Ethereum

Ethereum is a global, decentralized platform for money and new kinds of applications. On Ethereum, you can write code that controls money, and build applications accessible anywhere in the world. It is the community-run technology powering the cryptocurrency Ether ($ETH) and thousands of decentralized applications.

• Overview
• Technology
• Smart Contracts
• Execution: Ethereum Virtual Machine (EVM)
• Ether ($ETH)
• Consensus: Proof of Stake
• NFTs
• History
• The Merge
• Future Developments
• Sharding
• Layer 2 Scaling

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Overview

Ethereum is a decentralized, open-source blockchain platform that runs smart contracts. First proposed in 2013 by Vitalik Buterin, Ethereum was released in 2015 and quickly became the largest and most actively used blockchain platform.

Ethereum enables developers to build and deploy decentralized applications (dApps). Instead of relying on centralized servers and cloud computing, dapps run on a peer-to-peer network of computers running the Ethereum protocol. The Ethereum blockchain acts as a global virtual computer that can execute peer-to-peer contracts using a cryptocurrency called Ether ($ETH).

The main innovation of Ethereum is that it allows developers to write smart contracts. These are programs that run exactly as programmed without risk of censorship, downtime, or third party interference. The potential applications of smart contracts are vast, including financial services, games, identity systems and much more. Ethereum aims to create a more globally accessible, free, and trustworthy Internet.

Technology

Ethereum is based on blockchain technology similar to Bitcoin. Transactions made on Ethereum are recorded on its blockchain. The native cryptocurrency used to pay for transaction fees is called Ether (ETH).

Smart Contracts

Smart contracts are programs stored on the Ethereum blockchain that run as programmed without risk of downtime, censorship, fraud or third party interference. They are snippets of code that execute based on predefined conditions agreed upon by participants. For example, a smart contract could automatically send money to a seller once a digital asset is transferred to the buyer.

Smart contracts are deployed by developers and execute independently according to their code. They can store data, send transactions, and even interact with other contracts.

Smart contracts have many potential use cases including financial services, identity management, supply chain tracking, voting systems, prediction markets, gaming, and more. Major decentralized finance (DeFi) applications are built using Ethereum smart contracts.

Smart contracts are immutable and transparent - their code is public on the blockchain. This ensures trust and accountability between participants. However, bugs in smart contract code can lead to unintended behavior, so rigorous testing is essential.

Execution: Ethereum Virtual Machine (EVM)

Ethereum runs smart contracts using a decentralized virtual machine called the Ethereum Virtual Machine (EVM). The EVM executes peer-to-peer contracts on the blockchain using a stack-based bytecode language.

The Ethereum Virtual Machine (EVM) is the runtime environment for Ethereum smart contracts. It provides a decentralized and trustless execution environment for smart contracts.

The EVM is a 256-bit virtual stack machine that executes bytecode scripts. It runs on the computers of all participants on the Ethereum network. When a smart contract is triggered, the EVM executes its functions across the globally distributed nodes, maintaining consensus.

The EVM follows a set of rules for executing smart contract bytecode, handling computation costs, and maintaining state. Its full specifications are defined in the Ethereum Yellow Paper.

Each Ethereum node runs a local copy of the EVM to validate contract executions without needing to trust any external party. The EVM ensures all nodes reach consensus by processing transactions and smart contracts exactly according to protocol rules.

The EVM provides security through deterministic execution and independence from external systems. Its decentralized architecture protects smart contracts from downtimes, censorship, and interference.

Ether ($ETH)

Ether ($ETH) is the native cryptocurrency of the Ethereum network. It acts as a "fuel" that powers the execution of smart contracts and transactions on Ethereum. Ether is required to deploy smart contracts onto the Ethereum blockchain. It is also used to pay for transaction fees and computational services on the Ethereum network.

Ether is given as a reward to miners who contribute computing power to secure the network and process transactions through mining.

The supply of $ETH started at 72 million at network launch and grows at an annual inflation rate of approximately 4.5%. There is no cap on the total supply of Ether. Ether provides economic incentives to support a thriving ecosystem of Ethereum users, developers, miners, investors, and other participants. It aims to be a store of value and a native financial asset on Ethereum.

Consensus: Proof of Stake

Ethereum currently uses a proof-of-work consensus algorithm to maintain agreement on the network's state. It incentivizes miners to compete to add new blocks of transactions to the blockchain.

Miners must solve computationally intensive cryptographic puzzles in order to add proposed blocks. This process of mining secures the network and provides trustless consensus.

Ethereum is transitioning to a more efficient proof-of-stake consensus model called Casper. Instead of mining, ETH holders can validate transactions based on the amount of ETH they have staked.

This new model aims to make Ethereum more scalable, secure and sustainable as it continues to grow.

NFTs

Radix takes a fundamentally different approach to NFTs compared to Ethereum and other smart contract platforms. This provides significant advantages for both developers and users.

On Ethereum, NFTs are typically implemented using standards like ERC-721 and ERC-1155. These are essentially smart contract templates that emulate real-world assets. To integrate special features, new standards must be created like ERC-998 (for composable NFTs).

This smart contract abstraction on top of Ethereum's accounting model creates complexity. Developers must learn niche standards and deal with tricky ownership representations in contracts. Users face risk of losing NFTs if contracts have bugs.

Radix eschews this abstraction entirely by building an accounting model and native tokens tailored for real-world assets. NFT ownership and behavior is defined at the ledger level, not in a contract emulating it.

The Radix approach also eliminates issues with cross-contract coordination that occur when an NFT depends on external contracts for functionality. On Radix, complex integrations between components and assets is seamless.

For end users, Radix simplifies NFT ownership. Tokens feel like discrete digital assets held in your account, not just entries in a table managed by a smart contract. Transfers happen peer-to-peer without intermediating logic.

Overall, Radix provides a more elegant and intuitive platform for NFTs by directly incorporating assets as primitive building blocks, rather than attempting to emulate them in smart contracts. This results in a better user experience and reduced complexity for developers.

History

The Merge

The Merge is a major Ethereum network upgrade that transitions the consensus mechanism from proof-of-work to proof-of-stake. This migration to proof-of-stake will happen in 2022.

In proof-of-stake, ETH holders can become validators by staking ETH to help process transactions and create new blocks. The total amount staked acts as a way to help secure the network.

Validators take over the role miners previously played in securing the network and are rewarded for their work with newly minted ETH.

The Merge represents a major evolution in Ethereum as it transitions to become a greener, faster, and more secure blockchain network built on staking and validators.

Future Developments

Sharding

Sharding is a scaling solution that splits the Ethereum blockchain into multiple smaller chains known as "shards". This parallelizes transaction processing and increases throughput.

In a sharded Ethereum network, each shard would process its own transactions and maintain its own state. The shards would only store and process a portion of the network's data, allowing more transactions to be processed in parallel.

Sharding aims to reduce network congestion and high gas fees by spreading out transaction volumes across 64 new shards. Validators would be randomly assigned shards to validate rather than processing the entire blockchain.

The data from shards would be rolled up periodically into the Ethereum Beacon Chain which coordinates and secures the sharded network. Sharding is expected to launch after The Merge.

Layer 2 Scaling

Layer 2 solutions are technologies built on top of Ethereum that handle large transaction volumes off-chain, reducing congestion on the main blockchain.

Layer 2 solutions offer higher transaction throughput, lower fees, and faster confirmation times while still leveraging the underlying security of Ethereum.