Ethereum is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of fraud or third party interference.

In Ethereum, all transactions are public and recorded on a blockchain, a shared digital ledger. This gives developers the ability to create markets, store registries of debts or promises, move funds in accordance with instructions given long in the past (like a will or a futures contract) and many other things that have not been invented yet, all without a middleman or counterparty risk.

The Ethereum network is kept running by miners, nodes which do the computationally-intensive work of validating and relaying transactions across the network. Miners are rewarded with ether for each successful block they mine.

This provides the economic incentive for people to dedicate hardware and electricity to the Ethereum network.

Ethereum’s native token, ether, is mined through a Proof of Work algorithm like Bitcoin. However, Ethereum plans to move to a Proof of Stake algorithm called Casper in the future.

In Proof of Stake, miners are not rewarded with more ether for validating blocks; instead, they earn interest on their ether holdings.

The amount of ether in circulation is not capped like Bitcoin, but it is subject to inflationary pressure due to the issuance of new tokens to miners as rewards. The annual inflation rate is currently around 18%, but it is expected to decrease over time as Ethereum moves from Proof of Work to Proof of Stake.

As of September 2018, there are about 105 million ether tokens in circulation, with a market capitalization of over $20 billion. The vast majority of ether tokens are held by speculators and investors, with only a small fraction used for actual transactions on the Ethereum network.