder it is to manipulate.

It’s empowering because developers no longer need to trust their business to some IT company. Ethereum allows users to safely buy and sell computing power to other users directly. Because it’s worldwide available (and also the pioneer in smart contracts), it has become the largest host of blockchain projects.

That’s self-reinforcing, because developers create tools for each other, saving time and money. Which allows us to create more practical apps for everyday people. This brings more users to the Ethereum app marketplace, which attracts even more developers.

Fast-forward from 2015 to 2022, over 2,700 apps now use ETH. Decentralized applications (dApps) are its main use case:

How Does Ethereum Work?

The goal of Ethereum is to give users more control of their data by running apps on the blockchain. While there are many complicated ways to achieve this, using Ethereum is simple:

  1. Pick a wallet
  2. Buy ETH
  3. Pick a dApp
  4. Confirm

Here’s an example of what it looks like for a complete beginner in crypto. Let’s say you want to buy a coin that’s only available on the Ethereum blockchain (they’re called ERC-20 tokens). To do this, you need to buy Ether and use two dApps: a wallet, and a Decentralized Exchange (DEX).

  1. To buy ETH, go to any platform that sells cryptocurrency. e.g., Go to Binance and buy with a bank account or other payment methods
  2. Once you’ve bought some ETH, you then install a “Web3” wallet like Metamask. Click Create Wallet, save the secret phrase, create a password, and you’re good to go.
  3. Above your Metamask balance, you’ll see the network (Ethereum Mainnet), account name, and public address. Copy this address to send ETH from Binance (or wherever you bought it).
  4. Return to your balance in Binance, find the option to Withdraw/Send Crypto, and select Ethereum. To fill out the fields, paste the address you copied, select ERC-20 as the network, and complete the security steps.
  5. Once the ETH arrives at your Metamask wallet, you can now visit DEXs like Uniswap.
  6. Click on Launch App to open the Uniswap dApp. Click Connect Wallet and accept permissions from the Metamask pop-up
  7. From the swap drop-down, find the coin you want to exchange for ETH. If it doesn’t show, you’ll have to paste the token contract instead. You can copy that by searching your token on CoinMarketCap. The address appears near the top under “Contracts:” with the ETH logo.
  8. After you select both coins and amounts, click Approve on Metamask to enable the token. Then click Swap to preview the order on Metamask.
  9. The window will show your exchange rate plus network fees (also called gas fees). It’s recommended to always have some ETH in balance for fees. Click Confirm to exchange ETH for the other coin.
  10. You can now see the transaction status on Metamask. Depending on network congestion, you receive the new token in a few minutes or hours.

You just used a dApp built on Ethereum. And there are dApps for so much more: lending, gaming, browsing, betting, even voting.

Why Is Ethereum So Popular?

Have you wondered what makes Ethereum consistently rank in the Top 3 coins for nearly a decade? Part of the answer is the same reason Bitcoin keeps dominating. These projects are first-movers in blockchain currencies and utility.

Knowing that most modern blockchains launched after 2018, Ethereum has spent an extra 3 years in the market and 5 years in development. Because developers want to be in the largest blockchain marketplace, Ethereum has stayed popular. But for how long?

Modern networks are faster and cheaper, which makes them gain users faster than Ethereum. These new blockchains will likely become the new smart-contract leader, whether it’s Ethereum forks, Layer 2s, or competitor networks. Yet, that doesn’t make ETH anything less than a blue-chip project.

Ethereum vs Bitcoin

You may also wonder: If Ethereum is such an old project with more utility, why is it less dominant than Bitcoin? Short answer: they’re very different. Long answer:

  • ETH has a higher max supply of ~120M. Maybe Ether would be pricier than Bitcoin if supply were also 21M, although that would limit its utility. Ethereum’s flexible cap has been increasing every year.
  • Bitcoin is expensive because people treat it like an investment and store of value. Ethereum is a utility token like the oil that fuels machines. It’s not meant to be held but spent on programs unless those apps are yield farming platforms.
  • Bitcoin and Ethereum gain market value differently. For example, security for Bitcoin is more important than efficiency, which justifies proof-of-work. Ethereum has reduced its security by switching to proof-of-stake, but because efficiency increases utility, it exponentially increased its market value.

What sets Ethereum apart is the ecosystem created by the developer community.

What’s the Ethereum Ecosystem?

Ethereum offers the infrastructure for blockchain platforms. The better the infrastructure, the more developers will build on it. This creates a loop where newer platforms add to Ether’s utility.

It’s hard to draw the line of where the Ethereum ecosystem ends because everything is becoming interconnected. Many blockchains were created on Ethereum, so each of their ecosystems is also part of ETH. That includes Ethereum alternative versions (forks like Pulsechain), Layer-2 blockchains (e.g., Polygon), and networks built on Ethereum’s Virtual Machine (EVM) like BNB Chain.

To make it more complex, Ethereum can also interact with incompatible blockchains by using relay chains (PolkaDot), cross-chain networks (Avalanche), and oracles (ChainLink). Popular projects from other blockchains eventually create ERC-20 token versions for more exposure. And if we’re talking of Ethereum DeFi dApps, there might be dozens of liquidity-pool tokens on every exchange.

For a simplified version, the Ethereum ecosystem is:

  • The ETH token for Ethereum’s blockchain
  • Utility tokens from every dApp listed publicly. While it’s mostly ERC-20 tokens, platforms can use different standards based on their purpose (e.g., ERC-721 for NFTs).
  • Ethereum Layer 2 blockchains and their cryptocurrency
  • Ethereum’s off-chain governance via DAOs, online forums, and improvement proposals
  • Validator software services and delegated ETH2 staking providers

If you’re the majority of people (who aren’t developers), the ecosystem is simplified to a handful of dApps. Let’s see the most relatable use cases.

What Are the Use Cases of Ethereum?

3,000 dApps isn’t that much when you realize that most of them are practically identical. There are six clear use cases, the most popular being DeFi services:

DeFi Services

Because Web3 dApps are a transactional Internet layer, most of the development and ETH allocation goes to financial services:

  • Decentralized wallets
  • Multi-signature vaults
  • Yield farming platforms
  • Staking and Lending protocols (e.g., LiquidLoans)
  • Play-to-Earn Game Finance
  • Decentralized Exchanges
  • NFT Marketplaces
  • Betting

The rise of DeFi in 2020 led to a massive price surge in Ethereum. You might think that passive crypto would lead to inflation and lower prices. Instead, ETH increased its floor price because DeFi created new businesses, and people don’t want to sell when they’re earning.


Both the blockchain and DeFi dApps increased liquidity with the creation of stablecoins. Ethereum’s smart contracts allow programming tokens to peg prices to fiat currencies, either with collaterals or supply algorithms. So while investors might be selling Ethereum, they’re still holding Ethereum tokens like USDC, USDL, and DAI.

DeFi platforms soon expanded to stablecoin services, allowing users to:

  • Reduce risk on liquidity pools
  • Reduce fees when buying back ERC-20 tokens
  • Lock tokens in protocols and receive temporary liquidity tokens in exchange
  • Earn from fees and liquidations by contributing to “stability” pools

Ironically, the next use case is the opposite of stablecoins.


NFTs are non-fungible ERC-721 tokens that can only be traded for ERC-20 tokens or ETH. Because there can only be one, they’re linked to digital assets and considered collectibles. They’re illiquid assets that only sell when collectors find them valuable, which makes them volatile and speculative.

By now there might be more NFTs than tokens. These marketplaces have been around since 2017, even on Solana. But because Ethereum has the largest ecosystem, it became the first to popularize them by 2021 (especially on Opensea).

As a new exchange means, NFTs have their own use cases, including digital art, domain tokenization, and in-game assets.


Decentralized Autonomous Organizations are free-to-join companies with flat hierarchies. These can both be off-chain (for informal community discussions) and on-chain (for voting decisions via staking and randomness). There’s no central authority, which in theory gives all users the opportunity to make governance decisions.

Some believe that DAOs make platforms better, some believe there shouldn’t be any governance. They’re controversial because:

  • The largest contributors have the most voting influence. Eventually, they dominate the Governance and set rules that don’t benefit the whole.
  • When there are uncapped staking rewards, these contributors earn faster than smaller ones. Once a user has more power than 50% of the network, you can’t guarantee decentralization or security.
  • DAOs have unclear legal definitions. When things go wrong, no one is held liable for people’s losses.

The most successful one is MakerDAO.

Human-Readable Addresses

Human-readable addresses are easier to remember and useful for creating digital identities. We use usernames instead of IDs, domains instead of IP addresses, and seed phrases instead of numbers. Now, it’s possible to replace your public wallet address with a custom name using the Ethereum Name Service (ENS).

You can buy, say, Satoshi.eth and link it to your address just like NFTs are linked to pictures. You can send crypto to Satoshi.eth instead of pasting the full address. Depending on the name provider, you might sell, rent, or use these names on websites. We could also use them for hiding public addresses for privacy.

Enhanced Web Browsers

An example of Ethereum applied to browsing is the Brave browser. Brave has an ERC-20 token called Basic Attention Token (BAT), which offers a different approach to digital advertising and privacy. Users earn BAT for watching non-intrusive ads, which they can then cash out, stake, or donate to support their favorite creators.

Brave browser distributes 70% of ad revenue among users in BAT. Users also like this platform because it’s light, efficient, and has built-in blockers for privacy-invasive ads and trackers.

The History of Ethereum (2013 – 2023)

Often when projects become successful, they branch out into other spaces: NFTs, DeFi, play-to-earn, metaverse. These innovations broaden Ethereum’s utility but also its definition, which makes it more confusing for beginners. To understand where all these come from, it helps to go back and see where Ethereum started (and why it even exists):

The Rise Of Ethereum (2013 – 2020)

Vitalik Buterin might be the most famous person in crypto besides Satoshi. He founded Ethereum in 2013 with Gavin Wood, Charles Hoskinson, and Joseph Lubin, who later founded PolkaDot, Cardano, and Consensys respectively. But it didn’t happen overnight: the idea was 2-4 years in the making.

Vitalik first joined crypto when co-founding the Bitcoin magazine after the coin’s launch in 2011. He then realized Bitcoin had limited use and wondered “what else can cryptocurrencies be used for?”. Then, they developed throughout 2013, raised $16M in Ethereum’s ICO ($0.31 per coin), and launched in July 2015.

It was a proof-of-work blockchain with a max supply of 60M ETH (now 120M+). One update after another, Ethereum was becoming more accessible and steadily increasing traffic. Which led to the problems we’re dealing with today.

Ethereum isn’t scalable enough and it’s immutable. The simplest way to improve the blockchain is by creating alternate versions (forks). Ethereum has seen 100+ forks since 2015, such as Ice Age (2015), the famous DAO fork (which created Ethereum Classic, ETC), and the most recent one,Pulsechain.

In an attempt to solve the constant scalability issues, the Ethereum 2.0. development began.

Reinventing Blockchain: What Is Ethereum 2.0.? (2020 – 2022)

Ethereum 2.0. aims to replace the blockchain with a proof-of-stake mechanism. This saves 99% of energy consumption while multiplying network speed and scalability. It’s a multi-stage upgrade called Serenity, and Phase 0 (Beacon Chain) was completed in December 2020.

Not only did this introduce Ethereum staking, but it also sped up the rise of DeFi. Through different platforms, ETH achieved a Total Value Locked (TVL) of $10B+ at launch, $111.43B at its peak, and a current $40B average. Before December’s update, ETH averaged $300 and $15B in daily trading volume. It immediately increased its floor price to $1200+, crossing $3,500 four times (with a $4,891.70 all-time high).

Up until 2022, proof-of-work and proof-of-stake Ethereum have coexisted. ETH 2.0. officially starts after the end of PoW, which takes place during The Merge. It’s a very anticipated transition that was delayed to September 2022. Traders also started preparing, which pushes ETH’s price above $1,800 amid this bear market.

Coming Soon: The Ethereum Roadmap (2022 – ???)

According to the roadmap, all of Serenity’s stages should be finished by 2022. We’ve just seen Phase in late 2020, and Phase 1 won’t come until 2023-2024. Expect delays for future announcements.

Ethereum 2.0. consists of two processes:

  • The Serenity Roadmap, which starts with Beacon Chain and follows with Sharded Chains, Ethereum-flavored Web Assembly (eWASM), and undefined improvements for Stage 3. Judging by deadlines, Ethereum will reach the latest stages by 2025.
  • Parallel Upgrades, which include The Merge (late 2022), Surge, Verge, Purge, and Splurge. Parallel means they have dependencies, start all around the same time, and end at different ones (e.g., Stage 4 might end before Stage 3). These technical updates aim to replace PoW, spread computational loads, improve data storage, and reduce validator hardware requirements, plus miscellaneous tweaks.

While it’s not easy to explain all stages, it’s clear there are lots of upgrades to support ETH’s long-term market value.

Problems With Ethereum

If you wonder why Ethereum has to be so complicated, it’s because there’s no easy solution for scalability on large networks. Replacing old methods is hard because blockchains are immutable, and thousands of dApps rely on that infrastructure. Because a lot of money is at stake, it takes a long time to bring new versions and test their security.

If Ethereum had no problems, there wouldn’t be as many alternative blockchains and forks. But most issues would go away if Ethereum solved just this one:

Low Scalability

While other blockchains are more scalable, they don’t nearly have the network volume of Ethereum. The blockchain trilemma limits the ability for blockchains to fulfill ALL the necessary features for functionality. For a better perspective:

  • Bitcoin has 1.5x to 2x more daily volume and roughly 300k transactions per day
  • Ethereum crossed 300K in 2017. Today’s average transaction number is 1.2M, not including the ecosystem.
  • Bitcoin has a block time of 10 minutes. Scalability should be a bigger problem than Ethereum’s, but it’s not.
  • Ethereum confirms blocks in <15s (or 3 seconds after PulseChain) and also shares its load with multiple layer-2 blockchains. It barely keeps up with the developer’s needs.

It’s not problematic for Bitcoin because, for most people, it’s a long-time investment made in a few purchases. But smart contracts use Ether every day. Some use cases (like play-to-earn) might sign hundreds of transactions per minute, and there are over 3,000 dApps.

High Gas Fees

To solve scalability, there are long and short-term solutions: to increase supply with technology or reduce demand with higher prices. Sometimes you need over $100 to do anything with ERC-20 tokens, and network fees scale with your amount. If you don’t have enough or don’t want to pay them, you essentially lock your funds in the Mainnet.

If you pay $100 fees, many services become unusable:

  • Trading below $1000 on DEXs
  • Buying $500 NFTs or claiming free ones
  • Withdrawing yield farming rewards

It encourages people to hold or trade less. And because fewer peopleuseit, ETH prices fall. Even though today’s fees are far lower, still:

  • Network congestion sometimes causes spikes
  • Fees aren’t below $0.10 as in modern blockchains

High Entry Barrier

There are some misconceptions about what it’s like to develop on Ethereum. It might seem that because it’s so popular, building on it must be easy or available to everyone. And that’s not wrong, because developers have more tools now than in 2015.

That doesn’t mean Ethereum is easy to get into:

  • The Solidity programming language might be easy. But complexity comes when trying to reduce fees or remove unintended code behavior.
  • Blockchain development isn’t recommended unless you already know some programming (e.g., JavaScript).
  • It requires some technical knowledge to become a full node. To become a validator, you also need to stake 32 ETH.

For these reasons, it took ~7 years for Ethereum to reach 3,000 dApps, most of which appeared around 2020. Modern blockchains like BNB Chain crossed 1,200 in ~2 years and might outnumber Ethereum in another few. After all, blockchain businesses need efficient networks, not just large marketplaces.

Top Projects On Ethereum

It’s hard to keep track of the hundreds of different apps. But unless you’re a developer, you don’t need that many. Only a wallet, exchange (or NFT marketplace if you own any), and an interest-earning platform.

As a starter, you can’t go wrong with these:


Metamask is the most used WEB3 wallet for mobile and browsers. It can hold hundreds of tokens and NFTs from multiple networks like Ethereum. Web3 wallets are worldwide available and a must-have, as you can’t connect to dApps without one.


Uniswap is the main decentralized exchange for ERC-20 tokens. It has a $6.5B TVL, $5B of daily volume, and +100K monthly users. This allows traders to swap almost any new token at fair prices and high speed.


Opensea is the largest NFT marketplace on Ethereum and the go-to platform for collectors. You can discover thousands of collections, buy NFTs, or create your own ones for free*. Along with Metamask and Uniswap, Opensea ranks in the Top 3 dApps with a monthly average of 300K new users and a $500M trading volume.


PulseChain is the first Ethereum fork that copies every token, user account, and smart contract. This allows users to switch to a more efficient network without losing or having to transfer assets. They also get free copies of all assets held in Ethereum.

Pulsechain aims to decrease block time to 3s while reducing fees and sharing network load.

Ethereum in a Nutshell

Ethereum is the digital fuel of blockchain. Developers use it to build tools for each other and create a decentralized Internet. While DeFi is the most successful use case, smart contracts might eventually reach every sector, starting with gaming, social media, governance, and more.

As the most used developer blockchain, Ethereum has the most scalability limitations. Developers can solve this with layer-2 blockchains like Polygon, forks like PulseChain, and upgrades like Serenity. The question is: Can Ethereum regain its past glory before another project overthrows it?

Even though other blockchains are faster or cheaper, they’re far more centralized than Ethereum (and Avalanche). Ethereum doesn’t have that much competition if you count decentralization as the no.1 feature. It’s the essence of blockchain technology.

Scalability problems are temporary. Ethereum has stood the test of time, and it will continue to do so for many years to come.



What Is an Ethereum Wallet?

The Ethereum wallet is a dApp built on Ethereum that allows you to send funds and manage a balance on the ERC-20 network. Most Web3 wallets support it by default because they’re EVM compatible. You know it’s an Ethereum wallet when you can connect it to Ethereum dApps.

Can I Buy ETH Outside the Ethereum Blockchain?

If you’re using custodial wallets or centralized exchanges, Ethereum will be available regardless of the network. Out of all the mobile apps, you can use to buy crypto, almost all offer Ethereum. You can indirectly buy Ethereum on other networks via pegged tokens like Wrapped Ether (1 WETH = ~1 ETH).

How High Will Ethereum Go?

Because Ethereum has no maximum supply, there might be no price limit. The problems that come with that are token inflation, lower scalability, or higher network fees. If Ethereum can solve those problems before other competitors do, it’s reasonable to expect a $10,000+ Ethereum within a few years.

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Disclaimer:Please note that nothing on this website constitutes financial advice. Whilst every effort has been made to ensure that the information provided on this website is accurate, individuals must not rely on this information to make a financial or investment decision. Before making any decision, we strongly recommend you consult a qualified professional who should take into account your specific investment objectives, financial situation and individual needs.

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Max is a European based crypto specialist, marketer, and all-around writer. He brings an original and practical approach for timeless blockchain knowledge such as: in-depth guides on crypto 101, blockchain analysis, dApp reviews, and DeFi risk management. Max also wrote for news outlets, saas entrepreneurs, crypto exchanges, fintech B2B agencies, Metaverse game studios, trading coaches, and Web3 leaders like Enjin.

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