Introduction to Ethereum

Ethereum (ETH) is the second-largest cryptocurrency by market capitalization and the most widely used blockchain platform for decentralized applications (dApps). It was proposed by Vitalik Buterin in 2013 and launched in 2015. Ethereum's main innovation was its support for smart contracts—self-executing programs that run on the blockchain.

Ethereum allows developers to create dApps, tokens (ERC-20, ERC-721), decentralized finance (DeFi) protocols, NFTs, and more. It helped usher in Web3, giving rise to entire ecosystems of decentralized services and digital economies.

Ethereum Supply and Staking

• Total Supply (2025): ~120 million ETH (no fixed cap)

• Consensus Mechanism: Proof-of-Stake (PoS) since The Merge (Sept 2022)

• Validators: Stake 32 ETH to validate transactions and secure the network

• ETH Burn Mechanism: Introduced in EIP-1559, a portion of gas fees is permanently burned

Unlike Bitcoin, Ethereum has no hard supply cap, though it is sometimes deflationary due to ETH burn exceeding issuance.

Transaction Speed and Costs

• Block Time: ~12 seconds

• Transactions per Second (Base Layer): ~15–30 TPS

• Average Gas Fees (2024): $0.50 to $60+ depending on congestion

• Scalability Solution: Relies heavily on Layer 2 rollups (Arbitrum, Optimism, zkSync)

Ethereum is faster than Bitcoin but still expensive and congested during peak usage, making it reliant on scaling solutions.

Technical Characteristics

• Blockchain Type: Proof-of-Stake

• Virtual Machine: Ethereum Virtual Machine (EVM)

• Smart Contracts: Native support

• Token Standards: ERC-20 (fungible), ERC-721/1155 (NFTs)

• Upgrades: Governed by EIPs (Ethereum Improvement Proposals)

• Ecosystem: Largest developer base in crypto

Limitations and Emerging Concerns

1. No Supply Cap: Ethereum has no maximum supply, which can be concerning for long-term scarcity-based valuation.

2. High Transaction Fees: Despite upgrades like EIP-1559, gas fees often spike during heavy usage.

3. Complex User Experience: Layer 2s add friction and confusion for average users.

4. Validator Centralization Risk: Staking requires 32 ETH or use of staking pools, many of which are run by centralized services.

5. Security & Exploits: As the home of DeFi, Ethereum is also a target-rich environment for exploits and scams.

6. Technical Complexity: The network has grown so complex that even core developers admit it’s difficult to audit or simplify.

Conclusion

Ethereum remains a foundational platform for Web3, powering innovation in DeFi, NFTs, DAOs, and digital identity. Its smart contract functionality and developer adoption are unmatched.

However, it faces ongoing challenges: high fees, scalability dependence on Layer 2s, technical complexity, and centralization risk from staking pools.

While Ethereum will likely remain dominant in the near term, its long-term success depends on simplifying its architecture, reducing costs, and preserving decentralization as competition increases.