Created by Vitalik Buterin, Ethereum is a cryptocurrency that allows smart contracts and decentralized applications (dapps) to operate on its network.

Ethereum, the second-biggest cryptocurrency after Bitcoin, is a blockchain-powered platform for creating decentralized applications (dapps).

Where Bitcoin was designed as a currency and a store of value, Ethereum is a decentralized network for running smart contracts—code that runs on a peer-to-peer network and is verified by Ethereum's blockchain.

The idea is to create applications that are secure, transparent and censorship-resistant, since they don't rely on centralized platforms.

Ethereum has been used as the underlying software layer for everything from decentralized finance (DeFi) applications, to "play-to-earn" games using non-fungible tokens (NFTs).

Ultimately, many believe that Ethereum could underpin a re-imagining of how the internet works, dubbed "Web3," in which control of the internet is disintermediated away from big companies such as Amazon and Facebook.

Our super simple guide will help you understand Ethereum’s big idea and the role Ether plays in that vision.

What is Ethereum?

If Bitcoin is the floppy disk of blockchain, Ethereum is the CD: it’s an evolution of the technology. What Bitcoin proved was that a currency could be created by a community, and sent and received by anyone with a cryptocurrency wallet. It also solved the rather tricky double spending issue.

What Ethereum has proven, however, is that blockchain can provide so much more than just a store of value. It can be used to organize people, ideas, companies, money, services, you name it. If anything can be written into code and used by a smart contact, it can be built on Ethereum.

This simple idea has prompted people to use Ethereum to manage property and shares, create social networks and financial applications, develop games, and even build a new nation.

Ether is the cryptocurrency Ethereum uses to build and maintain its network. Ether’s sub-units, Gwei and Wei, are named after Wei Dai, an early pioneer of cryptocurrencies.

Bitcoin (BTC) is a peer-to-peer cryptocurrency. Think of it as a digital token. You can't physically touch or hold Bitcoins, and all Bitcoin transactions are logged on a public, decentralized, immutable ledger.

The first official purchase using Bitcoin was for pizza in May 2010. Two pizzas from Papa John’s were exchanged for 10,000 BTC. May 22 is now known as Bitcoin Pizza Day.

Many found Bitcoin appealing because it was a new way to pay for goods and services that didn't rely on a centralized bank, government, or credit provider. These days, there are ongoing debates over whether Bitcoin really functions as everyday money, or more as a store of value (aka "digital gold").