What is Ethereum (ETH) and how is it different from Bitcoin?

Ethereum and Bitcoin serve different purposes. Bitcoin is primarily used as a digital currency and store-of-value asset. Ethereum is a programmable blockchain that supports smart contracts and applications. Both assets carry risks, including volatility, technical risk, and custody/security considerations.

What “Ethereum” actually refers to:

People use “Ethereum” to mean two related things:

• Ethereum (the network): the blockchain and rules that participants follow to validate transactions and run smart contracts.
• Ether/ETH (the asset): the unit of value used to pay for transactions and activity on the network.

Essentially, Ethereum is a shared and public computing platform. The currency, ETH, is what users pay to interact with it.
 

An Ethereum wallet is a tool that lets users manage access to ETH and other assets that live on the Ethereum network. It stores or protects the information used to authorize transactions, often referred to as cryptographic keys.

Ethereum wallets are also used to interact with smart contracts and decentralized applications. By contrast, a Bitcoin wallet is designed with a payment-focused scope.

Like a Bitcoin wallet, an Ethereum wallet does not store the token itself. Ownership is recorded on the public blockchain. The wallet is merely a tool that provides access and control.
 

Purpose
Ethereum is a programmable blockchain used to support applications and automated logic. Bitcoin was created to act as a decentralized form of digital money.

Technology
Ethereum’s technology consists of a flexible programming environment. It allows for complex applications to be built on scale on its network. Bitcoin’s scripting system is intentionally limited to prioritize security and stability.

Supply model
Ethereum does not have a fixed supply cap. Instead, issuance and transaction-fee mechanisms are governed by network rules and upgrades. By contrast, Bitcoin has a fixed maximum supply of 21 million BTC.
 

Ethereum is associated with smart contracts, decentralized applications, and token-based systems. Examples include:

• Platforms like Aave allow users to lend or borrow crypto through smart contracts.
• Value-Referenced Crypto Assets (VRCAs) like the USD Coin (USDC) operator on Ethereum.
• Ethereum supports non-fungible tokens (NFTs) that trade on marketplaces like OpenSea.
• Decentralized exchanges like Uniswap let users swap tokens directly rather than a traditional order-book system.

These examples are illustrative only and do not represent endorsements or recommendations. Ethereum-based activity involves market and technical risk.
 

A smart contract is a program stored on a blockchain. It is built to automatically execute when predefined conditions are met. Once deployed, a smart contract runs as written and does not rely on a central authority to operate.

Smart contracts are used for a range of on-chain activity, but they also introduce technical risk, including coding errors or unintended behavior.
 

Yes. Canadians can buy, sell, and hold Ethereum. Like Bitcoin, Ethereum is not legal tender in Canada and is not issued or overseen as currency by the government of Canada.

Canadian securities regulators have cautioned that crypto assets are high-risk and have encouraged Canadians who choose to trade crypto to use platforms registered with Canadian securities regulators.
 

Owning Ethereum, like any asset, is never risk-free. Buying Ethereum in Canada presents risks that can be reduced, but not eliminated, by using reputable, regulator-aligned services and following good security practices.

Canadian regulators have cautioned that crypto assets are high-risk and can be volatile. Using unregistered platforms can add additional risks because user safeguards may be absent. When evaluating “safety,” it helps to separate market risk from platform and personal security risk.

Market risk (i.e., price volatility) can’t be removed by any platform. Platform risk can be reduced by choosing services that are transparent about fees, custody, and account protection.

Crypto assets are not covered by the Canadian Investor Protection Fund (CIPF) or deposit insurance. Ndax operates within Canadian regulatory requirements.
 

No. Ethereum and other cryptocurrencies are not qualified investments for registered plans under Canada Revenue Agency guidance.

Some Canadians choose to gain ETH price exposure in their registered accounts by using certain Ethereum-related ETFs or funds. Holding an ETF is not the same as holding ETH directly on a blockchain.
 

The total cost of buying Ethereum involves several components. These may include a trading fee, bid-ask spread, and potential withdrawal or network fees.

Ethereum transactions also involve network fees, often referred to as “gas fees.” These fees are paid to the Ethereum network for processing transactions and smart-contract interactions and can vary based on network demand.

Ethereum works globally because many independent computers agree on the state of the blockchain and the results of smart-contract execution.

The blockchain
Ethereum’s blockchain is a public ledger that records transactions and smart-contract activity in blocks. Each block is linked to the prior one. This helps prevent records from being altered without detection.

Transactions and confirmations
When a user sends ETH or interacts with a smart contract, the transaction is broadcast to the network and included in a block. Confirmations increase as additional blocks are added. This is meant to improve confidence in finality. 

Validators and proof of stake
Ethereum uses a proof-of-stake consensus system. Validators participate in securing the network under protocol rules. This differs from Bitcoin’s proof-of-work mining model.
 

Ethereum’s price, like any asset, is determined by what buyers and sellers are willing to pay at any given moment.

The most commonly cited reasons why users recognize value in Ethereum include:

• Utility: ETH is used to pay for network activity.
• Programmability: Ethereum supports smart contracts and applications.
• Network effect: Widespread developer and application usage.

Skeptics may point to volatility, technical complexity, competition from many other large networks, and regulatory or policy risk.
 

Ethereum is not truly anonymous. All transactions are recorded on a public ledger. While addresses do not include a user’s name, identities can sometimes be linked to addresses through real-world activity.

Is Ethereum safe to buy in Canada?
“Safety” depends on market volatility, platform practices, and individual security habits. But, Ethereum can be bought legally in Canada.

Can I buy Ethereum in my TFSA or RRSP?
No. CRA guidance states cryptocurrencies like ETH are not qualified investments for registered plans.

Who created Ethereum?
Ethereum was proposed by a developer named Vitalik Buterin and was launched in 2015 by a group of contributors. Buterin remains the public face of Ethereum and heads its research efforts.

Can I buy less than one ETH?
Yes. Ethereum is divisible. Buying a fraction of an ETH is common.

What are gas fees?
Gas fees are network fees paid to the Ethereum network for processing transactions and smart-contract interactions. Fees vary based on network demand and transaction complexity.

Is Ethereum anonymous?
No. Ethereum is considered pseudonymous because all transactions are recorded on a public ledger.

Does Ethereum’s supply model guarantee the price will go up?
No. Supply design is one factor. Price depends on market demand and many other factors.

Next lesson in Crypto 101 for Canadians: What is a blockchain?