FOLLOW THE MECHANISM
- 1Account
Holds native balance, nonce and possibly code.
- 2Transaction
Authorizes a proposed state change.
- 3Execution
- 4Consensus
Validators and nodes agree on the accepted history.
A conceptual sequence. Real implementations can add steps, intermediaries, and conditions.
The ledger stores changing state
Ethereum records account balances, nonces, code and contract storage. Transactions change that state according to the protocol’s execution rules. This differs from Bitcoin’s unspent-output accounting. An ordinary key-controlled account authorizes transactions with signatures, while contract accounts execute code when called. Modern account features can add delegated or programmable behavior, so a familiar address format alone does not tell you every permission associated with an account.
Execution is shared and metered
The Ethereum Virtual Machine provides the execution environment for contract code. Validating nodes reproduce the relevant computation and check the resulting state. Gas meters resources, and fees are paid in ETH at the protocol level. An application can arrange to sponsor or reimburse fees, but the network’s resource charge still exists. Shared execution allows contracts to interact while also creating dependencies between applications.
Consensus chooses and finalizes history
Ethereum uses proof of stake. Execution clients check transactions and state transitions; consensus clients follow the chain and finality rules; validator software performs stake-backed duties. Running an application or holding a token does not make someone a validator. The network’s consensus secures valid execution, but it does not certify that a particular lending contract, token issuer or oracle is economically sound.
One network hosts many asset types
ETH is the native asset. An ERC-20 token is usually a balance and transfer system implemented by a contract, potentially with minting, freezing or upgrade powers. A token on a rollup or another chain has a separate execution context even if the ticker is identical. Understanding an Ethereum application therefore requires its network, contract, permissions and dependencies, not simply the claim that it “uses blockchain.”
MAKE IT CONCRETE
One address, several balances
Suppose an illustrative address holds 2 ETH and 100 tokens issued by a contract. Its ETH is recorded in native account state; the token balance is tracked by the token contract. A transfer restriction in that token contract can block moving the 100 tokens while the ETH remains transferable. Sharing an address does not make the two assets obey identical rules.
FAILURE PATHS & COMMON MISREADINGS
Where the model can break
KEEP EXPLORING