What is Ethereum?
Written by an ex-institutional trader. What Ethereum is, how it works as a programmable blockchain, what ETH and gas fees are, what it is used for, how it differs from Bitcoin, and the risks for Australian investors.
Direct answer
Ethereum is a programmable blockchain, a global computer that runs apps and agreements without a central operator. Where Bitcoin was built mainly to move and store value, Ethereum was built to run code, called smart contracts, that executes automatically. Its native cryptocurrency, Ether (ETH), is used to pay the fees that power the network and is the second-largest crypto by value.
Most of the crypto world is built on Ethereum: stablecoins, decentralised finance, NFTs and thousands of tokens all run on it. Every action costs a fee, paid in ETH and known as gas. Ethereum is more flexible than Bitcoin but also more complex, and that complexity brings extra risks, from smart-contract bugs to volatile gas fees. ETH is a volatile asset and selling it in Australia is generally a taxable event.
What Ethereum is
Ethereum is a programmable blockchain: a shared, global computer that runs apps and automatic agreements without any single company in control. Bitcoin proved you could have digital money without a bank. Ethereum took the next step and made the blockchain programmable, so developers can write code that runs on it exactly as written.
Its native cryptocurrency is Ether, ticker ETH, the second-largest crypto by value after Bitcoin. ETH is both an asset people invest in and the fuel that pays for activity on the network. When people say they are buying "Ethereum", what they hold is ETH.
Disclosure: SatoshiMacro may earn a commission if you sign up to an exchange through links on this page, at no extra cost to you. See our full affiliate disclosure.
How it works
Ethereum runs smart contracts, which are programs stored on the blockchain that execute automatically when their conditions are met, with no middleman. Thousands of computers around the world keep a copy of the network and agree on its state, so no single party can change the rules or shut it down.
Every action on Ethereum costs a fee, paid in ETH and called gas. Gas compensates the validators who process and secure transactions; it rises when the network is busy and falls when it is quiet. In 2022, Ethereum switched from proof of work to proof of stake, an upgrade known as The Merge that cut its energy use by more than 99 percent. Validators now stake ETH as collateral to secure the network and earn rewards.
What it is used for
Most of the crypto world runs on Ethereum. The main uses:
- Stablecoins. The largest stablecoins like USDC live primarily on Ethereum.
- Decentralised finance (DeFi). Lending, borrowing and trading apps that run without a bank.
- NFTs and tokens. Most NFTs and thousands of other crypto tokens are issued on Ethereum.
- Web3 apps. Games, identity tools and marketplaces built to run on a decentralised network.
This is why ETH is sometimes described as a bet on the platform that hosts much of crypto, rather than just a currency.
Ethereum vs Bitcoin
| Feature | Bitcoin | Ethereum |
|---|---|---|
| Main purpose | Digital money and store of value | Programmable platform for apps |
| Native coin | BTC | ETH (Ether) |
| Supply | Fixed cap of 21 million | No fixed cap; issuance varies |
| Consensus | Proof of work (mining) | Proof of stake (since 2022) |
| Smart contracts | Limited | Yes, the core feature |
| Often seen as | Digital gold | Digital infrastructure |
They are complementary rather than direct rivals, and many investors hold both for different reasons.
How to get ETH
The straightforward route for Australians is to buy ETH on an AUSTRAC-registered crypto exchange, funding with AUD via PayID or bank transfer, then optionally moving it to your own wallet. You buy and hold the actual ETH, which you can later sell, send or use in apps.
Popular Australian crypto exchanges
All three are AUSTRAC-registered Australian exchanges. Crypto is volatile; only invest what you can afford to lose.
The risks
Ethereum is more flexible than Bitcoin, and that flexibility brings extra risks:
- Price volatility. ETH can fall sharply and quickly. Only invest what you can afford to lose.
- Smart-contract bugs. Apps built on Ethereum can contain flaws that are exploited, and funds in a buggy or malicious contract can be lost.
- Gas-fee spikes. Fees can jump during congestion, making small transactions briefly uneconomic.
- Scams. Fake tokens, phishing and bogus apps are common; the openness that makes Ethereum powerful also lets bad actors operate.
Used carefully, with a reputable exchange and secure wallet, ETH is a core part of the crypto landscape. Remember that selling or swapping it is generally a taxable event in Australia.
This is general information, not financial advice. Last reviewed: 2026-06-02.
Test your knowledge
A quick 3-question check on the key ideas above. Choose an answer for each, then check your score. Every answer is explained, and nothing is sent anywhere; it all runs in your browser.
Frequently asked questions
What is Ethereum in simple terms?
Ethereum is a programmable blockchain: a shared, global computer that runs apps and automatic agreements without any single company controlling it. Bitcoin is mainly digital money, but Ethereum can run code, so developers build things like stablecoins, lending apps and NFTs on top of it. Its own cryptocurrency, Ether or ETH, is used to pay the fees that keep the network running and is the second most valuable crypto after Bitcoin.
What is the difference between Ethereum and Ether (ETH)?
Ethereum is the network, the blockchain and platform. Ether, with the ticker ETH, is the cryptocurrency that runs on it. People often say they are buying Ethereum, but what they actually hold is ETH. ETH has two jobs: it is an asset people invest in and trade, and it is the fuel that pays for transactions and running apps on the network, where those fees are called gas.
What are gas fees on Ethereum?
Gas is the fee you pay in ETH to do anything on Ethereum, from sending ETH to using an app. The fee compensates the validators who process and secure transactions, and it rises when the network is busy and falls when it is quiet. Gas can be a few cents or, at peak congestion, many dollars for a single action, which is why timing and newer low-cost networks built on top of Ethereum matter for active users.
Is Ethereum a good investment?
That is not something this guide can answer for you, and ETH is a high-risk, highly volatile asset that can fall sharply. ETH is more than a currency bet; it is closer to a bet on the platform that hosts much of crypto, so its value reflects demand for the whole ecosystem. As with any crypto, only invest what you can afford to lose, do your own research, and remember past performance is not a guide to the future. This is general information, not financial advice.
How is Ethereum different from Bitcoin?
Bitcoin was designed to be sound digital money with a fixed supply of 21 million coins and a deliberately simple, secure design. Ethereum was designed to be programmable, so it can run smart contracts and apps, which makes it far more flexible but also more complex. Bitcoin uses proof of work; Ethereum switched to proof of stake in 2022, cutting its energy use sharply. They are complementary rather than direct competitors: many people hold both.
Do you pay tax on Ethereum in Australia?
Generally yes. The ATO treats ETH like other crypto, so selling it, swapping it for another coin, or spending it is usually a capital gains tax event. A profit is typically a capital gain that must be reported, and holding for more than 12 months may qualify you for the 50 percent CGT discount. Earning ETH through staking is generally treated as ordinary income at the time you receive it. Keep records of every transaction and see the crypto tax guide for detail.
