If Bitcoin is digital gold, Ethereum is something different. It is more like a global, open computer that anyone can build on. Ethereum is the second largest cryptocurrency by value, and it powers a massive ecosystem of financial applications, digital agreements, and new types of investing.

Here is what you need to know.

What Is Ethereum? (The Simple Version)

Ethereum is a blockchain, just like Bitcoin, but with one major difference: you can build things on it. Launched in 2015 by developer Vitalik Buterin, Ethereum was designed to be programmable. Developers can write pieces of code called smart contracts that live on the blockchain and run automatically when certain conditions are met.

The currency that powers Ethereum is called Ether, or ETH. Anytime you do something on the Ethereum network, whether that is sending money, using an application, or trading a token, you pay a small fee in ETH. That constant demand for ETH is a key foundation of its value.

What Is a Smart Contract?

A smart contract is simply a set of rules written in code. When the conditions are met, it automatically carries out the agreed action without the need for a bank, lawyer, or middleman.

Here is a simple example. Imagine you and a friend make a bet on a sports game. Normally, you would have to trust each other to pay up. With a smart contract, the money can be held automatically and paid out to the winner the moment the final score is confirmed, based on verified data, with no one able to delay or interfere.

Smart contracts make it possible to build financial applications that run around the clock, do not require a central office, and are open to anyone in the world.

What Is DeFi?

DeFi stands for decentralized finance. It refers to the collection of financial applications built on blockchains, mostly Ethereum, using smart contracts.

Think of it as a bank that is open to anyone, runs on code instead of employees, and never closes. DeFi applications allow people to lend money and earn interest, borrow against their crypto holdings, and trade assets without going through a traditional financial institution.

Ethereum hosts more DeFi activity than any other blockchain. Its large developer community and deep pool of capital locked into applications make it the center of the on chain financial world.

How has the Price of ETH Moved?

Ethereum reached its all-time high of approximately $4,950 in August 2025, a peak confirmed by market reporting on Ethereum’s price breaking its previous high and approaching a $600 billion market cap. Since then, ETH has pulled back significantly, generally moving in line with broader market corrections seen in crypto prices following major rallies.

Over the past 12 months, ETH has ranged from 52-week lows around $1,388 to the August 2025 peak near $4,950, reflecting wide price swings typical of crypto markets.

The volatility is real. Ethereum has historically moved large percentages in both directions within a single year, underscoring both the potential risks and opportunities inherent in long-term positions.

How Ethereum Keeps Its Value: Burning and Staking

After switching to proof of stake in 2022, two primary forces now shape ETH’s supply dynamics.

The first is the burn. Every transaction on Ethereum permanently destroys a small amount of ETH. When network activity is high, more ETH is burned than is newly issued, which can cause the total supply to shrink over time.

The second is staking. Validators lock up ETH to help secure the network and earn rewards. This process removes ETH from active circulation, tightening the liquid supply available on the market.

Together, these two forces, combined with ETH’s role as the fuel that powers the world’s largest smart contract network, form the foundation of what drives Ethereum’s value.

Recent Upgrades and What They Do

In May 2025, Ethereum activated the Pectra upgrade, its largest improvement since 2022. The upgrade introduced enhanced validator flexibility, expanded staking limits, account abstraction features, and increased data capacity designed to improve network performance and lower costs for applications built on Ethereum. It also enabled smart contract functionality for standard wallets, making the network more user friendly and accessible.

In December 2025, Ethereum implemented the Fusaka upgrade, which further expanded network capacity and improved scaling infrastructure, including advancements aimed at boosting Layer 2 performance and lowering transaction costs. Following these improvements, average Layer 2 fees declined significantly, strengthening Ethereum’s competitive position in decentralized finance and on chain applications.

The next major upgrade, called Glamsterdam, is planned for mid 2026. It is expected to focus on additional scalability improvements, transaction efficiency, and protocol level enhancements designed to support long term network growth.

The Main Take Away

Ethereum is the most widely used programmable blockchain in the world, measured by developer activity, decentralized finance usage, and total value secured on the network. Its 2025 upgrade cycle improved scalability, reduced transaction costs through Layer 2 expansion, and enhanced staking and validator flexibility, making the network more efficient and institutionally accessible.

As of early 2026, ETH is trading well below its prior all time highs following a broader market correction. Historically, major crypto assets have experienced cyclical drawdowns after strong rallies, even as network development continues.

For long term investors, understanding what drives Ethereum’s value, including network usage, staking participation, and protocol upgrades, is a consideration alongside short term price movement. Whether evaluating ETH for the first time or reassessing after the pullback, the starting point typically begins with the fundamentals.

Frequently Asked Questions

What is the difference between Ethereum and ETH?

Ethereum is the network, meaning the blockchain infrastructure and the decentralized applications built on top of it. ETH, or Ether, is the native cryptocurrency used to pay for transactions and computational activity on that network. It functions as the fuel that powers Ethereum’s smart contracts and applications.

Is Ethereum trying to replace Bitcoin?

No. Bitcoin and Ethereum are designed for different purposes. Bitcoin was created primarily as a decentralized store of value and alternative monetary system, while Ethereum was built as a programmable blockchain platform for decentralized applications and smart contracts. Many institutional research reports describe them as complementary assets rather than direct competitors.

Why is ETH down so much from its high?

ETH declined alongside the broader cryptocurrency market correction that began after the late 2025 rally. Crypto markets have historically experienced significant cyclical drawdowns following major bull runs. Despite price volatility, Ethereum’s core fundamentals such as network usage, staking participation, and ongoing protocol upgrades have remained active throughout prior market cycles.

This content is for informational purposes only and is not investment advice or recommendation to buy or sell bitcoin or any security.

Participants, along with Galaxy, hold a financial interest in Ethereum (ETH). Galaxy regularly engages in buying and selling ETH, including hedging transactions, for its own proprietary accounts and on behalf of its counterparties. Galaxy also provides services to vehicles that invest in ETH. If the value of such assets increases, those vehicles may benefit, and Galaxy’s service fees may increase accordingly. The valuation in this communication is based on technical, fundamental, and market analysis and not on any formal valuation method. For more information, please refer to Galaxy’s public filings and statements. Cryptocurrencies, including ETH, are inherently volatile and risky and ultimate market movements may not align with this statement.

For additional risks related to digital assets, please refer to the risk factors contained in filings Galaxy Digital Inc. makes with the Securities and Exchange Commission (the “SEC”) from time to time, including its Quarterly Report on Form 10-Q, available at www.sec.gov.