Ether, like other cryptocurrencies, makes use of a decentralized digital ledger to record all ether transactions. It is open to the public, completely transparent, and very impossible to change retrospectively. This is referred to as the blockchain, and it is formed via the mining process.

Miners are responsible for confirming clusters of ether transactions to create ‘blocks’ and cryptographically protecting them via the use of complicated algorithms. New blocks are then added to the chain of previous blocks, and the miner gets a ‘block reward’ – a predetermined quantity of ether tokens. 

-The miner gathers recent bitcoin transactions into a ‘block.’
-The block is cryptographically encrypted and connected to the current blockchain.
-The miner is rewarded with a block reward, which they may immediately reinvest in the market.

While the Ethereum blockchain is quite similar to that of bitcoin, its programming language allows developers to create software that manages and automates certain blockchain transactions. This kind of software is referred to as a smart contract.

If a typical contract spells forth the conditions of a relationship, a smart contract guarantees its fulfillment by encoding them in code. It is software that automatically executes the agreement upon the fulfillment of predetermined criteria, obviating the time and cost associated with manually concluding a contract.

To illustrate, an Ethereum user may construct a smart contract instructing it to transmit a certain quantity of ether to a buddy on a specified date. They would include this code into the blockchain, and once the contract is fulfilled – that is, the agreed date is reached – the ether would be immediately delivered to the other party.