Ethereum's architecture describes how the network is built, how data is processed, and how Smart Contracts are executed — all in a decentralised way.
At its core, Ethereum combines a blockchain data structure with a global execution environment called the EVM (Ethereum Virtual Machine). This combination makes it possible to run programmable logic — not just transfer value — without any central authority.
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The system is designed to unite three properties that normally conflict: Security, Decentralisation, and Programmability. Understanding how it does this is the core of this lesson.
This is what separates Ethereum from Bitcoin: Bitcoin is a ledger for value. Ethereum is a programmable world computer.
Read, then continue
Step 2 of 10 · Architecture Overview
🏗️ The 4 Layers of Ethereum
Ethereum consists of several logically separate but tightly connected layers. Each has a distinct role. Click any layer to see its key responsibility.
Execution
Execution Layer (EVM)
Runs Smart Contracts · Processes Transactions
The biggest difference vs Bitcoin. The EVM is a global, deterministic "computer" — it runs the same code identically on all nodes and ensures everyone reaches the same result.
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Consensus
Consensus Layer (PoS)
Determines which block is valid · Validators, not Miners
Since The Merge (2022), Ethereum uses Proof of Stake. Validators stake ETH to secure the network. Tasks: block validation, maintaining final state, protection against attacks like double spending.
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Data
Data Layer (Blockchain / State)
Stores transactions, balances, Smart Contracts
Ethereum stores not just transactions but the entire state of all accounts. It consists of blocks (chronological) and the global state. Key insight: this is an account-based model, not UTXO like Bitcoin.
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Network
Network Layer (P2P)
Nodes communicate directly · No central server
Nodes are distributed globally. They communicate peer-to-peer. Tasks: forwarding transactions, synchronising the blockchain, propagating new blocks.
Click each layer to expand it
Step 3 of 10 · Execution Layer Deep-Dive
⚙️ The Ethereum Virtual Machine
The EVM is Ethereum's engine. It's a global, deterministic computing machine — the same code runs identically on every single node worldwide.
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Deterministic means: given the same input and state, every node produces exactly the same output. This is what makes trustless execution possible — no node has to trust another.
Here's how a transaction flows through the EVM:
Transaction
→
EVM checks: enough gas? valid signature?
Smart Contract Code
→
EVM executes bytecode instruction by instruction
State change
→
New global state written to blockchain
Every node runs this process independently — and all reach the same new state.
Smart Contracts are compiled to EVM bytecode — a low-level instruction set the EVM can execute. Developers write in Solidity (or Vyper), which compiles to bytecode. Users never see this — they just interact with the contract's functions.
Step 4 of 10 · Account Model
👤 Two Types of Accounts
Ethereum uses an account-based model (unlike Bitcoin's UTXO model). There are exactly two types of accounts:
👛 Externally Owned Account (EOA)
Controlled by a private key (a human)
Can hold ETH balance
Can sign and send transactions
Has a nonce (tx counter)
No code — cannot run logic
→ Your MetaMask wallet is an EOA
📜 Contract Account
Controlled by its own code, not a key
Can hold ETH balance
Cannot initiate transactions — only react
Has code hash + storage
Executes automatically when called
→ Uniswap, Aave, every DeFi protocol
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Only EOAs can initiate a transaction. Contract accounts can only execute code in response to being called — by an EOA or by another contract. This chain of calls is how complex DeFi interactions work.
Step 5 of 10 · Data Layer
🗂️ Ethereum as a State Machine
Ethereum is best understood as a global state machine. The entire network maintains one shared state — a snapshot of every account's balance, code, and storage.
Every transaction transitions this state. The blockchain is the ordered record of every state transition ever made.
0xabc...123 (EOA)
Balance4.2 ETH
Nonce47
Code∅
0xdef...456 (Contract)
Balance128 ETH
Nonce1
Code0x6080...
Storagepool data
0x789...ghi (EOA)
Balance0.08 ETH
Nonce3
Code∅
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Key difference from Bitcoin: Bitcoin only stores transaction history (UTXO). Ethereum stores the current state of every account. This makes complex applications possible but requires significantly more storage.
Step 6 of 10 · Execution Economics
⛽ Gas — The Fuel of Ethereum
Every operation on Ethereum costs Gas — a unit measuring computational effort. Gas prevents infinite loops, spam attacks, and ensures the network stays fair.
You pay Gas in ETH. The price (Gas Price, in Gwei) floats with network demand. Total fee = Gas used × Gas price
Gas Costs by Operation Type
ETH Transfer
21,000
Token Transfer (ERC-20)
~65,000
Uniswap Swap
~130,000
Deploy Contract
~500,000+
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Since EIP-1559, Gas works differently: there's a base fee (burned, removing ETH from supply) plus a priority fee (tip to validators). This made fee estimation more predictable and added deflationary pressure to ETH.
Step 7 of 10 · Consensus Layer
🔀 The Merge — PoW → PoS
In September 2022, Ethereum completed The Merge — transitioning from Proof of Work to Proof of Stake. This was one of the most significant upgrades in blockchain history.
⛏ Proof of Work (before)
⚡Miners compete to solve puzzles
🔋Extremely energy intensive
💻Requires specialised hardware (ASICs)
🌍~112 TWh/year energy consumption
🔒Secure but wasteful
✦ Proof of Stake (after)
💰Validators stake 32 ETH to participate
🌿~99.95% reduction in energy use
🖥️Runs on consumer hardware
⚔️Slashing punishes dishonest validators
🔒Secure + economically aligned
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Slashing is PoS's security mechanism: if a validator tries to cheat (e.g. sign conflicting blocks), a portion of their staked ETH is destroyed. Bad behaviour becomes extremely expensive.
Step 8 of 10 · Interactive · Transaction Flow
🔁 How a DeFi Transaction Actually Executes
When you swap tokens on Uniswap, it looks like one action — but it triggers a chain of contract calls. Let's trace what actually happens:
0 / 6 steps revealed
Reveal all 6 steps first
Step 9 of 10 · Interactive · Term Matching
🧩 Match the Concept to its Definition
Six core Ethereum concepts — match each to its correct definition. Click a term, then click the correct slot.
Step 10 of 10 · Final Check · Key Learnings
✅ True or False — Final Check
Key Learnings
Ethereum's architecture has 4 layers: Network (P2P), Consensus (PoS), Data (State), and Execution (EVM).
The EVM is a global, deterministic machine — every node runs identical code and reaches the same state.
Two account types: EOAs (human-controlled, key-signed) and Contract Accounts (code-controlled, reactive).
Ethereum is a state machine — every transaction transitions the global state of all accounts.
Gas measures computational effort and prevents spam. EIP-1559 burns base fees, adding deflationary pressure.
The Merge (2022) replaced Proof of Work with Proof of Stake — 99.95% energy reduction, slashing replaces hashpower.
Account-based model (vs Bitcoin's UTXO) stores full current state, enabling complex applications.
DeFi transactions trigger chains of contract calls — one user action can involve dozens of contracts.
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Lesson Complete!
You've mastered Ethereum Architecture — from the 4-layer structure to the EVM, account model, state machine, Gas economics, and The Merge.
🏗️ 4-Layer Architecture⚙️ EVM Execution👤 Account Model⛽ Gas Economics🔀 The Merge🏆 Advanced · Complete