[ETH]What is Ethereum? (2025-09-13 Extended)

⚠️ This is an encyclopedic, informational article that is not intended to be an investment recommendation. Investing in cryptocurrencies involves high risk and you are solely responsible for any losses. The content herein is not a substitute for personal investment judgment.

The symbol of Ethereum and an image that says Ethereum

Table of Contents

1) What is Ethereum?

Ethereumis a second-generation blockchain platform founded in 2015 by Vitalik Buterin, who revolutionized the idea of "running programs on top of a blockchain". If Bitcoin is "digital gold," Ethereum is more like a giant distributed computer that the whole world uses together. Anyone can put code on it to create smart contracts that automatically execute when conditions are met, and the decentralized apps (DApps) that run on top of it are transforming finance, art, gaming, and social.

Ethereum's native currency is Ether (ETH). ETH pays the fees (=Gas) for running code or sending transactions on the network, and is also used to reward validators and for staking.

2) How did we get here: a backstory and roadmap at a glance

Problem statementVitalik saw the limitation that "it's hard to implement complex contracts in Bitcoin scripts" and designed the chain with an EVM (universal execution environment).
Steps to upgrade
- In 2022, **The Merge**: transition from Proof of Work (PoW) to Proof of Stake (PoS). Power usage is dramatically reduced, and the foundation for the subsequent scaling roadmap is laid.
- April 2023 **Shanghai/Shapella**: Staking ETH **withdrawal** becomes possible, lowering barriers to participation for individuals and institutions. ([Coindesk][1])
- March 2024, **Dencun**: **EIP-4844 (Proto-Danksharding)** introduces L2-used **Blob data space**, paving the way for significantly lower rollup fees. ([Ethereum Foundation Blog][2])
- May 2025 **Pectra**: 'Prague + Electra' merged hard fork. Significant UX and wallet usability changes were implemented on the mainnet, including **EIP-7702 (Bridge to Smart Accounts)**. Operational efficiency improvements were also made, including raising some validator parameters (e.g., staking limits). ([QuickNode][3])

Recap: **The Mudge → Chappella → Denkun → Pectra**, a three-year cascade of upgrades that achieved the following incremental goals in turn: "Energy Efficiency - Exits (Withdrawals) - L2 Cost Reduction - Wallet UX Improvements." The next phase of upgrades will see better data flow (DA-PeerDAS) and lighter state management (Buckle Tree/EOF, etc.). ([Crypto APIs][4])

3) Smart Contracts - Token Standards - DApps

Smart contractsWrite a contract in code that "automatically executes when a condition is met". The deposit-loan-derivatives-game logic rolls without a central server.
Token standards:
- ERC-20: The base for most memecoin-utility tokens.
- ERC-721: **NFT** standard. Digital art, collectibles, and game items on-chain.
- (expanded) ERC-4337 based on Account abstraction (AA) As wallets proliferate, Web2-grade UX like "recover wallet, session key, pay for gas" becomes more common. Pectra's **EIP-7702** is a step in the right direction, allowing smart account functionality to be embedded into existing external accounts (EOAs) for a smoother UX without "changing addresses." ([Safe][5])

4) Consensus and Security: PoS Staking in a Nutshell

**Proof of Stake (PoS): validators with a stake of 32 ETH or more randomly propose blocks, which are then signed and confirmed by the majority. Electricity consumption is dramatically lower than PoW.
**Post-Chapella, staking liquidity has increased, making it easier for individuals to enter the market with Liquid Staking (LST) tokens (e.g. stETH, rETH, etc.) ([Coindesk][1])
**Restaking: The **EigenLayer** is a typical example. The structure of sharing/renting the security of an **External Module (AVS)** by entrusting already staked ETH (or LST) as additional collateral has emerged in 2024\~25. Along with the advantage of recycling security, there is also a discussion of **risk transfer (slashing-interdependence)**. ([EigenCloud Blog][6])

5) Scaling strategy: L1 is robust, L2 is fast

Ethereum took a rollup-centric strategy of "**L1 is responsible for secure, decentralized consensus** and **processing is done in bulk on L2**".

After **Denkun (EIP-4844)**, L2 could cheaply upload proofs to L1 as **block data**. This change paved the way for **structurally lower fees** for rollups like Avitrum, Optimism, and Base, and led to an explosion of L2 usage in 2025. ([Ethereum Foundation Blog][2])
**Base: A rollup of the OP stack created by Coinbase. DAU-per-day transactions hit an all-time high during 2025, with fees often dropping below a few cents. Corporate-creator campaigns (on-chain summers, etc.) and commercial payment integrations act as a gateway to **new mass adoption**. ([BitPinas][7])
**Avitrum/Optimism: maintains its lead in TVL-activity, and the Optimism superchain is expanding into an ecosystem that loosely binds multiple OP stack chains. This includes the **Isthmus** hard fork, which quickly absorbed core functionality shortly after Pactra. ([optimism.io][8])

One-line summary: **Denkun → L2 fee structure improvement → L2 democratization** became a full-fledged reality in 2025.

6) 2024\~2025 Changelog: Denkun and Pectra, what's new?

Dencun (2024-03-13)
- **EIP-4844 (Proto-Darksharding)**: Introduced blobs for rolled-up data → lower L2 data cost, higher throughput.
- The first major fork to implement the "L2 fast, L1 hard" philosophy in code. ([Ethereum Foundation Blog][2])
Pectra (2025-05-07)
- With **EIP-7702**, we added **EOA→Smart Account** functionality to significantly improve the wallet UX (social recovery, session keys, gas payment, batch signatures, etc.)
- Validator operational efficiency - improvements in **network governance/operational quality** such as higher limits.
- Core development has finalized **mainnet deployment** by catching errors on multiple testnets (Holesky/Sepolia issues → Hoodie testnet). ([QuickNode][3])

7) DeFi-NFT-DAO: 2025 Watch Points

DeFi (DeFi): Falling roll-up fees are reviving low-volume, high-frequency trading, and real-world assets (RWA), yielding stables, and derivatives are taking center stage.
NFTs: Transaction volumes are lower than previous highs, but creator royalties, on-chain tickets, and game items are realigning as **sustainable utilities**.
DAO: Vault management - voting becomes more mobile wallet friendly, experimentation with **small community DAOs** is alive and well (proliferation of Pectra and AA wallets helps a lot)

8) Regulatory-Financialization: Spot Ether ETFand mainstreaming

US Spot Ether ETFactually **started trading** in July 2024 (BlackRock, Fidelity, VanEck, etc.), with liquidity and product lineup expanding in 2025, meaning there is a clearer path to entry for long-term funds by providing an **institutional, compliant on-ramp**. However, the issue of **non-staking** within ETFs remains, and the challenge is how much the ETFs reflect the "ETH=cashflow asset" narrative. ([Reuters][9])
Flow in 2025Ether ETFs have seen some of the strongest months of net inflows since the summer, with signs of a "BTC bias → ETH diversification" (multiple reports of strong inflows on a monthly aggregate basis). The key point is that **a conduit for traditional ETF flows to reach the Ethereum ecosystem** has been established. ([Cointelegraph][10])

9) Competitive landscape: Solana-Other L1s, and "The Routinization of Multichains."

Solanaoffers a strong alternative in speed and fees, Ethereum is an L2+Modular Architecturein the response.
Multichain UXis leveled, and users are more likely to judge by "which app/token" than "which chain". Ethereum aims to be the center of interoperability as a hub for standards, developers, and capital.

10) Risk checklist (important)

Gas bill spikes - congestion: Events/new token launches can cause temporary congestion, even on L2.
MEV - Censorship Controversy: Builder/Relay Focus - Censorship resistance issues continue, PBS(proponent-builder separation) between settling and Decentralized Sequencer Discussion matters.
Re-staking riskAs good as security recycling is Slashing to governance transitions The stakes are high. Parameter-insurance-distribution is key. ([EigenCloud Blog][6])
Smart contract bugsEven if it's open source Auditing - Bug Bounties Without it, it's dangerous.
Regulatory changesCountry-specific regulations vary, including securitization, KYC/AML, taxation, etc, ETF-Stablecoin Legislation Sensitive to change.

11) 2025 Timeline Highlights (Update Summary)

2024-03-13: Denkun Mainnet activation (EIP-4844) → Improved L2 data cost structure. ([Ethereum Foundation Blog][2])
2025-05-07: Pectra Mainnet activation (EIP-7702, etc.) → **Smart Account era in full swing**. ([QuickNode][3])
After 2024-07: **U.S. spot ether ETF starts trading**, repeats inflows in 2025. ([Reuters][9])
L2 popularization: Base-Abitrum-Optimism metrics expanded, fees lowered, and campaigns **increase regular user influx**. ([BitPinas][7])

12) What Ethereum is Changing (Case Study)

Micropayments: Enable creator patronage, in-game purchases, and ticket validation for **cents** (especially for L2). ([Ethereum Foundation Blog][2])
Financial infrastructureDecentralized exchanges - deposits/loans/derivatives are automatically operated by **smart contracts**.
On-chain identity-logins: Accelerate the "wallet=login" era with social recovery, session keys, passkeys, and more (EIP-7702/AA). ([Alchemy][11])
Real-world assets (RWA): Payment, settlement, and collateralization gain immediacy and transparency by tokenizing receivables, transmission rights, and claims.
Public data - audit: Increased auditability and book transparency when recording some data (statistics, receipts) on-chain.

13) Frequently asked questions (FAQ)

Q. Who runs Ethereum?
→ Driven by **open source rules** and the consensus of the global validator-client-developer community, not by any particular company.

Q. Why are there fees?
→ On-chain computing is a resource. Gas is an **economic safeguard** to prevent abuse and maintain security. L2 proliferation is driving the average cost down dramatically. ([Ethereum Foundation Blog][2])

Q. If I buy ETH, does it earn interest like a dividend?
→ **Staking** can earn rewards, but the inclusion of staking within an ETF varies by product (US spot ETH ETFs do not include staking by default). ([Reuters][9])

Q. What changes will I see immediately after Pectra?
→ Wallet experience is smoother (recovery-batch-signature-gas-payment, etc.), and combined with L2, the **threshold to use the app** is lower. ([QuickNode][3])

14) Author's Eye ✍️ (your own space)

Ethereum in 2025 has shifted its focus from scaling to usability, and I'd like to continue exploring with you, the reader, where the balance lies between achieving mass usability without losing the decentralization philosophy.

15) One-page summaries

DefinitionA **distributed computer** + **smart contract platform** for the world to use together.
Currency: **ETH** (gas-secure-staking).
Core upgrade chronology: The Merge (2022) → Chappella (2023, withdrawn) → **Denkun (2024, EIP-4844)** → **Pectra (2025, EIP-7702)**. ([Ethereum Foundation Blog][2])
Strategies: L1 is stable-consensus, **L2 (rollup)** is mass processing. L2 mass adoption is evident in 2025. ([Ethereum Foundation Blog][2])
Financialization: **Spot Ether ETF (US)** Repeats inflow expansion phase after opening. Legal on-ramp settlement of long-term funds. ([Reuters][9])
Your next challenge: MEV - Censorship - Decentralized Sequencers - Re-Staking Risk Management - Buckletree/PeerDAS and more **Extensions**.

Appendix) Points to dig deeper (optional)

Wallet UX in action: Wallets without seed phrases, social recovery procedure template. ([Alchemy][11])
Re-staking checklist: Slashing conditions, AVS correlation, limit-insurance-distribution. ([EigenCloud Blog][6])
L2 selection guide: Fee-Congestion-Bridge-Security Assumptions, **Base/Abitrm/Optimism** vs. ([BitPinas][7])

Updated as of: 2025-09-13 (Asia/Seoul).

[1]: https://www.coindesk.com/tech/2023/04/12/ethereums-shanghai-upgrade-activates-starting-new-era-of-staking-withdrawals?utm_source=chatgpt.com "Ethereum's Shanghai Upgrade Is Complete, Starting New ..."

[2]: https://blog.ethereum.org/2024/02/27/dencun-mainnet-announcement?utm_source=chatgpt.com "Dencun Mainnet Announcement - Ethereum Foundation Blog"

[3]: https://www.quicknode.com/guides/ethereum-development/ethereum-upgrades/pectra-upgrade?utm_source=chatgpt.com "Ethereum Pectra Upgrade: Key Improvements and Impact"

[4]: https://cryptoapis.io/blog/319-ethereum-scaling-in-2025-inside-the-fusaka-upgrade?utm_source=chatgpt.com "Ethereum Scaling in 2025: Inside the Fusaka Upgrade"

[5]: https://safe.global/blog/eip-7702-smart-accounts-ethereum-pectra-upgrade?utm_source=chatgpt.com "EIP-7702: A Win for Smart Accounts in Ethereum's Pectra ..."

[6]: "EigenLayer 2024 Year in Review: Building the Future of Open ..." https://blog.eigencloud.xyz/eigenlayer-2024/?utm_source=chatgpt.com "EigenLayer 2024 Year in Review: Building the Future of Open ..."

[7]: https://bitpinas.com/cryptocurrency/live-crypto-updates-aug-11-2025/?utm_source=chatgpt.com "Base Marks Second Anniversary With Record Usage | Live ..."

[8]: https://www.optimism.io/blog/optimism-brings-ethereum-s-pectra-upgrade-to-the-superchain?utm_source=chatgpt.com "Optimism Brings Ethereum's Pectra Upgrade to the ..."

[9]: https://www.reuters.com/technology/us-sec-approves-first-spot-ether-etfs-start-trading-tuesday-2024-07-22/?utm_source=chatgpt.com "US SEC approves first spot ether ETFs to start trading Tuesday"

[10]: https://cointelegraph.com/news/spot-ether-etfs-3b-august-inflows-eth-yearly-high?utm_source=chatgpt.com "Spot Ether ETFs rack up $3B in August as ETH hits yearly ..."

[11]: https://www.alchemy.com/blog/eip-7702-ethereum-pectra-hardfork?utm_source=chatgpt.com "Prepare for EIP-7702 and the Ethereum Pectra Upgrade"

[ETH] What is Ethereum? (2025-09-13 expanded)