Question 1

What is ETH, and what role does it play in Ethereum?

Accepted Answer

ETH (Ether) is Ethereum’s native asset: it is both the settlement asset used to pay Gas when executing transactions and smart contracts, and the asset staked to constrain validator behavior under proof of stake (PoS). ETH is not an ERC-20 token issued by an ordinary contract on Ethereum; the protocol directly records accounts’ native ETH balances. ETH therefore links network use and network security. Users consume computing resources and pay fees in ETH when calling contracts, transferring funds, or deploying contracts; independent validators must deposit ETH into the protocol-designated deposit contract to participate in block proposals and attestations.

Question 2

How are Ethereum Gas fees calculated, and why must ETH be used to pay them?

Accepted Answer

Ethereum transaction fees are priced according to the Gas actually consumed and paid in ETH. Gas measures the computing resources required to execute an operation; it is not an amount of ETH. A user’s final fee can generally be understood as: actual Gas used × (base fee + priority fee). The gas limit in a transaction is the maximum amount of Gas the sender reserves for execution, while gas used is the amount actually consumed; unused Gas does not become part of the final fee. Under EIP-1559, the protocol automatically adjusts the base fee according to the previous block’s Gas use relative to target capacity; the priority fee is an additional tip offered by the user to increase the incentive for inclusion in a block. Users can also set a maximum total price per unit of Gas to cap the price they are willing to bear. Thus, more complex contract logic usually requires more Gas, while network congestion affects the cost per unit of Gas through the base fee. The amount of ETH transferred and the execution fee paid are separate: even a very small transfer requires sufficient native ETH to pay for Gas.

Question 3

How does ETH staking participate in Ethereum validation, and where do rewards and risks come from?

Accepted Answer

Ethereum uses proof of stake: validators provide staked ETH as economic collateral, check blocks, submit attestations, and propose blocks when selected pseudo-randomly. Running an independent validator requires depositing at least 32 ETH into the deposit contract; people holding less ETH may use pooled or delegated services, but those are service-provider arrangements and do not make them independent validators directly through the protocol. When a validator is required to perform duties in a slot, promptly validating and attesting to correct blocks can earn protocol-issued ETH rewards; when selected as a proposer, it can also earn corresponding rewards for including valid attestations. Rewards are not a fixed rate: they depend on effective balance, the total number of active validators, whether the validator is selected, and duty performance. Being offline or missing duties loses rewards and may incur penalties; provable violations such as double proposals or contradictory attestations trigger more serious slashing. This design means that an attacker seeking to influence consensus must bear the cost of locking up, and potentially losing, substantial ETH, while honest validators that remain online receive rewards.

Question 4

Why does ETH supply change, and how are fee burning and issuance related?

Accepted Answer

ETH has no fixed maximum supply. Its supply is determined jointly by issuance created as validator rewards and base-fee burning. When validators perform consensus duties such as proposing blocks and attesting, the protocol creates new ETH as rewards; when transactions are included in blocks, their base-fee portion is permanently burned by the protocol. EIP-1559 provides that the base fee does not go to the block proposer but is burned; only the priority fee is paid to the fee recipient associated with block proposal. Therefore, increased network use does not necessarily reduce total ETH, but if base fees burned during a period exceed validator-reward issuance during that period, net supply decreases; the reverse is also true. Supply changes also depend on issuance-side conditions such as the scale of staking and validator duty performance, so they cannot be judged solely from transaction count or one day’s Gas price.

Question 5

How did the 2022 Merge change ETH creation and participation?

Accepted Answer

The Merge was completed on September 15, 2022, moving Ethereum mainnet from proof of work (PoW) to proof of stake (PoS). Previously, miners competed with computing power to produce blocks; afterward, validators with staked ETH became responsible for proposing blocks and attesting to chain state, and mining was no longer a valid way to produce mainnet blocks. This was not an ETH swap or migration event: ordinary ETH holders and non-node stakers did not need to replace their assets or wallets because of the Merge. What it changed was the consensus and issuance structure—execution-layer block rewards paid to miners in the PoW era stopped, and new protocol issuance was mainly used to reward PoS validators. Ethereum’s official materials state that this significantly reduced new ETH issuance. The Merge also shifted the principal cost of network security from ongoing computing-power consumption to ETH that is locked and exposed to slashing risk.

Question 6

How can staked ETH be withdrawn after the Shanghai/Capella upgrade?

Accepted Answer

After the Shanghai/Capella (Shapella) upgrade was activated on mainnet on April 12, 2023, validators could withdraw staked ETH from the consensus layer to execution-layer addresses. Before the upgrade, validators could stake and earn rewards, but could not retrieve those balances through the protocol into directly tradable execution-layer accounts. Withdrawals have different cases: validators with valid withdrawal credentials can transfer the portion of their balance above their effective staked balance under the rules; to retrieve a full validator balance, they must first initiate a voluntary exit and wait for the protocol’s exit queue and withdrawal processing. The exit queue changes with network demand at the time, and exists to prevent many validators from leaving simultaneously and weakening network stability. This differs from selling a liquid-staking token on a secondary market: in the first case, a validator exits and withdraws its own staked balance at the protocol layer; in the second, a holder sells a token issued by a third party to a market buyer, with price and liquidity determined by that token and its market.

Question 7

What practical impact do Dencun and EIP-4844 have on ETH and layer-2 networks?

Accepted Answer

The Dencun upgrade activated EIP-4844 (Proto-Danksharding) on March 13, 2024, introducing a transaction type that carries temporary blob data. Its primary target is rollups: a rollup can publish proofs or compressed transaction data to blob space instead of using entirely more expensive permanent calldata. Blob data is pruned from the network after about 18 days, while applications can still verify relevant data through commitments and proofs. This design created a separate fee market for rollup data availability, so rollups that use blobs may reduce their cost of publishing data to mainnet, which may be passed through as lower fees for their users. This does not mean Gas for every Ethereum mainnet transaction automatically becomes cheaper, nor does it require ETH holders to swap or migrate assets. Actual layer-2 fees still depend on whether a rollup adopts blobs, the blob fee market, and its own pricing method.

Question 8

What is the difference between ETH and WETH, and why is wrapping needed?

Accepted Answer

ETH is the protocol’s native asset; WETH (Wrapped Ether) is an ERC-20 representation managed by a smart contract and backed 1:1 by ETH. After a user deposits ETH into the WETH contract, the contract mints an equal amount of WETH; upon redemption, WETH is burned and an equal amount of ETH is released. Wrapping is needed because native ETH predates the ERC-20 standard and does not have that standard interface. Many decentralized applications need to handle assets through a uniform ERC-20 interface and therefore use WETH. Regardless of how much WETH one holds, native ETH must still be retained to pay Gas on Ethereum mainnet; WETH itself cannot natively pay Gas. Their risk boundaries also differ: ETH balances are managed by the Ethereum protocol, whereas WETH minting, redemption, and token balances additionally depend on the specific contract being used. Different chains or applications may have different WETH implementations, so the name alone does not establish that they are the same contract.

Question 9

How is ETH divided, and what are wei and gwei?

Accepted Answer

ETH is divisible, with wei as its smallest unit: 1 ETH = 10^18 wei. Gas prices are commonly expressed in gwei: 1 gwei = 10^9 wei = 10^-9 ETH. This unit system lets the protocol settle very small fees and balances precisely. For example, the price per unit of Gas in a fee calculation is commonly displayed in gwei, but a wallet ultimately converts “actual Gas used × price per unit of Gas” into ETH or wei for deduction. Rounding of the displayed amount does not change the actual on-chain accounting result in wei.

Ethereum (ETH) Price