What is Ethereum and How does it Work? Ethereum is a blockchain platform for programs and applications that don't require a centralized party. You could call it the "world's programmable blockchain."
Blockchain technology is public, open-source, decentralized, and cryptographic. It powers decentralized applications (dApps) supported by an innovative contract transaction protocol.
It's essential to distinguish ether (ETH) from Ethereum before getting into the details. Ethereum is the blockchain that runs ether, and we'll call the blockchain network Ethereum.
Ethereum Virtual Machine includes peer-to-peer transactions that run on its collective computing power to support the automatic, conditional transfer of value and information, including money, voting rights, and property.
ETH functions like a 'world computer' on a blockchain. The underlying blockchain technology is the hard drive, smart contracts are programs, miners are CPUs, and users pay with ETH to use this 'computer'.
Ethereum's invention is inspired by Bitcoin. Bitcoin established the foundation for decentralized blockchain technology. But its functionality is limited to peer-to-peer electronic cash transfers. Ethereum expands upon Bitcoin's functionality to programmable apps. Essentially, it aims to create a decentralized computer network to run various applications. To borrow its founder Vitalik Buterin metaphor: Bitcoin is like a calculator, but Ethereum wants to become a smartphone running many applications.