Ethereum and the idea of smart contracts

Ethereum is a blockchain network that supports programs known as smart contracts. Its native asset is Ether, usually abbreviated ETH. The network and the asset are related, but they are not the same thing: Ethereum is the infrastructure, while ETH is used within it.

Programs on a shared network

A smart contract contains rules that can be executed on the blockchain. Applications use these rules to manage actions such as transferring tokens or recording ownership. A contract follows its code; its name does not mean it is a legal agreement or that the code is free of mistakes.

Why transactions use gas

Actions on Ethereum require computational work. Gas measures that work, and users pay transaction fees in ETH. The amount can vary with the action and network demand. Sending a token and interacting with an application can therefore have different costs.

Tokens are not all equivalent

Applications can create tokens on the network, but sharing infrastructure does not give them the same purpose, rights or risk profile. A token’s usefulness depends on its design and on the application behind it. A familiar network logo is not a quality guarantee for every project built on that network.

Smart contracts introduce software risk alongside ordinary market risk. Reading what an application is designed to do is a useful first step in understanding it; it is not evidence that it will perform safely in every situation.

Further reading

Ethereum.org — What is Ethereum?
Ethereum.org — Introduction to smart contracts