WHAT IS ETHEREUM?
The 26-year old founder of the world’s second largest blockchain revolution, Vitalik Buterin defines Ethereum to be
A peer-to-peer network for sending messages and a generalized blockchain with a built-in programming language allowing people to use the blockchain for any kind of decentralized applications that they want to create.
A transaction-based state machine to keep a permanent record of digital transactions. An open-source, decentralized system working on a distributed peer-to-peer network, hence being accessible to all. It lets us use the digital currency without the need for intermediaries.
PIONEER BEHIND ETHEREUM
Vitalik Buterin, a first-year high school dropout joined the Bitcoin community in 2011. Vitalik thought of bringing one smart contract system while making an acquaintance with the Bitcoin community in Israel.
He shares in an interview :
It’s more of like everyone thought that there’s a way up there who is controlling things, and then with file-sharing networks like BitTorrent, the cyberpunk community thought you know, why don’t we do decentralised cash.
On asking the reason for its transformational character in an interview with VICE News, Vitalik says,
They represent the kind of epochal changes in the options that we have for interacting with each other. With Bitcoin, we don’t need banks to send money anymore. It’s just something that happens directly peer-to-peer and Ethereum extends that to making digitally enforceable agreements.
PHASES OF DEVELOPMENT
The phases are made with the vision for its sustainability
Genesis block 0 emerged with the official launch of the public mainnet in 2015.
Vulnerability in the DAO(2016): With the unplanned ‘hard fork’ in 2016 along with the theft of 50 million dollars worth of ETH, creation of Ethereum and Ethereum Classic came into existence.
Constantinople(2019) came up with some refined security enhancements,
Istanbul’s(2019) was the final upgrade with ProgPoW mining algorithm before implementing Serenity.
Ethereum 1x went onto its own series of upgrades to the Ethereum mainnet.
ETHEREUM 2.0 (ETH 2.0)
Serenity phase 0: introducing the Casper protocol where the beacon chain, the heart of ETH 2.0, directing the network’s move from PoW to PoS consensus algorithm staking 32ETH by 2/3 of validators on the next block. On the launch of ETH 2.0, Danny Ryan, researcher of Ethereum Foundation, asserted
The launch of the Beacon Chain is a huge accomplishment and lays the foundation for Ethereum’s more scalable, secure, and sustainable home.
Serenity Phase 1: Sharding will allow the parallel transaction, storing, and processing of information in shard chains supported by the Beacon chain, each of which will be validated by a collection of 128 nodes. A scaling mechanism that divides the network’s transaction among different sets of validators, providing crosslinks by Phase 0 to check and secure the state of shard chains.
Serenity Phase 2: Ethereum-flavored Web Assembly(eWASM), an upgrade from the existing EVM. It allows smart contracts to be written in a variety of coding languages, along with Solidity.
Keeping all the progress ahead, the team will further work on the improvement of a list of issues like light client state protocol, coupling with mainchain security, and super quadratic or exponential sharding.
PROCESSING TRANSACTIONS IN THE ETH BLOCKCHAIN
Externally owned accounts, regulated by private keys do not possess any code whereas, Contract accounts possess code and are modulated by contract code. The accounts send messages by creating and signing transactions using their private key. Two externally owned accounts communicate for a value transfer. On the other hand, an externally owned account and a contract account communicate for activating the contract account’s code to perform various actions like transfer tokens, mint new tokens, create new contracts, etc.
Accounts are small objects in the global shared state of Ethereum. Each account has a state associated with it and a 20-byte address. An address in Ethereum is a 160-bit identifier that is used to identify any account. Ethereum account state consists of four components: nonce, balance, storage root, codeHash.
Ethereum’s global state consists of a mapping stored in a data structure known as Merkle Patricia Tree between account addresses and account states. This tree is required to have a key for every value stored inside it. They store the roothash of every transaction. A transaction-based state machine that will transition to a new state after going through a series of inputs.
ETHEREUM VIRTUAL MACHINE(EVM)
EVM- The stack-based architecture model which executes the processing of the transaction in the Ethereum network. The EVM comes with a Turing complete machine that has the limitation of its amount of gas for a particular validation. Ethereum uses the KECCAK-256 hash.
An application that automatically exchanges transactions between two parties without the need of an intermediary provided the conditions written in the contract are met.
Olga Mack defines Smart Contracts as pieces of code that codifies business logic and at the core, they facilitate three functions:
1.They store rules .
2. They verify rules.
3. They are self-executables.
A concept put forth by Nick Szabo back in 1994. Ethereum’s unique ‘Smart contracts’, analogous to that of a vending machine, where the if…then process is already pre-programmed on the machine. Every contract is pre-programmed, translated into a code, and is distributed among the nodes. If the nodes validate the terms of the contract, the transaction happens automatically.
MINING IN ETHEREUM
PoW consensus algorithm
Also called Ethash(previously Dagger-Hashimoto), mining in PoW consensus demands time and processing power from every miner to solve a cryptographic/mathematical puzzle to add a new block in the chain. If successful in the tedious task, the miners receive a reward in the form of a native digital token, Ether.
Miners use enormous amounts of energy to validate a transaction. As in Bitcoin, 7 transactions take place per second, and in Ethereum, 30 transactions. Each transaction is massive in using computational energy. In a vision to improve scalability issues, Ethereum has introduced the new phase ETH 2.0 Serenity which comes with the PoS consensus algorithm.
PoS consensus algorithm
A miner becomes a validator in PoS consensus. It involves validators locking up some of their coins as stake. If they discover a block that can be added to the chain, they will validate it by placing a bet on it. Casper’s slashing protocol counters the “Nothing at stake” issue in PoS, where a validator simply puts the money in multiple chains which prompts malicious attacks even if one wins again and again.
However, if a validator acts in a malicious manner and attempts “nothing at stake”, they will be castigated and all of their stake is going to get slashed.
In StackExchange, Hudson James and Joris Bontje says:
Casper designs harsher incentives in order to guarantee network security, including punishing miners who go offline, unintentionally or not.
On the launch of Beacon Chain on December, 2020, Danny Ryan goes about to say in an interview:
Turn on your nodes and happy staking!
ETH IS A PROMISING NETWORK!
Ethereum in the coming time will revolutionize the areas relating to real estate, governance, and finance. It has the potential to bring positive disruption to industries thus swapping the power from a centralized authority to a decentralized network.
After a week’s launch of ETH 2.0, the deposit contract hit $22.5 million, locking more than $1billion worth of ETH on December 17.
Ethereum is standing at the front of the decentralised finance (DeFi) boom. At the time of writing, $37.55bn was locked in DeFi applications.
Crypto-rating estimates that the price of ETH will go up to $16,000 in 2025 which adds up a 3274% increase from the current Ethereum price.
Ryan Selkis, co-founder and CEO at Messari remarks propitiously:
Bitcoin may be primed for a big year due to its macro positioning, but it’s Ethereum that has taken flight as crypto’s most important platform… one that could power an entirely new financial system, and a more open, resilient internet.Source: capital.com