With a current market cap (as of the afternoon of April 17) of $360 billion, Ethereum (CRYPTO: ETH) is the world's second most valuable cryptocurrency. It's behind only Bitcoin when it comes to market domination.

Just in the past five years, Ethereum's native token has skyrocketed nearly 1,700% in value. That would have turned an initial $1,000 investment into a jaw-dropping $18,000 balance today.

Ethereum has also been on a fantastic run since the start of 2023, benefiting from the broader crypto market's rally. But this digital asset remains 36% off its high. Before you rush to buy the dip, here are three things you should know about Ethereum.

Aiming to boost functionality
Ethereum's key characteristic is that it allows for the functionality of smart contracts. These are computer programs that automatically execute once separate parties in a transaction satisfy their ends of the agreement. Think about an escrow account immediately releasing funds as soon as a home buyer meets certain conditions. In theory, Ethereum could handle this without human intervention, which could lower costs.

This feature is what makes this cryptocurrency much more useful when compared to Bitcoin, according to what Ethereum bulls believe. In fact, Ethereum has a sprawling ecosystem of decentralized applications (dApps), ranging from gaming and finance protocols to non-fungible tokens and the metaverse. Smart contracts enable these types of use cases, which could disrupt traditional industry structures.

Given this background knowledge, it's not surprising that Ethereum is often dubbed the "world's decentralized computer."

A sustainable future
Like Bitcoin long has, Ethereum used to operate a proof-of-work consensus mechanism. This is an energy-intensive way to process transactions and secure the blockchain. Estimates point to how Bitcoin's network uses the same amount of energy as a small country.

Believing that this was harmful to the environment and not on a sustainable path, Ethereum's developers successfully transitioned the network to a proof-of-stake (PoS) system in September 2022. After the so-called Merge, in this setup, token owners who lock up their holdings have the right to validate transactions. According to Ethereum's website, the PoS consensus mechanism reduces energy usage by over 99%.