How Ethereum Works: Gas, Smart Contracts & Finality
By The Block Research
Ethereum • **October 16, 2026, 9:31AM EDT
Intermediate
UPDATED: October 16, 2026, 9:33AM EDT
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Ethereum is more than a network for sending ETH. It is a programmable Layer 1 blockchain where state, transactions, consensus, gas, smart contracts, token standards, and wallet design all work together to maintain a shared global system.
This guide delves into how Ethereum operates under the hood and explores how other Layer 1 networks approach similar design challenges.
LEARN
- How Bitcoin Works (Intermediate)
- See more in learn: Bitcoin
What you’ll learn
- Differing approaches to state management between Ethereum and Bitcoin's UTXO model
- The lifecycle of a transaction: creation, signing, propagation, validation, inclusion, and finalization
- How proof-of-stake finality works through slots, epochs, checkpoints, and attestations
- The role of gas, EIP-1559, base fees, and priority fees in shaping transaction costs
- Deployment and execution of smart contracts on Ethereum
- Token standards (ERC-20, ERC-721, ERC-1155) for interoperability
- Account abstraction and ERC-4337 for improved wallet flows
- Comparisons of Ethereum with alternative Layer 1 blockchains
Learning outcomes
By the end of this course, learners should be able to:
- Explain how Ethereum’s core systems (state, transactions, consensus, and gas) work in harmony to support the network.
- Trace the journey of a transaction from creation to finalization.
- Describe how smart contracts and token standards extend Ethereum’s base layer into a programmable economy.
- Compare Ethereum’s design choices with other Layer 1 blockchains using performance, security, and decentralization trade-offs.
Course lesson summaries
(Note: Due to the Markdown conversion, the specific lesson summaries are not included as they were in the original HTML. These would typically be presented as concise overviews of each topic covered in the course.)