Simplifying Ethereum

Most times, people new to the ecosystem tend to think Ethereum is just a cryptocurrency, but it is more; it is a programmable blockchain that allows developers to build decentralized applications without relying on a central authority.

To truly understand how Ethereum works, these are a few core concepts one must know:

• Accounts

• Transactions

• The Ethereum Virtual Machine

• Gas

• Blocks

This article explains them from my perspective.

Let us walk through it step by step.

ETHEREUM STARTS WITH ACCOUNTS

Everything on Ethereum begins with an account. These accounts are of two types:

1. Externally Owned Accounts (EOAs)

2. Contract Accounts

What do these accounts actually mean or do?

EXTERNALLY OWNED ACCOUNTS

These are controlled by private keys and belong to users. What this basically means is that without these private keys, one cannot have access to their account. They are mostly referred to as EOAs, and they can:

• Send transactions

• Hold ETH

• Interact with smart contracts

Wallets like MetaMask manage EOAs.

CONTRACTS ACCOUNTS

These are smart contracts deployed on Ethereum; they live on the blockchain and contain code. They do not have private keys. Instead, they execute code when triggered by a transaction or another contract.

Both account types can hold ETH and interact with each other, but only EOAs can initiate transactions.

TRANSACTIONS ARE HOW STATE CHANGES

A transaction is a request to change Ethereum’s state. These are the only ways to change Ethereum’s state.

This could be:

• Transferring ETH

• Deploying smart contracts

• Calling functions inside an existing contract

Each transaction includes:

• The sender

• The recipient

• The amount of ETH

• Gas limit and gas price

• Optional data for contract interaction

When a transaction is created, it does not execute immediately. It is first broadcast to the network and placed in the mempool, where validators can see it and select it for inclusion in a block. After confirmation, the transaction becomes irreversible.

THE EVM EXECUTES TRANSACTIONS

The Ethereum Virtual Machine, or EVM, is the engine that runs Ethereum; it is the environment where transactions are executed.

Every Ethereum node runs the EVM, which ensures that transactions are processed the same way everywhere. This is what makes Ethereum trustless. When a validator includes a transaction in a block, the EVM executes it step by step.

Smart contracts are written in languages like Solidity, but they are not executed directly. Instead, they are compiled into bytecode that the EVM understands. If it is a simple ETH transfer, the EVM updates account balances. It is the EVM that determines whether the transaction succeeds or fails.

GAS PAYS FOR EVM COMPUTATION

Gas is how Ethereum measures the cost of computation.

Each instruction the EVM executes consumes a specific amount of gas. Simple actions use little gas, while complex smart contract logic uses more. The sender of a transaction pays for this gas using ETH.

Gas ensures two things:

• The network remains secure and efficient

• Validators are compensated for their work

Read more about validators

If a transaction runs out of gas while the EVM is executing it, the execution stops, and the state changes are reverted. However, the gas spent is still lost, because the network already did the work.

BLOCK RECORDS WHAT HAPPENED

Ethereum is a blockchain, which means executed transactions are stored in blocks linked together in order.

Validators bundle executed transactions into blocks.

Each block contains:

• A list of transactions

• A reference to the previous block

• Metadata such as gas usage and timestamps

When a block is finalized, the results of all transactions inside it become part of Ethereum’s permanent history. Account balances are updated, contract storage changes are saved, and the global state moves forward.

These blocks are produced by validators under Ethereum’s Proof of Stake system.

Because blocks are linked together, altering past data is practically impossible. This is what gives Ethereum its immutability.

TLDR;

An account creates a transaction.
The transaction is executed by the EVM.
The EVM consumes gas to perform computation.
The result is included in a block.
The block updates the state of all accounts.

Nothing on Ethereum happens outside this flow. Ethereum works because its core pieces fit together with precision.

Once you understand these fundamentals, smart contracts and decentralized applications starts making a lot of sense.

If you are learning Ethereum development, mastering these basics is not optional. and I hope reading from my point of view will help.