Ethereum Explained in Detail

Ethereum is a decentralized, open-source blockchain platform that enables the creation of smart contracts and decentralized applications (dApps). It's like a digital city where developers can build and deploy their own apps without the need for intermediaries.

The Ethereum network was founded in 2014 by Vitalik Buterin, a young programmer who had a vision for a more decentralized internet. Buterin's idea was to create a platform that could support a wide range of applications, from simple contracts to complex games and social media platforms.

Ethereum's native cryptocurrency is Ether (ETH), which is used to pay for transaction fees and computational services on the network. The total supply of Ether is capped at 18 million, making it a scarce resource that's highly valued by investors and users alike.

Ethereum is a complex system, but it's designed to be easy to understand. The Ethereum Whitepaper is a great resource to get started.

Crypto can feel overwhelming, but with the right materials, you can grasp the basics in no time. These materials are designed to help you understand Ethereum in just a few minutes.

Ethereum is a platform that allows developers to build their own applications and decentralized programs.

Ethereum was initially described in a white paper by Vitalik Buterin in late 2013, proposing a way to build decentralized applications and a more robust language for application development.

Buterin's idea was to create a platform that could attach real-world assets, such as stocks and property, to the blockchain, and he wanted his platform to be the underlying and imperceptible medium for the applications running on top of it.

The name Ethereum was chosen by Buterin after browsing a list of elements from science fiction on Wikipedia, and he liked it better than the other alternatives because it sounded nice and had the word "ether" in it.

In 2014, Ethereum was announced at the North American Bitcoin Conference in Miami, and the founders met to develop a fuller sense of what Ethereum might become.

In 2013, Vitalik Buterin wrote a white paper that described a way to build decentralized applications using blockchain technology. This paper proposed a more robust scripting language that would allow for attaching real-world assets to the blockchain.

The idea of Ethereum was born out of a disagreement with the Bitcoin Core developers, who were focused on using blockchain technology solely for financial transactions. Buterin wanted to explore other uses for blockchain technology.

In December 2013, Vitalik Buterin, Anthony Di Iorio, Charles Hoskinson, Mihai Alisie, and Amir Chetrit founded Ethereum. This initial group of founders was later joined by Joseph Lubin, Gavin Wood, and Jeffrey Wilcke.

Here's a list of the original founders of Ethereum:

After the initial meeting in December 2013, the founders worked together to develop a fuller sense of what Ethereum might become. They rented a house in Miami and spent time brainstorming and refining their ideas.

The name "Ethereum" was chosen by Vitalik Buterin, who was browsing a list of elements from science fiction on Wikipedia. He liked the name because it sounded nice and had the word "ether", which referred to the hypothetical invisible medium that permeates the universe and allows light to travel.

In 2014, formal development of the software underlying Ethereum began through a Swiss company called Ethereum Switzerland GmbH (EthSuisse).

The idea of putting executable smart contracts in the blockchain needed to be specified before it could be implemented in software, which was done by Gavin Wood in the Ethereum Yellow Paper.

Gavin Wood was then the chief technology officer, and his work on the Ethereum Virtual Machine was a crucial step in the development process.

A Swiss non-profit foundation, the Ethereum Foundation (Stiftung Ethereum), was founded, and development was funded by an online public crowd sale from July to August 2014.

Participants bought the Ethereum value token (ether) with another digital currency, bitcoin, to support the development of the platform.

Early praise was given for the technical innovations of Ethereum, but questions were also raised about its security and scalability.

Ethereum's key features make it a unique and powerful platform. It has a decentralized and open-source architecture, allowing developers to build and deploy their own applications.

One of the most notable features of Ethereum is its use of smart contracts. These contracts are self-executing and can automate complex processes, making it possible to create decentralized applications that are secure and transparent.

Ethereum's virtual machine, the EVM, is responsible for executing these smart contracts. It's a Turing-complete machine, meaning it can handle any computation, making it a versatile tool for developers.

The platform's native cryptocurrency, Ether, is used to pay for transaction fees and computational services on the network.

Gas is a unit of account within the EVM used in the calculation of the transaction fee. This fee is the amount of ETH a sender must pay to the network to have the transaction included in the blockchain.

Each type of operation in the EVM is hardcoded with a certain gas cost, which is roughly proportional to the monetary value of the resources a node must expend or dedicate to perform that operation.

The sender must specify a gas limit and gas price when creating a transaction. The gas limit is the maximum amount of gas the sender is willing to use in the transaction.

The gas price is the amount of ETH the sender wishes to pay to the network per unit of gas used. It's denominated in gigawei (Gwei), a subunit of ETH equal to 10 ETH.

A transaction may only be included in the blockchain at a block slot that has a base gas price less than or equal to the transaction's gas price. The portion of the gas price that is in excess of the base gas price is known as the tip and goes to the block proposer.

The sender buys the full amount of gas up-front, at the start of the execution of the transaction, and is refunded at the end for any unused gas. This means the sender is only debited for the gas actually used.

Ethereum apps are designed to work without selling your data, giving you control over your online privacy.

You can build a bank that's powered by logic you've programmed, giving you complete autonomy over your financial transactions.

Ethereum apps are built on a decentralized platform, meaning that no single entity controls the flow of information.

This decentralized approach ensures that your data remains private and secure.

Ethereum apps can be programmed to follow specific rules and logic, allowing you to create custom financial systems that work for you.

The ERC-20 Token Standard allows for fungible tokens on the Ethereum blockchain, proposed by Fabian Vogelsteller in November 2015. This standard implements an API for tokens within smart contracts, enabling functions like transferring tokens and getting the current token balance.

ERC-20 Token Contracts are smart contracts that correctly implement ERC-20 processes, keeping track of created tokens on Ethereum. These contracts provide a way for numerous cryptocurrencies to launch as ERC-20 tokens and be distributed through initial coin offerings.

The Ethereum Virtual Machine (EVM) is the runtime environment for transaction execution in Ethereum.

It's a stack-based virtual machine with an instruction set specifically designed for Ethereum, which includes stack operations, memory operations, and operations to inspect the current execution context.

The EVM is designed to be deterministic on a wide variety of hardware and operating systems, so each node produces the same post-transaction state.

This enables network consensus, which is crucial for the Ethereum network to function correctly.

EVMs have been implemented in multiple programming languages, including C++, C#, Go, Haskell, Java, JavaScript, Python, Ruby, Rust, Elixir, Erlang, and soon WebAssembly.

The ERC-20 Token Standard allows for fungible tokens on the Ethereum blockchain. ERC-20 Token Contracts keep track of created tokens on Ethereum.

ERC-20 tokens implement an API for tokens within smart contracts, providing functions for transferring tokens, getting token balances, and getting total token supply.

Numerous cryptocurrencies have launched as ERC-20 tokens and have been distributed through initial coin offerings.

Non-fungible tokens (NFTs) are unique and indivisible tokens that have been used to represent collectibles, digital art, sports memorabilia, virtual real estate, and items within games.

The first official NFT standard for Ethereum is ERC-721, which was followed up by ERC-1155, introducing semi-fungibility.

ERC-20 has also been used for NFTs, such as CryptoPunks.

The first NFT project, Etheria, was deployed to the Ethereum network in October 2015 and demonstrated live at DEVCON1 in November of that year.

In 2021, Christie's sold a digital image with an NFT by Beeple for US$69.3 million, making him the third-most-valuable living artist in terms of auction prices at the time.

Ethereum's smart contracts are written in high-level programming languages like Solidity, which has similarities to C and JavaScript.

Smart contract source code can be written in multiple languages, including Solidity, Serpent, Yul, LLL, and Mutan.

Serpent is a deprecated language similar to Python, and Mutan is a Go-based language that's also deprecated.

Contract source code and compiler information are usually published along with the launch of the contract, so users can see the code and verify that it compiles to the bytecode on-chain.

One issue with using smart contracts on a public blockchain is that bugs, including security holes, are visible to all but can't be fixed quickly.

The 2016 attack on The DAO is an example of this, where the bug couldn't be quickly stopped or reversed.

Ether is a cryptocurrency that's generated as a reward to validators in a proof-of-stake system for adding blocks to the blockchain.

It's represented as an unsigned integer associated with each account, which is the account's ETH balance denominated in wei. 10 wei equals 1 ether.

At the end of each epoch, new ETH is generated by adding protocol-specified amounts to the balances of all validators for that epoch. The block proposers receive the largest portion.

Ether is the only currency accepted by the protocol as payment for the transaction fee. The transaction fee is composed of two parts: the base fee and the tip.

The base fee is "burned" and the tip goes to the block proposer. Validators receive the validator reward together with the tips as an incentive to keep the blockchain growing.

Ether is often mistakenly referred to as "Ethereum". The uppercase Greek letter Xi, Ξ, is sometimes used as a currency symbol for ether.

Ethereum has two types of accounts: user accounts and contract accounts. Both types have an ETH balance and can transfer ETH to any account.

User accounts are also known as externally-owned accounts. They can execute the code of another contract or create a new contract.

Contract accounts are unique in that they have associated bytecode and storage. This bytecode is evaluated when a transaction is sent to the contract.

The code of a contract can read user-specified data from the transaction and may have a return value. It can also send ETH, read from and write to the contract's storage, and create temporary storage that vanishes at the end of code evaluation.

Ethereum addresses are 40 hexadecimal digits long, including the prefix "0x". They are determined by the rightmost 20 bytes of the Keccak-256 hash of the ECDSA public key.

Contract addresses are also in the same format, but are determined by the sender and creation transaction nonce.

ENS, or Ethereum Name Service, is a distributed naming system based on the Ethereum blockchain.

It provides a solution to the problem of long and confusing crypto addresses by assigning human-readable names to machine-readable identifiers.

ENS assigns names like "Alice.eth" to machine-readable addresses like "0xDC25EF3F5B8A186998338A2ADA83795FBA2D695E".

With ENS, you can receive any type of cryptocurrency or NFT via your ENS domain.

ENS is based on two Ethereum smart contracts: the ENS registry and the Resolver.

The ENS registry records the owner of the domain, the resolver for the domain, and the caching time for all records under the domain.

The Resolver translates the domain name to a machine-readable address and vice-versa.

ENS supports the most popular DNS names, including .com, .org, .io, .app, and several others.

Ethereum has maintained its spot as the second-largest cryptocurrency by market capitalization since its inception.

The term "Ethereum Killer" emerged around 2016/2017 as substitute blockchains like Cardano entered the crypto scene.

Cardano and others like EOS, Tezos, Solana, Fantom, Avalanche, and Binance Smart Chain have surfaced as possible Ethereum killers.

These alternative blockchains employ different consensus models to tackle Ethereum's limitations, such as Solana's proof-of-history (PoH) and Binance Smart Chain's proof-of-authority (PoA) and delegated proof-of-stake (DPoS).

Despite their efforts, none of these alternative blockchains have been able to unseat Ethereum as the second-largest cryptocurrency by market cap.

Ethereum is also currently the largest blockchain for NFT trading activities.

Ethereum has undergone several significant upgrades to improve its scalability and security. The London hard fork in August 2021 introduced EIP-1559, which has arguably been the most popular upgrade out of all the EIPs.

The Merge in September 2022 merged the existing PoW Ethereum mainnet with the Beacon Chain, forming a new proof-of-stake Ethereum. This transition significantly reduces ETH issuance by 90%, making it potentially deflationary.

The Shanghai Upgrade, expected to happen in March 2023, will enable ETH stakers to unstake and withdraw their ETH and rewards from the Beacon Chain. This upgrade will make over 17.5 million ETH available for withdrawals.

The London Hard Fork was a significant upgrade to the Ethereum network, implemented in August 2021. It included five Ethereum Improvement Proposals (EIPs), with EIP-1559 being the most notable.

EIP-1559 introduced a new mechanism for estimating gas fees, switching from an open auction to an automated bidding system. This change had a profound impact on the network, making it more efficient and scalable.

The London Hard Fork also included EIP-3554, which is not as well-known as EIP-1559, but still a crucial part of the upgrade. However, EIP-1559 is the one that gets the most attention.

EIP-1559 brought a fee-burning mechanism to the Ethereum network, which has already burned over $1 billion worth of Ether. This is a significant development, and it's clear that it's going to have a lasting impact on the network.

The London Hard Fork was a major step forward for Ethereum, and it's exciting to think about what the future holds for this innovative blockchain.

The Merge was a significant transition for Ethereum, renaming its shift from proof-of-work to proof-of-stake from Ethereum 2.0 to The Merge. It went live on Sept. 15, 2022, after the successful completion of the Goerli testnet merge on Aug. 11, 2022.

The Merge merged the existing PoW Ethereum mainnet with the Beacon Chain, a PoS chain, forming a new proof-of-stake Ethereum. This new Ethereum consists of a consensus layer and an execution layer, with the consensus layer synchronizing the chain state across the network.

The Merge significantly reduced ETH issuance, dubbed the "triple halving", since it reduced ETH issuance by 90%. This has the potential to make ETH deflationary, with over 14 million ETH already staked.

Stakers are expected to earn between 8% and 12% APR at current projections, but staked ETH won't be withdrawable immediately after the Merge. It will only be enabled after the Shanghai upgrade, estimated to be 6 to 12 months later.

The Merge did not increase transaction throughput or reduce gas fees, as the block production rate stays roughly the same at 12 seconds. It also won't enable on-chain governance, with protocol changes still discussed and decided off-chain through stakeholders.

The transition to PoS is expected to reduce Ethereum's annual energy consumption from 112 TWh/yr to only 0.01 TWh/yr – a 99.9% drop. This reduction prompted investors to expect an influx of institutional money in a "greener" Ethereum.