Accounts are the main building blocks for the Ethereum ecosystem. It is an interaction between accounts that Ethereum wants to store as transactions in its ledger. There are two types of accounts available in Ethereum—externally owned accounts and contract accounts. Each account, by default, has a property named balance that helps in querying the current balance of Ether.

Externally owned accounts are accounts that are owned by people on Ethereum. Accounts are not referred to by name in Ethereum. When an externally owned account is created on Ethereum by an individual, a public/private key is generated. The private key is kept safe with the individual while the public key becomes the identity of this externally owned account. This public key is generally of 256 characters, however, Ethereum uses the first 160 characters to represent the identity of an account.

If Bob, for example, creates an account on an Ethereum network—whether private or public, he will have his private key available to himself while the first 160 characters of his public key will become his identity. Other accounts on the network can then send Ether or other cryptocurrencies based on Ether to this account.

An account on Ethereum looks like the one shown in the following screenshot:

An externally owned account can hold Ether in its balance and does not have any code associated with it. It can execute transactions with other externally owned accounts and it can also execute transactions by invoking functions within contracts.

Contract accounts are very similar to externally owned accounts. They are identified using their public address. They do not have a private key. They can hold Ether similar to externally owned accounts; however, they contain code—code for smart contracts consisting of functions and state variables.