Ethereum & The World Computer

Bitcoin proved you could have decentralized money. Ethereum asked: what if you could decentralize everything else too?

Bitcoin's Limitation

Bitcoin is brilliant at one thing: transferring value. Its scripting language is intentionally limited — you can create basic conditions for spending coins, but you can't build complex logic on top of it.

In 2013, a 19-year-old named Vitalik Buterin proposed something different: a blockchain with a built-in programming language. A platform where anyone could deploy arbitrary code that runs exactly as written, with no downtime and no censorship.

He called it Ethereum — "the world computer."

Accounts, Not UTXOs

Unlike Bitcoin's UTXO model, Ethereum uses an account-based model — more like a traditional bank account. There are two types:

• Externally Owned Accounts (EOAs) — controlled by a private key. This is you — a human with a wallet.
• Contract Accounts — controlled by code. These are smart contracts — programs that live on the blockchain.

Every account has a balance (in ETH), a nonce (transaction counter), and optionally, code and storage (for contracts).

Smart Contracts: Code as Law

A smart contract is just a program stored on the blockchain. Once deployed, it runs exactly as written — no one can change it (well, unless you programmed in an upgrade mechanism).

Some examples of what smart contracts can do:

• Token creation — define your own cryptocurrency in 50 lines of code
• Decentralized exchanges — swap tokens without a middleman
• Lending protocols — borrow and lend crypto with automatic liquidation
• NFTs — prove ownership of unique digital items
• DAOs — organizations governed by code and token-holder votes

Think of a smart contract like a vending machine: you put in money, follow the rules, and the machine executes the deal automatically. No negotiation, no trust needed.

The EVM: Ethereum's Engine

The Ethereum Virtual Machine (EVM) is the runtime environment where smart contracts execute. Every node on the Ethereum network runs the same EVM, processing the same transactions, reaching the same results.

Key properties:

• Deterministic — same input always produces same output
• Sandboxed — contracts can't access the outside world directly
• Turing-complete — can compute anything (given enough resources)

That last point creates a problem: if contracts can run any computation, what stops someone from deploying an infinite loop and bricking the network?

Gas: The Price of Computation

Ethereum's answer: gas. Every operation in the EVM costs a certain amount of gas. Sending ETH costs 21,000 gas. Storing data costs more. Complex calculations cost more still.

When you submit a transaction, you specify:

• Gas limit — the maximum gas you're willing to use
• Gas price — how much you'll pay per unit of gas (in gwei, a tiny fraction of ETH)

Transaction cost = Gas used × Gas price

Example:
  Gas used:  65,000
  Gas price: 30 gwei
  Cost:      65,000 × 30 gwei = 1,950,000 gwei = 0.00195 ETH

If your transaction runs out of gas mid-execution, it reverts — all changes are undone, but you still pay for the gas used. This prevents infinite loops and makes spam expensive.

Proof of Stake: Ethereum's Evolution

Ethereum launched with Proof of Work (like Bitcoin), but in September 2022, "The Merge" switched it to Proof of Stake (PoS). Instead of miners burning electricity, validators stake 32 ETH as collateral. If they cheat, their stake gets slashed.

Benefits: ~99.95% less energy, faster finality, and the foundation for future scaling upgrades.