What Is Ethereum? A Beginner’s Guide to ETH
A clear beginner’s guide to Ethereum: what it is, how Ether and smart contracts work, how it differs from Bitcoin, and the risks to understand.
Ethereum is, alongside Bitcoin, one of the best-known crypto projects, but it’s often described in a confusing way, partly because the name refers to two related things. Ethereum is the network. Ether (ETH) is the coin that runs on it. Once that distinction is clear, the rest follows naturally.
This guide explains what Ethereum is in plain language: how the network works, what Ether and smart contracts are, how it differs from Bitcoin, and what’s worth understanding before you get involved.
What is Ethereum?
Ethereum is a decentralised network. Like Bitcoin, it runs on computers around the world rather than through a central authority. But where Bitcoin was designed primarily as digital money, Ethereum was designed to be programmable: a platform other applications can be built on. It launched in 2015.
The network’s own cryptocurrency is Ether, with the ticker ETH. Ether is what you use to pay for activity on the network, and it’s the asset most people mean when they talk about “buying Ethereum”. Strictly, you’re buying Ether, the coin that runs on the Ethereum network. For a deeper technical introduction, the community-maintained ethereum.org is a good next step.
Smart contracts: the key idea
The thing that sets Ethereum apart is the smart contract. A smart contract is a program that runs on the Ethereum network and executes automatically when its conditions are met, without needing a middleman to enforce it.
That sounds abstract, but the consequence is large. Ethereum can host applications, not just transactions. A smart contract can hold and move funds, run the logic of an application, and do so in a way that anyone can verify. This is the foundation everything else on Ethereum is built on.
How Ethereum stays secure: proof of stake
Bitcoin is secured by miners using computing power. Ethereum works differently. Since September 2022, it has used a system called proof of stake. Instead of miners, validators lock up Ether as a deposit and are rewarded for confirming transactions honestly. If they act dishonestly, they can lose part of that deposit. This is also where staking comes from.
What you can do on Ethereum
Because Ethereum is programmable, a whole ecosystem has grown on top of it. The most significant part is decentralised finance: financial applications like lending, borrowing and trading that run on smart contracts rather than through banks.
Beyond that, Ethereum hosts a wide range of applications and tokens, including many stablecoins. The common thread is that Ethereum acts as a base layer other things are built on, which is why it’s often described as a platform rather than just a currency.
Ethereum vs Bitcoin
The clearest way to understand Ethereum is to compare it with how Bitcoin works. Both are decentralised networks secured by their participants, and both have a native coin. The difference is purpose.
Bitcoin is designed primarily as a store of value and a form of digital money, deliberately simple and focused. Ethereum is designed as a programmable platform, with Ether powering the applications built on it. A useful shorthand: Bitcoin is closer to digital gold, while Ethereum is closer to digital infrastructure that other things run on. They solve different problems, which is why both exist rather than one replacing the other.
How to hold Ether
Like any cryptoasset, Ether isn’t stored in a wallet itself. Your crypto wallet holds the keys that control it. The same principle applies as with any coin: whoever controls the private keys controls the Ether.
You can buy Ether in CHF on Eti-Tech. Eti-Tech is non-custodial, which means we don’t hold your crypto for you. Our guide to crypto custody explains what that means in practice.
What to understand before you start
Ethereum is powerful, but it carries the same broad risks as any crypto, plus a few of its own. The price of Ether can move sharply. Network fees, often called “gas”, can rise when the network is busy, which can make activity unexpectedly expensive at peak times. And because the ecosystem is large and fast-moving, it attracts scams.
That last point is worth taking seriously. Many losses on Ethereum come from malicious smart contracts or fake applications rather than from the technology failing. Before connecting a wallet or approving a transaction, it pays to know how to spot a crypto scam. Caution is the main skill that keeps people safe.
In Switzerland, Ether you hold is generally part of your taxable wealth, and staking rewards may be taxable. Our guide to crypto taxes in Switzerland explains the basics.
What to remember
Ethereum is a decentralised, programmable network, and Ether (ETH) is the coin that powers it. Its defining feature is the smart contract, which lets it host applications, most notably decentralised finance, rather than only process payments. It complements Bitcoin rather than competing directly with it: different designs for different jobs.
If you’re ready to start, how to buy Bitcoin in Switzerland walks through the process, and the same steps apply to Ether. Our Registration page explains Eti-Tech AG’s membership of VQF, a FINMA-recognised self-regulatory organisation and one of the largest in Switzerland.
Official sources
Ethereum.org: What is Ethereum?
Ethereum.org: Proof-of-stake (PoS)
FINMA: Guidelines on token types (payment, utility and asset tokens)
VQF: The self-regulatory organisation recognised and supervised by FINMA
Last reviewed: 20 October 2026. This article provides general information, not investment advice.
FAQ
- What is Ethereum in simple terms?
- Ethereum is a decentralised, programmable network. Its native cryptocurrency is called Ether (ETH). Where Bitcoin is mainly digital money, Ethereum is a platform that applications can be built on.
- What is the difference between Ethereum and Ether?
- Ethereum is the network; Ether (ETH) is the cryptocurrency that runs on it. When people talk about “buying Ethereum”, they’re usually buying Ether.
- What is a smart contract?
- A smart contract is a program that runs on the Ethereum network and executes automatically when its conditions are met, without needing a middleman. It’s what lets Ethereum host applications.
- How is Ethereum different from Bitcoin?
- Bitcoin is designed mainly as digital money and a store of value. Ethereum is designed as a programmable platform, with Ether powering the applications built on it. They serve different purposes.
- Is Ethereum a good investment?
- This article doesn’t give investment advice. Ether is a volatile asset that can rise or fall in value, and it carries the usual crypto risks plus network-specific ones. Anyone considering it should understand those risks and their own situation.
Related reading
Crypto-assets involve significant risk. Their value can rise or fall, and you may lose part or all of your investment. Network fees, smart-contract risk, and irreversible transactions may apply. This article is for general informational purposes only and does not constitute investment advice, legal advice, an offer, or a solicitation. Eti-Tech AG is a VQF SRO member and a Swiss VASP.
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