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03 — Crypto & Web3 · Beginner

Ethereum & Smart Contracts

CTRT Learn · Beginner · 12 min read

In brief

  • If Bitcoin is digital money, Ethereum is a programmable blockchain — a global computer anyone can build on.
  • Smart contracts are programs that run exactly as written, automatically, with no middleman to trust.
  • This enables decentralized applications — finance, marketplaces, identity, ownership — without a company in control.
  • Gas is the fee paid in ether (ETH) to run these programs; ETH is both fuel and an investable asset.

Bitcoin showed money could be decentralized. Ethereum, launched in 2015, asked a bigger question: what if you could decentralize anything? By adding a programming layer to the blockchain, it became a platform for applications that run without any company operating them. This lesson explains smart contracts, what they make possible, and why ether is more than just another coin.

From a ledger to a computer

Bitcoin's blockchain mainly tracks one thing: who owns how much bitcoin. Ethereum generalised the idea. Its blockchain is a world computer — a shared, global machine that can run arbitrary programs and remember their state. Instead of just recording payments, it can execute logic: "if this happens, automatically do that." Every computer in the network runs the same programs and agrees on the results, so the outcome is trustworthy without anyone in charge. This single shift opened the door to an entire universe of applications.

What a smart contract is

A smart contract is a program stored on the blockchain that runs automatically when its conditions are met. The name is slightly misleading — it's not a legal document but code that enforces an agreement. A useful analogy is a vending machine: you put in money, select an item, and the machine delivers it automatically, with no cashier needed. A smart contract does the same for digital agreements — hold funds in escrow, pay out when a condition is met, swap one asset for another — executing exactly as written, every time, without a trusted intermediary.

The key properties: smart contracts are automatic (no human needed to execute), transparent (anyone can read the code), and immutable (once deployed, they run as written and can't be quietly changed). That last property is powerful and dangerous — a bug in a contract holding millions can't simply be patched, which is why security and audits matter enormously.

Decentralized applications (dApps)

String smart contracts together and you get decentralized applications — software that runs on the blockchain instead of a company's servers. Because no single entity controls them, they can't easily be shut down, censored, or have their rules changed on users. The categories you'll explore later include:

  • DeFi — lending, trading, and earning yield without banks (its own course ahead).
  • Stablecoins — dollars that live and move on-chain (next course).
  • NFTs — provable ownership of unique digital items.
  • DAOs — organisations governed by code and token-holders rather than executives.

Ether and gas

Running programs on a shared global computer isn't free — it consumes the network's resources. Users pay a fee called gas, denominated in Ethereum's native currency, ether (ETH), to execute transactions and contracts. Gas does two things: it compensates the validators who secure the network, and it prevents abuse (spamming the computer would cost a fortune). This gives ETH genuine utility — it's the fuel the entire ecosystem runs on. As more activity happens on Ethereum, more ETH is needed to power it, which underpins one argument for its value as an asset.

Proof of stake and Ethereum's evolution

In 2022, Ethereum completed "The Merge," switching from energy-hungry proof-of-work to proof of stake (introduced in the Blockchain course), cutting its energy use by over 99%. Now, participants stake ETH to help secure the network and earn rewards for doing so honestly — which also makes ETH a yield-bearing asset. Ethereum continues to evolve rapidly, especially around scaling (handling more transactions cheaply), a topic important enough to have its own course later in this track.

Why it matters

Ethereum turned blockchains from a single-purpose tool (money) into a general platform for building open, unstoppable applications — the technical foundation of Web3. Many of the protocols CTRT researches are built on Ethereum or compete with it, and understanding smart contracts is essential to evaluating any of them. Bitcoin asks "what is sound money?"; Ethereum asks "what can we build when trust is automated?" Both questions sit at the centre of this asset class.

Key terms

  • Smart contract — self-executing code on the blockchain that runs as written.
  • World computer — Ethereum's shared, programmable global machine.
  • dApp — a decentralized application running on smart contracts.
  • Ether (ETH) — Ethereum's native currency, used to pay for computation.
  • Gas — the fee paid in ETH to run transactions and contracts.

Next course — Stablecoins & On-Chain Dollars →

CTRT Learn is general education, not financial, legal, or tax advice. Nothing here is a recommendation to buy or sell any asset. Digital assets are volatile and may result in total loss of capital. CTRT is operated by Centrente, part of the Trancent world.