This is the simplest way to think about Ethereum.
Imagine a friendly town with one Big Book that lists who owns what. Every library in town keeps the same Big Book, and when one page changes, all the other books change to match. You live in this town.
You have a mailbox number everyone can see (so people can send you things) and a secret key only you know (so only you can move your things).
This town is called Ethereum.
It has little rule-following helpers that do simple jobs, like “move this from me to my friend.”
The town uses a coin called ETH. When you want the helpers to write in the Big Book, you add a tiny sticker called gas—paid with a tiny bit of ETH—so they do the work.
There are also “tokens,” which are just different kinds of items that ride on the town’s tracks—like tickets, points, or special one-of-a-kind cards.
When you send something, you sign a short note with your secret key, the helpers check it, and if it’s good they add it to the next page of the Big Book.
No single boss runs the book; lots of libraries keep it, so cheating is very hard. Some people lock up their ETH for a while to help guard the book and earn thank-you coins later.
You keep your secret key in a wallet (like a keyring or purse). You can hold it yourself, or let a trusted shop hold it for you—whoever holds the key can move your things.
That’s it: one shared book, a mailbox, a secret key, tiny gas stickers, and helpers who keep everything fair.
Okay, now let’s try again but this time we’ll make it real.
Start with the simplest picture: a blockchain is a shared ledger—a single list of who owns what—that thousands of computers keep identical copies of. When the ledger changes, every honest copy updates the same way. That’s the magic: no one company’s database; many independent computers agreeing on the same record.
Ownership on a blockchain is controlled by keys. You have a public address (like your bank account number) and a private key (like a super-secret stamp). If you sign a message with your private key, the network accepts that you authorized the move. The ledger itself is public; your privacy comes from not revealing your private key.
Ethereum is one specific blockchain that, in addition to recording balances, can also run small programs called smart contracts. Think of it like a spreadsheet that can run formulas everyone agrees on. Those programs let people build apps for payments, trading, collectibles, and many other uses—without a central company controlling the ledger.
ETH (Ether) is the native coin of Ethereum. Every action on Ethereum—sending something, running a program—consumes a little work from the network, and you pay for that work in ETH. That fee is called “gas.” So even if you’re moving some other asset on Ethereum, the fee is paid in ETH.
Tokens are assets created by smart contracts that “ride on” Ethereum. They aren’t ETH itself; they’re entries managed by a program. A stablecoin like USDC is a token that aims to stay near $1, while an NFT is a token meant to be unique. All of them still use ETH to pay gas when they move.
A transaction is just a signed instruction that asks the network to update the ledger. “Subtract from me, add to them,” or “call this contract and do X.” Validators (the network’s rule-enforcers) check that it’s valid and, when enough agree, they include it in the next block. Nothing gets “broken into pieces”; the shared record simply changes, and every copy reflects the same new balances.
Decentralization is about who gets to write to the ledger. On Ethereum, thousands of independent participants run the rules, not a single company. Because many different machines verify the same rules, it’s very hard to cheat, censor, or alter history once confirmed.
Gas exists because computation and storage are scarce. Simple moves (send a coin) use little gas; complex actions (run a big contract) use more. You control what fee you’re willing to pay for speed: higher fees get processed sooner when the network is busy, much like paying for faster shipping.
ETH’s supply isn’t hard-capped like Bitcoin’s 21 million. New ETH is issued as rewards to those who secure the network, and a portion of fees is burned (destroyed). Depending on activity and rewards, total supply can drift slightly up or down over time.
Staking is how Ethereum stays secure today. People lock ETH to operate or back validators who propose and verify blocks, and they earn rewards in ETH for doing it correctly. You can unstake, but there can be a delay, and services may add their own waiting periods or risks. It can feel “income-like,” but it isn’t a bank account and it carries technical/operational risk.
Wallets are how you hold and use assets. A self-custody wallet gives you the seed phrase (you are the bank; great power, great responsibility). An exchange or broker holds keys for you (easier, but you trust them). Either way, when you use Ethereum, you’re ultimately approving transactions that the network will verify and record.
Putting it together: imagine sending your friend 10 USDC on Ethereum. Your wallet prepares a transaction telling the USDC contract to move 10 from your balance to theirs, you sign it with your private key, and you include a small ETH gas fee. Validators confirm it, the ledger updates everywhere, and your friend sees +10 USDC—simple as that.
That’s the whole arc: a public ledger everyone shares; keys prove control; Ethereum runs programs; ETH pays for work; tokens ride on top; validators keep everyone honest; and staking powers security. Once you’re comfortable with those pieces, the rest of crypto vocabulary is mostly variations on this theme.
Quick Review
Blockchain — A public, shared database that many independent computers keep in sync by following the same rules.
Ledger — The running record on the blockchain of balances and transactions (“who owns what, and what changed”).
Keys — A matched pair (public + private) that controls access to your assets using math.
Public address — Your “account number” derived from your keys; safe to share so others can send you assets.
Private key — Your secret “signature stamp.” Whoever has it can move your assets. Never share it.
Ethereum — A specific blockchain that can also run programs everyone agrees on.
Smart contracts — Those programs on Ethereum that hold rules and assets and run exactly as written.
ETH — The native coin of Ethereum; required to use the network.
Gas — The fee (paid in ETH) for the work the network does to process your transaction or run a contract.
Tokens — Assets created by smart contracts (not the native coin). They ride on Ethereum and pay gas in ETH.
Stablecoin — A token designed to track a stable value (often ~$1), e.g., USDC.
NFT — A unique token that represents one-of-a-kind items or claims (collectibles, tickets, deeds).
Transaction — A signed instruction to update the ledger (send assets, call a contract).
Validators — Participants who check transactions, propose blocks, and keep the network honest.
Block — A batch of validated transactions, linked to prior batches to form the “blockchain.”
Decentralization — No single company controls the ledger; many independent computers enforce the rules.
Supply — How much ETH exists at a given time.
Issuance — New ETH created as rewards to validators for securing the network.
Burn — ETH that is permanently destroyed by the protocol (typically a portion of every fee).
Staking — Locking ETH to help secure Ethereum and earn rewards, with possible delays/risks to withdraw.
Wallets — Apps or devices that hold your keys and let you view, send, and receive assets.
Self-custody — You control the keys yourself (maximum control, maximum responsibility).
Seed phrase — A human-readable backup for your keys; anyone with it can control your assets.
Exchange — A company/broker that holds keys for you and helps you trade more easily.
Custody — Who actually controls the keys (you in self-custody, or a service like an exchange).