What Is Ethereum? A Plain-English Guide
Ethereum is the second-largest cryptocurrency network, and it does something Bitcoin doesn’t: it runs programs. Where Bitcoin is designed mainly to store and move value, Ethereum is a global, programmable platform on which developers build applications. Its native coin is called Ether (ETH), and it’s the fuel that powers everything on the network.
Smart contracts — the key idea
Ethereum’s breakthrough is the smart contract: code that lives on the blockchain and runs automatically when its conditions are met, with no middleman. Think of it as a self-executing agreement — “if X happens, send Y” — that no one can quietly alter once deployed. Smart contracts are the building blocks for decentralised finance (DeFi), NFTs, stablecoins and much more. Most of the crypto ecosystem beyond Bitcoin runs on Ethereum or networks inspired by it.
Gas fees
Every action on Ethereum — sending ETH, swapping tokens, minting an NFT — requires a payment called a gas fee, paid in ETH, to compensate the network for the computing work. Gas fees rise and fall with how busy the network is: at peak times they can be steep, which is why cheaper “layer 2” networks built on top of Ethereum have become popular for smaller transactions. Always check the gas cost before confirming, especially for small transfers where the fee can rival the amount you’re sending.
Proof of stake and ETH staking
Unlike Bitcoin’s mining, Ethereum secures itself through proof of stake: participants lock up ETH to help validate transactions and earn rewards for doing so honestly. This is why you can stake ETH to earn a yield, either directly or through an exchange. Staking rewards aren’t free money, though — they carry lock-up and market risk, and in Australia they’re taxed as income when received.
Why people hold ETH
Some hold ETH as a bet on the growth of the whole ecosystem built on Ethereum — the more the network is used, the more demand there is for ETH to pay for it. Others use it purely to interact with apps. As always, ETH is volatile and can fall sharply, so treat it as a high-risk holding.
Buying ETH in Australia
Almost every Australian exchange lists ETH. The process is the same as buying Bitcoin: use an AUSTRAC-registered platform, mind the fees, and move larger holdings to a wallet you control. Compare platforms on our Trust Score ranking.
Tax note
Selling ETH, swapping it for another coin, or spending it are all capital gains events for the ATO, and staking rewards are taxed as income. See our crypto tax guide.
This is general information only, not financial advice. ETH is volatile and high-risk — never invest more than you can afford to lose.
General information only — not financial or tax advice. Verified 2026-08-13; details can change.