Similar to all cryptocurrencies like Bitcoin, Ethereum works with the foundation of a blockchain network. Blockchains are decentralized, distributed public ledger where all transactions are recorded and verified. How this distribution works is that everyone participating in the Ethereum network holds onto a ledger which is identical to all. This ledger allows them to view all transactions that have occurred. This network is deemed to be decentralized because instead of being managed by a centralized system, it is operated by all these ledger holders.
In order to uphold a secure network and verify transactions, blockchains use cryptography. People on the blockchain solve complex mathematical equations or “mine” that confirms and verifies a transaction on the network, adding new blocks to the blockchain. This confirmation is then added to all the ledgers of the distributed holders. These “miners” are incentivized through cryptocurrency tokens, in this case Ether, which are awarded to them for adding to the blockchain. Through this, they effectively unlock coins or fractions of coins.