Ethereum, smart contracts and proof of stake

7 minute read · By Krishna Avadhani, Vestora Academy · Updated 18 October 2026

Ethereum, launched in 2015, adds smart contracts: programs that run on the blockchain and move funds automatically when conditions are met. They power tokens, decentralised exchanges, lending protocols and NFTs.

In September 2022 Ethereum switched from proof of work to proof of stake ("the Merge"). Validators lock up (stake) ether as collateral and earn rewards for honest validation; misbehaving validators can lose part of their stake.

Layer-2 networks (rollups) process transactions off the main chain and post compressed proofs back to it, cutting fees. Other smart-contract chains include Solana, Cardano and Avalanche, each with different trade-offs between speed, cost and decentralisation.

Key takeaways

Smart contracts are programs that hold and move value.
Ethereum moved to proof of stake in 2022.
Layer-2 rollups make transactions cheaper.

Check your understanding

1. What did "the Merge" (2022) change?

Ethereum's supply cap
Ethereum moved from proof of work to proof of stake
Bitcoin's halving
Ethereum became a stablecoin

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Ethereum moved from proof of work to proof of stake. Validators replaced miners.

2. In proof of stake, validators secure the network by...

Mining with GPUs
Locking up coins as collateral
Paying banks
Voting by email

Show the answer

Locking up coins as collateral. Staked coins can be slashed for misbehaviour.

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