Ethereum extends the ledger idea in one direction: alongside balances, it stores code. A smart contract is a program deployed to an address, and calling it makes every node on the network run the same instructions and agree on the result. The program cannot be altered once deployed unless it was written with an upgrade path, and it executes exactly as written — including when what is written is a mistake.
Computation is metered in gas. Every operation has a gas cost, a transaction states how much gas it will pay for and at what price, and the total is paid in ether. This is the mechanism that stops a program from looping forever at the network's expense: it runs until its gas is exhausted, then stops. It is also why a period of heavy demand raises costs for everyone at once — block space is scarce, and gas price is the auction that allocates it.
The network moved from proof of work to proof of stake in September 2022, in an upgrade known as the Merge. Blocks are now proposed by validators who have deposited ether as collateral rather than by miners spending electricity. A validator that signs contradictory blocks can have part of its stake destroyed. The change cut the network's energy use by orders of magnitude and replaced a hardware-driven security budget with a capital-driven one.
Fee policy changed earlier, in 2021, with EIP-1559. Each block carries a base fee that adjusts automatically with congestion, and that base fee is burned rather than paid to the block producer. Ether's net issuance is therefore the difference between what staking pays out and what usage burns, which can be positive or negative depending on how busy the network is. Unlike Bitcoin, Ethereum has no fixed cap; it has a floating schedule with a demand-linked sink.
Scaling has been pursued by moving execution off the base layer rather than by enlarging it. Rollups process transactions in bulk elsewhere and post compressed data and proofs back to Ethereum, which settles them. The base layer's job in that design is to be the place where disputes are resolved and data is guaranteed to be available — a settlement and data layer rather than a general-purpose computer. Most activity a reader encounters now happens on a rollup, and the fees are correspondingly lower.
For anyone assessing the asset rather than the technology, the honest summary is that ether is a claim on the network's fee revenue and its staking issuance, with no redemption promise and no issuer. It is also the collateral of choice across most of decentralised finance, which means demand for it is entangled with the health of applications built on top — a dependency that cuts in both directions.