The current Ethereum uses proof-of-work mining, which uses the same mining process as Bitcoin. Basically, miners use their processing power to solve complex encryption puzzles, thereby competing for the next block in the chain.
Ethereum will eventually use the Casper protocol to turn to proof of stake. POS is more environmentally friendly than POW and has higher scalability.
main problem
There is no doubt that Ethereum has had a huge impact on the crypto world, but its performance has some major problems. So far, Ethereum has failed in scalability. They can only manage 25 transactions per second, which is not ideal for Dapps that want mainstream adoption. Most importantly, Ethereum can be expensive for developers. The gas price for executing dapps may already fly to the sky.
In addition to this, there is another issue that will affect Ethereum and other cryptocurrencies. The issue is interoperability. As of now, if Alice owns Bitcoin and Bob owns Ethereum, there is no simple and direct way to interact between the two. This is a very big problem, because in the future, there may be thousands of blockchains running in parallel, and there should be a way for them to interact seamlessly with each other.
One project that aims to solve this interoperability problem is Cosmos.