What if a network could do more than record payments - and also execute rules?

A rule can decide what happens to money

Imagine a project wants to raise 10 ETH.

A rule can be written in advance:

If the total reaches 10 ETH, the funds can go to the project.

If the deadline arrives before the goal is reached, contributors can get their money back.

The rule does not live with a manager who has to remember to carry it out.

It lives in a program on the network.

That kind of program is called a Smart Contract.

“Smart” does not mean artificial intelligence, and it does not mean the program is automatically safe or well designed.

It is simply the name used for a program that applies rules on the network.

A transaction can trigger the program

Suppose the project has already collected 7 ETH.

Olivia sends another 3 ETH to the program.

Her transaction triggers the rule.

The computers checking the network run the same calculation:

Previous state: 7 ETH Added: 3 ETH New state: 10 ETH

Now the condition is met.

One important point:

Each computer is not moving its own money.

They are all calculating and checking the same change to the shared record.

The result is stored, and the next action starts from there

Before the transaction, the program recorded 7 ETH.

After it, the program records 10 ETH.

The current information a program keeps is called its State.

A simple way to think about it:

History tells us what happened.

State tells us where things stand now after everything that happened.

The next action starts from that new state.

Because state changes, order still matters

Two transactions may affect the same Smart Contract.

If they run in a different order, the result may also be different.

Ethereum therefore still needs a shared transaction history and an agreed order.

The computers check the same ordered transactions, run the same program, and can reach the same state.

Running programs uses resources

A simple payment requires some work from the computers checking it.

A Smart Contract may perform more calculations and change more data.

Ethereum measures the work required for an operation using Gas.

Gas is a way to measure the computation and resources an operation requires under Ethereum’s rules.

The fee is paid in ETH.

Gas is not simply a fixed “price per transaction”.

Different actions can require different amounts of work.

What about creating the blocks?

That is a separate question from what a Smart Contract does.

Bitcoin uses Proof of Work to create blocks and agree on history.

Ethereum today uses Proof of Stake.

Participants called validators put up ETH as stake and take part in block production and agreement on history.

It helps to separate two questions:

What does the program do?

and

How does the network agree on the history in which the program ran?

This page is mainly about the first question.

So what did Ethereum add?

Ethereum lets a network agree not only on transactions and their order, but also on programs, rules, and data that changes over time.

A transaction can trigger a program.

Computers run and verify the same rules.

The result becomes the new State for the next action.

That means the network can answer more than:

“Who paid whom?”

It can also answer:

“What was the program supposed to do because of this transaction?”

What happens when a lot more people want to do this?

Every transaction has to travel through the network and be checked.

Every program execution requires computation.

And the State can grow over time.

Now imagine millions of people wanting to send payments, run programs, and get answers quickly.

What happens as usage grows - while we still want independent computers to keep up?