Understanding Ethereum

PoS, EVM

Hamburg, 12 May 2025 - Among all blockchains leveraging the Proof-of-Stake (PoS) consensus mechanism, Ethereum clearly leads the pack. Outpacing networks like Binance Smart Chain, Solana, and Cardano in adoption and market capitalization, Ethereum has solidified its position as the dominant layer-1 solution in the decentralized ecosystem. With over 4,000 active projects and more than 68 million smart contracts deployed, its technological impact is unmatched. By the end of 2024, Ethereum’s influence was also reflected in hard numbers: a total value locked (TVL) of $66.34 billion and a staggering $114.9 billion protecting the network.

 

The so-called Blockchain 1.0 introduced the first distributed, public ledger for tracking transactions over a peer-to-peer (P2P) network. Bitcoin has been the flagship of this innovation and represented an important milestone in the first generation of this emerging technology. By incorporating smart contracts and enabling dApps on its own blockchain, the official launch of Ethereum in 2015 started the era of Blockchain 2.0. Ethereum was the very first open-source blockchain, stimulated the creation of novel use cases and led to more initiatives in this area.

Ethereum’s main goals include scalability, standardization, completeness of features, ease of development and interoperability in a unified framework. It serves as a foundational layer and enables users to develop smart contracts and dApps on the Ethereum Virtual Machine (EVM), with their specific rules and requirements. Smart contracts can be used to automatically execute transactions once certain conditions are met, which reduces the need for intermediaries. Ethereum integrates blockchain technology with its built-in computational engine, known as the EVM. This engine supports decentralized, permissionless, and censorship-resistant applications and organizations.

All Ethereum nodes maintain a synchronized copy of the EVM’s state, making the EVM a “canonical computer” whose state is universally agreed upon. Participants submit computation requests, known as transactions, which the network verifies, validates, and executes. Execution triggers a state change in the EVM, which is then propagated across the entire network. The blockchain itself stores a complete record of all transactions and the current state of the EVM, safeguarded by robust cryptographic mechanisms that prevent tampering. Additionally, every transaction is cryptographically signed to ensure only authorized actions can be executed.

ETH serves as the Ethereum network’s native utility token. It can be obtained for investment purposes and is also used to cover computational fees within the network, which is known as gas. ETH remains central to the network’s operation regardless of the consensus mechanism, as it promotes a market for computation and incentivizes participants to verify, execute and broadcast transactions. A part of the transaction fees is burned, while the rest of the fees are given to the node that accomplishes the required task.

Validator rewards help to discourage malicious activity and therefore serve as a strong incentive mechanism. In addition to on-chain transactions, ETH can be traded on crypto asset exchanges or used to cover transaction fees and computing power. Enhancements to the blockchain network are introduced via EIPs, which describe new functionalities or changes to the ecosystem. Each EIP is submitted to the Ethereum community in the form of a document and serves as the primary channel for resolving existing challenges. A concise, well-defined scope notably increases the likelihood of an EIP’s success. To be considered, an EIP must provide a clear and thorough description of the proposal, demonstrate a tangible benefit to the protocol, and present a feasible implementation plan that avoids unnecessary complexity.

Author: Rafael Ruiz Cramme

About coinIX GmbH & Co. KGaA

Founded in 2017 and based in Hamburg, coinIX GmbH & Co. KGaA specializes in blockchain investments and digital assets. The firm’s team includes experts in asset management, venture capital, and emerging technologies.

coinIX invests in cryptocurrencies, token projects, and blockchain startups within decentralized markets. The company’s shares are publicly traded on the Düsseldorf, Berlin, and Munich stock exchanges (WKN: A2LQ1G | ISIN: DE000A2LQ1G5 | Ticker: XCX).

More information: www.coinix.capital

The coinIX COINVEST SCI1 is a German special AIF (Alternative Investment Fund) launched in June 2022, managed by coinIX Capital GmbH, a registered capital management firm. The fund is available exclusively to professional and semi-professional investors and can invest up to 100% of its capital in crypto assets.

It actively manages a diversified digital asset portfolio, generating additional income through staking and blockchain-native financial strategies. The fund’s ISIN is DE000A408Q55, and investments can only be made directly through coinIX. It is not available to private investors. More details: coinIX COINVEST SCI1.

 

 

 

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