What is Ethereum?

Ethereum in everyday terms

Ethereum is an open network on which people can build applications. A lending app, for example, can use smart contracts¹: programs that apply agreed rules to digital assets. Bitcoin chiefly provides a network for holding and transferring BTC; Ethereum also lets applications run on a shared network. BNB Smart Chain runs Ethereum-compatible apps on a separate network.

Ethereum was proposed in 2013² and launched in July 2015³. People other than its founders can build and use applications on it.

Why an Ethereum app uses ETH

Ether, or ETH, is Ethereum's native crypto-asset. Users pay network fees in ETH⁴, even when an application moves something else. If someone sends a stablecoin on Ethereum, the recipient gets that stablecoin while the sender pays ETH for the network work. Many of these assets use the ERC-20 standard⁵.

Fees vary with the work involved and demand for network capacity. Part of the fee is removed from circulation⁶; a possible additional fee goes to the validator. ETH also has a staking role. These mechanisms matter when studying ETH, but application use alone cannot determine its market price. The stablecoin guide covers the asset being transferred in the example.

Who confirms transactions?

Ethereum moved from mining to proof of stake in September 2022⁷. Validators stake ETH to help confirm blocks; running a validator independently requires at least 32 ETH⁸. That threshold applies to independent validation, not to buying ETH.

ETH directly or through an ETP

ETH in a personal wallet can pay fees and interact with Ethereum applications. Virtune Staked Ethereum ETP instead gives ETH price exposure through a security, without the investor managing keys or staking. It is physically backed by ETH held as collateral⁹; the investor owns the ETP, not ETH in a personal wallet.

Staking takes place within the product. Under its Final Terms, the issuer and staking provider may together take up to 25% of staking rewards earned¹⁰; the remainder is added within the ETP. Rewards vary and may not arise. There is no separate interest payment to the investor's account.

Costs when buying Virtune Staked Ethereum ETP

Cost	Charged by	When
Brokerage commission	Broker	On every purchase and sale
Difference between bid and ask price	Market	On every trade
Management fee, 1.40% per year	Issuer	Ongoing, from the product's value
Currency conversion	Broker, if applicable	If the product trades in another currency

Risks to understand

ETH's price can fall sharply, and physical backing does not protect against that fall. Staking adds risks, including validator failures that may reduce staked ETH. The prospectus describes these staking risks¹¹. The ETP also carries issuer, custody and exchange-trading risks. It trades during exchange hours while ETH moves around the clock. Crypto-assets can lose substantial value¹², as European authorities warn.