🦎 What Is Ethereum? A Beginner-Friendly Guide to the EVM

Crypto talk turns into geek-speak pretty fast. But it’s simpler than it seems. Let’s slow down the Nerd Express and start with the basics. Ethereum is the engine behind most of the cool stuff you see on the Base chain and throughout much of the crypto world.

Once you understand how Ethereum works, it’s like seeing the world below from an airplane. Instantly, it all fits together, and all this crypto stuff — even beyond Ethereum — makes more sense.

Let’s learn what Ethereum is and what made it the greatest crypto innovation since Satoshi pressed the GO button on Bitcoin. The gecko will guide you.

Quick takeaways

• Ethereum works like a worldwide, shared computer that anyone can access with a crypto wallet. That’s right. No grouchy banks. No gatekeepers. No sneaky peekers at the ATM. It’s free, as in freedom.

• Instead of using middlemen to send money to your friend who’s always broke, Ethereum uses smart contracts. These small computer programs live on the blockchain and can move value from you to your broke friend without anyone else in the middle of it. Hopefully, that broke @%*&! sends the ETH back one day.

• The Ethereum Virtual Machine (EVM) is the clever bit that actually runs these programs, and it lives on EVERY full node. Any chain built with the EVM can use the same apps and tools.

• Layer 2 networks like Base help with speed and cost. They handle the busy work on their own chain, then send the results back to the main Ethereum chain for security.

• Once you get the hang of Ethereum, most of the EVM world starts to make sense, and you instantly become the most interesting gecko in any room when you ‘splain how it works. They’ll swoon, I tell ya.

Ethereum in plain English

Ethereum is a shared computer that lives on thousands of machines (validators) around the world. Nobody owns the network and nobody can change the rules just because the food joint got their lunch order wrong and now someone’s gonna pay.

Remember that time the bank let that charge for @%*&!-hub go through even though you swore it wasn’t you? Not a problem with Ethereum. Only transactions approved by your private key get through. But if it was you… well, let’s just say the blockchain never forgets what you did with your crypto wallet.

And the blockchain is open, permissionless, as they say. Anyone – anywhere in the world – can send transactions, read the transaction data, or run programs on the Ethererum Virtual Machine (EVM). The virtual bit just means the network runs in an isolated environment where nobody can fiddle with the transactions. It just takes a bit of ETH to grease the silicon wheels. ETH functions as the gas token to keep the machines purring along. More on that in a bit, fam.

In the early days, they called Ethereum a “world computer.” It’s a global network of computers that all execute the same smart contracts and must agree on the same results.

It’s not all about ETH, though. ETH is the gas token and a store of value in its own right, but the network also supports programmable tokens. These might be fun memecoin tokens, or utility tokens that unlock features. Tokens represent ownership, but whatever they represent may or may not have value. That’s up to the market to decide.

Smart contracts: programs that run by themselves

Smart contracts run by themselves once deployed. Some are “set in stone” and never change. Others include admin or upgrade functions, which means the developer can update parts of the contract or control certain features. Always check for owner permissions before trusting a token contract. They can have some sneaky functions like blacklisting wallet addresses (so you can’t transfer or sell).

Think of it like buying a candy bar from a vending machine. You feed the machine the right amount of quarters and press the button. Whhirrr, clack! Now, you’ve got a snack. No middleman needed, and everyone gets the same result, given the same conditions. It’s deterministic. And you don’t need to ask Mom for permission, goshdarnit.

Smart contracts take the permissionless concept and apply it to finance, games, art, tokens, and everything else on the chain. Every decentralized finance (DeFi) protocol, NFT marketplace, and memecoin is powered by these contracts. They work like switches. If this happens, do that. And they do the same thing every time the same condition trips the switch. Smart contracts can even call other smart contracts or act on events from the analog world. Powerful stuff.

Base uses these EVM smart contracts, does the math and switch logic on the fly, and then passes the transactions to Ethereum in bulk. Base says to Ethereum, “Yo, big brother, this is my record of what happened. Make sure nobody can change it.”

Yeah, but what are tokens, anyway?

On Ethereum and Base, a token is just a number with rules wrapped around it. A smart contract keeps track of who owns how many and what those tokens are supposed to represent. That something could be money, voting power, game items, art, membership, or a completely unhinged memecoin with a crossed-eyed blue gorilla. The chain doesn’t care. It just keeps score.

You can think of tokens as on-chain ownership receipts. Instead of being tracked on a spreadsheet on some company’s laptop, the ledger lives on Ethereum (or Base), where everyone can read it, and nobody can quietly tweak the numbers when everyone’s watching football.

At a high level, there are two big types of tokens you’ll see all the time on EVM networks, and a third kind that’s becoming more popular due to its ability to change forms.

Fungible tokens: one unit = any other unit

This is the “all copies are the same” group.

Most fungible tokens follow the ERC-20 standard (fungible). This standard helps wallet apps know what to do with these digital critters.

Here are some examples:

• Stablecoins (usually pegged to a fiat currency like USD)

• DeFi tokens (these often unlock protocol features)

• Governance tokens (these let you vote on protocol changes)

• Memecoins that your broke friend “swears are about to moon”

Non-fungible tokens (NFTs): we’re all special snowflakes

Then you have ERC-721 tokens, better known as NFTs (non-fungible tokens). With NFTs, each token ID is unique and can point to all sorts of things.

• Art

• Game items

• Land in some metaverse thingee

• Event passes

• Whatever the dev dreamed up at 4 ayem, while high as a kite

Owning an ERC-721 token usually means: “Wallet X controls token #1234 in this collection, and the contract’s code determines what that token represents.”

There’s also ERC-1155, which is like a caterpillar that becomes a butterfly (both delicious, btw). Tokens with the ERC-1155 standard can handle either:

• Fungible items (for example, 1,000 health potions)

• Non-fungible items (for example, a legendary sword in a nerdy Web3 game)

The cool trick with ERC-1155 (semi-fungible tokens) is that they’re changelings. One instant, they’re the same as all the others… until a specific condition is met. Then, Presto-Bango! Now, they’re unique NFTs.

These are handy for games and more complex projects.

ETH vs tokens

One important detail: ETH itself isn’t an ERC-20 token. It’s still fungible, but it doesn’t have a book of rules following it around, yapping about this rule and that one. ETH is the native asset of the network and the gas token that pays for transactions. Tokens like ERC-20 or ERC-721 live inside their little smart contract homes on the network.

Same story on Base: ETH (or sometimes its L2 or L3 equivalent) pays for gas. Without fuel, nobody’s going anywhere.

Tokens and value

Tokens represent something, but that “something” isn’t guaranteed to be worth anything at all. A token can:

• Represent real value (like a stablecoin backed by collateral)

• Represent access or utility (like a game pass or governance vote)

• Represent a culture or community vibes (memecoins)

Whether the token actually holds value is up to the market, not the code or token type. Just remember: Anyone can make a token. Yeah, even that spooky dude you saw at the store. Some are good, some are bad, some are ugly.

Gas Fees (why nobody rides for free)

Everything you do on Ethereum, whether sending ETH to your broke friend, minting NFTs, swapping tokens, or shouting into the digital void on a Web3 social network, burns a tiny bit of gas. Okay, sometimes a lot of gas. It depends on the code complexity for whatever degen thing you’re doing and how busy the network is at that time.

Gas is basically the processing fee you pay the network so that validators will run your transaction.

Think of gas like paying the pizza guy. He’ll bring the food, but he’s not doing it for free.

• When the network is busy, gas goes up.

• When it’s quiet, gas goes down.

But the code’s complexity also plays a role. If the code reads like a Gordian knot that no one can untangle, everyone who uses the contract pays more than they would with tight, clean code.

L2 networks like Base help with gas costs by taking your transactions, compressing them, and giving Ethereum less work to do. This keeps gas costs lower. But the rule stays true, whether on Ethereum, Base, or any other EVM network:

If the EVM runs, you pay gas.

It’s the way of the World Computer

Layer 2s: Ethereum’s helpful sidekicks

Ethereum’s great, but it can get crowded, and all it takes is one viral app to ruin the party for everyone. Case in point, CryptoKitties broke everyone’s crypto superhighway with its NFT cat thingees. The whole network slowed to a crawl while people littered the internet with network-clogging NFT furballs. Even the simplest transactions cost a ton of ETH. Booo!

That’s where Layer 2s come in.

Layer 2s (L2s) like Base, Optimism, Arbitrum, and others:

• run their own faster, cheaper chain

• process zillions of transactions

• bundle them up

• and pass them back to Ethereum for final security

This is called “rollup technology,” and the idea is simple:

Let Ethereum be the guardian of the Ledger. Let Base handle the traffic.

You still use the EVM.

You still use smart contracts.

You still use ETH for gas.

You use less of it.

A lot of the same apps that are huge hits on Ethereum exist on Layer 2 networks as well. AND, Layer 2 networks develop their own ecosystems. A whole bunch of decentralized apps (dApps) live only on Base, or Arbitrum, or even Degen (a Layer 3 network under Base).

Why Ethereum Matters (and why geeks won’t shut up about it)

Ethereum solved a problem. Bitcoin is cool, but it doesn’t support enough commands to call it a programmable blockchain. It wasn’t “Turing complete.” Ethereum’s enhanced programmability lets anyone build apps that can do virtually anything. And it made the network open to everyone. You, me, the weird guy at the bus stop, we can all deploy smart contracts to the network.

Ethereum’s open, code-executing network unlocked a world of goodies.

• DeFi

• NFTs

• Decentralized Autonomous Organizations (DAOs)

• tokenized everything

• L2 ecosystems (like Base)

• Onchain identity

• weird art and NFT games

• questionable innovations

• and an entire builder culture

Whether it’s fantastic or fantastically bad, you can build it and send it into the wilds of the EVM. Ethereum is the foundation. It’s freedom. And it’s the code sandbox idea that other EVM chains copied.

Understanding Ethereum means you understand the blueprint for:

• Base

• Polygon

• Avalanche C-Chain

• BNB Chain

• Fantom

• And pretty much every EVM chain these nerds dream up

Ethereum didn’t just create a network. It created an ecosystem standard that powers some of the most used chains in all of cryptoland.

Risks and Limitations (it’s like a jungle sometimes)

Ethereum is pretty awesome, but it isn’t perfect (yet). Using the ecosystem comes with occasional tradeoffs and some risks you’ll want to avoid.

Gas fees can spike

Sometimes transactions cost a few cents. Sometimes they make you shout, “@%*&!” Twice.

Smart contracts can have bugs

Most smart contracts can’t be changed after they’re deployed. Bugs stay buggy. Forever. However, some contracts have upgrade permissions, which is a whole different bag of rattlesnakes.

Scams everywhere

Freedom to transact without intermediaries comes with the freedom to get scammed. And you can’t complain to the manager. Never trust a contract you haven’t checked. Memecoins are often the worst offenders. Check the contract with code scanners like Honeypot.is and Tokensniffer.

Irreversible transactions

Sent ETH to the wrong address?

Blockchain says, “Tough tacos, toots. Maybe next time put down the bong, first.”

Complex for beginners

Ethereum is wonderfully nerdy stuff. But that also makes it a bit tougher to use if you’re new to this. The good news is that the Based devs are working to make it easier to for all of us, abstracting all the geeky code stuff and giving users a simpler interface for powerful dApps. Point. Click. Done.

Case in point: Token Bundles on Lumpy Labs. Buy up to five tokens in a few clicks. All that shizzle would take a few days to track down and buy without this cool tool.

Despite the occasional blockchain gotchas you’ll learn to avoid, Ethereum has proven to be the most battle-tested programmable blockchain in the cryptoverse and there are tons of great projects in the ecosystem. Ethereum’s also the base layer that keeps the L2 chains secure.

Vive la Ethereum!