Bitcoin (btc) o ethereum (eth)

Ethereum is a decentralized, open-sourceblockchain featuring smart contract functionality. Ether (ETH) is the native cryptocurrency of the platform. It is the second-largest cryptocurrency by market capitalization, after Bitcoin.^[1] Ethereum is the most actively used blockchain.^[2][3]

Ethereum was proposed in by programmer Vitalik Buterin. Development was crowdfunded in , and the network went live on 30 July , with 72 million coins premined.^[4][5] The Ethereum Virtual Machine (EVM) can execute Turing-complete scripts and run decentralized applications.^[6] Ethereum is used for decentralized finance, and has been utilized for many initial coin offerings.

In , a hacker exploited a flaw in a third-party project called The DAO and stole $50 million of Ether.^[7] As a result, the Ethereum community voted to hard fork the blockchain to reverse the theft^[8] and Ethereum Classic (ETC) continued as the original chain.^[9]

Ethereum has started implementing a series of upgrades called Ethereum , which includes a transition to proof of stake and an increase in transaction throughput using sharding.^[10][11]

History[edit]

Ethereum was initially described in a white paper by Vitalik Buterin,^[12] a programmer and co-founder of Bitcoin Magazine, in late with a goal of building decentralized applications.^[13][14] Buterin argued that Bitcoin and blockchain technology could benefit from other applications besides money and needed a scripting language for application development that could lead to attaching real-world assets, such as stocks and property, to the blockchain.^[15] In , Buterin briefly worked with eToro CEO Yoni Assia on the Colored Coins project and drafted its white paper outlining additional use cases for blockchain technology.^[16] However, after failing to gain agreement on how the project should proceed, he proposed the development of a new platform with a more general scripting language that would eventually become Ethereum.^[4]

Ethereum was announced at the North American Bitcoin Conference in Miami, in January ^[17] During the same time as the conference, a group of people rented a house in Miami: Gavin Wood, Charles Hoskinson, and Anthony Di Iorio from Toronto who financed the project.^[17] Di Iorio invited friend Joseph Lubin, who invited reporter Morgen Peck, to bear witness.^[17] Six months later the founders met again in a house in Zug, Switzerland, where Buterin told the founders that the project would proceed as a non-profit. Hoskinson left the project at that time.^[17]

Ethereum has an unusually long list of founders. Anthony Di Iorio wrote: "Ethereum was founded by Vitalik Buterin, Myself, Charles Hoskinson, Mihai Alisie, & Amir Chetrit (the initial 5) in December Joseph Lubin, Gavin Wood, & Jeffrey Wilcke were added in early as founders." Formal development of the software began in early through a Swiss company, Ethereum Switzerland GmbH (EthSuisse).^[18] The basic idea of putting executable smart contracts in the blockchain needed to be specified before the software could be implemented. This work was done by Gavin Wood, then the chief technology officer, in the Ethereum Yellow Paper that specified the Ethereum Virtual Machine.^[19] Subsequently, a Swiss non-profit foundation, the Ethereum Foundation (Stiftung Ethereum), was created as well. Development was funded by an online public crowdsale from July to August , with the participants buying the Ethereum value token (Ether) with another digital currency, Bitcoin. While there was early praise for the technical innovations of Ethereum, questions were also raised about its security and scalability.^[13]

In , Ethereum Foundation employee Virgil Griffith was arrested by the US government for presenting at a blockchain conference in North Korea.^[20]

Etymology[edit]

Buterin chose the name Ethereum after browsing a list of elements from science fiction on Wikipedia. He stated, "I immediately realized that I liked it better than all of the other alternatives that I had seen; I suppose it was the fact that [it] sounded nice and it had the word 'ether', referring to the hypothetical invisible medium that permeates the universe and allows light to travel."^[17] Buterin wanted his platform to be the underlying and imperceptible medium for the applications running on top of it.^[21]

Launch and milestones[edit]

Several codenamed prototypes of Ethereum were developed by the Ethereum Foundation as part of their proof of concept series. "Olympic" was the last prototype and public beta pre-release. The Olympic network provided users with a bug bounty of 25, Ether for stress testing the limits of the Ethereum blockchain. In July , "Frontier" marked the tentative experimental release of the Ethereum platform.^[22]

Since the initial launch, Ethereum has undergone several planned protocol upgrades, which are important changes affecting the underlying functionality and/or incentive structures of the platform.^[23][24] Protocol upgrades are accomplished by means of a hard fork. The latest upgrade to Ethereum was "Muir Glacier", implemented on 1 January

The DAO event[edit]

In , a decentralized autonomous organization called The DAO, a set of smart contracts developed on the platform, raised a record US$ million in a crowdsale to fund the project.^[25] The DAO was exploited in June when US$50 million of DAO tokens were stolen by an unknown hacker.^[26][27] The event sparked a debate in the crypto-community about whether Ethereum should perform a contentious "hard fork" to reappropriate the affected funds.^[28] It resulted in the network splitting into two blockchains: Ethereum with the theft reversed and Ethereum Classic which continued on the original chain.^[29] The hard fork created a rivalry between the two networks. After the hard fork, Ethereum subsequently forked twice in the fourth quarter of to deal with other attacks.

Enterprise Ethereum Alliance[edit]

In March , various blockchain startups, research groups, and Fortune companies announced the creation of the Enterprise Ethereum Alliance (EEA) with 30 founding members.^[30] By May , the nonprofit organization had enterprise members&#;– including ConsenSys, CME Group, Cornell University's research group, Toyota Research Institute, Samsung SDS, Microsoft, Intel, J. P. Morgan, Cooley LLP, Merck KGaA, DTCC, Deloitte, Accenture, Banco Santander, BNY Mellon, ING, and National Bank of Canada.^[31][32] By July , there were over members in the alliance, including MasterCard, Cisco Systems, Sberbank, and Scotiabank.^[33][34]

Ethereum [edit]

Open-source development is currently underway for a major upgrade to Ethereum known as Ethereum or Eth2.^[35] The main purpose of the upgrade is to increase transaction throughput for the network from the current of about 15 transactions per second to up to tens of thousands of transactions per second.^[36]

The plan is to increase throughput by splitting up the workload into many blockchains running in parallel (referred to as sharding) and then having them all share a common consensusproof of stake blockchain, so that to maliciously tamper with one chain would require that one tamper with the common consensus, which would cost the attacker far more money than they could ever gain from the attack.

Ethereum (also known as Serenity) is designed to be launched in three phases:

1. "Phase 0" was launched on 1 December and created the Beacon Chain, a proof of stake (PoS) blockchain that will act as the central coordination and consensus hub of Ethereum ^[37][38][39]
2. "Phase 1" will create shard chains and connect them to the Beacon Chain.
3. "Phase 2" will implement state execution in the shard chains^[11] with the current Ethereum chain expected to become one of the shards of Ethereum

Characteristics[edit]

Ethereum is a permissionless, non-hierarchical network of computers (nodes) which build and come to consensus on an ever-growing series of "blocks", or batches of transactions, known as the blockchain. Each block contains an identifier of the block that it must immediately follow in the chain if it is to be considered valid. Whenever a node adds a block to its chain, it executes the transactions therein in their order, thereby altering the ETH balances and other storage values of Ethereum accounts. These balances and values, collectively known as the state, are maintained on the node's computer separately from the blockchain, in a Merkle Patricia tree.

Each node communicates with a relatively small subset of the network, known as its peers. Whenever a node wishes to include a new transaction in the blockchain, it sends it to its peers, who then send it to their peers, and so on. In this way, it propagates throughout the network. Certain nodes, called miners, maintain a list of all of these new transactions and use them to create new blocks, which they then send to the rest of the network. Whenever a node receives a block, it checks the validity of the block and of all of the transactions therein and, if valid, adds it to its blockchain and executes all of said transactions. As the network is non-hierarchical, a node may receive competing blocks, which may form competing chains. The network comes to consensus on the blockchain by following the "longest chain rule", which states that the chain with the most blocks at any given time is the canonical chain. This rule achieves consensus because miners do not want to expend their computational work trying to add blocks to a chain that will be abandoned by the network.

Ether[edit]

Ether (ETH) is the cryptocurrency generated by the Ethereum protocol as a reward to miners in a proof of work system for adding blocks to the blockchain. It is the only currency accepted in the payment of transaction fees, which also go to miners. The block reward together with the transaction fees provide the incentive to miners to keep the blockchain growing (ie. to keep processing new transactions). Therefore, Ether is fundamental to the operation of the network. Each Ethereum account has an ETH balance and may send ETH to any other account. The smallest unit of ETH is known as a Wei and is equal to 10 ETH. ^[40]

Ether is listed on exchanges under the ticker symbol ETH. The Greek uppercase Xi character (Ξ) is sometimes used for its currency symbol.

Addresses[edit]

Ethereum addresses are composed of the prefix "0x", a common identifier for hexadecimal, concatenated with the rightmost 20 bytes of the Keccak hash of the ECDSA public key (the curve used is the so-called secpk1, the same as Bitcoin). In hexadecimal, 2 digits represent a byte, meaning addresses contain 40 hexadecimal digits, e.g. 0xbf5ea0bacefffba Contract addresses are in the same format, however, they are determined by sender and creation transaction nonce.^[41] User accounts are indistinguishable from contract accounts in their address format and are used to receive both Ether and ERC tokens. Any valid Keccak hash put into the described format is valid, even if it does not correspond to an account with a private key or a contract. This is unlike Bitcoin, which uses base58check to ensure that addresses are properly typed.^{[clarification needed]}

ERC Tokens[edit]

The ERC Token Standard allows for fungible tokens on the Ethereum blockchain. Once implemented, tokens appear as contract addresses. Numerous cryptocurrencies have launched as ERC tokens and have been distributed through initial coin offerings.^[42] Fees to send ERC tokens must be paid with Ether.

Gas[edit]

Gas is a unit of account within the EVM used in the calculation of a transaction fee, which is the amount of ETH a transaction's sender must pay to the miner who includes the transaction in the blockchain.

Each type of operation which may be performed by the EVM is hardcoded with a certain gas cost, which is intended to be roughly proportional to the amount of resources (computation and storage) a node must expend to perform that operation. When creating a transaction, the sender must specify a gas limit and gas price. The gas limit is the maximum amount of gas the sender is willing to use in the transaction, and the gas price is the amount of ETH the sender wishes to pay to the miner per unit of gas used. The higher the gas price, the more incentive a miner has to include the transaction in their block, and thus the quicker the transaction will be included in the blockchain. For a transaction to be valid, the sender's starting ETH balance must be greater than or equal to gas limit × gas price. The sender buys the full amount of gas (ie. the gas limit) up-front, at the start of the execution of the transaction, and is refunded at the end for any gas not used. If at any point the transaction does not have enough gas to perform the next operation, the transaction is reverted but the sender still pays for the gas used. Gas prices are typically denominated in Gwei, a subunit of ETH equal to 10^-9 ETH.^[43]

This fee mechanism is designed to mitigate transaction spam, prevent infinite loops during contract execution, and provide for a market-based allocation of network resources.

Comparison to Bitcoin[edit]

Ethereum is different from Bitcoin, the cryptocurrency with the largest market capitalization as of , in several aspects:^[44][45]

• Bitcoin is a singular form of digital money where users can send, receive, and hold only bitcoins. Ethereum is a smart contract platform which allows entities to leverage blockchain technology to create numerous different digital ledgers and can be used to create additional cryptocurrencies that run on top of its blockchain. For example, Ethereum can be used to create tokens that are pegged with the value of the United States dollar (called a stablecoin) if a user wanted to transfer or hold the value of dollars on the blockchain. Ether itself can also be sent, received and held as digital money.
• Bitcoin is aimed to only be money, compared with Ethereum where a goal is to also run applications (like the Google Play or Apple App store).
• Its block time is 13 seconds, compared to 10 minutes for bitcoin.
• Mining of Ether generates new coins at a usually consistent rate, occasionally changing during hard forks, while for bitcoin the rate halves every 4 years.
• For proof of work (PoW), Ethereum uses the Ethash algorithm, which is intended to reduce the advantage of specialized ASICs in mining.
• Transaction fees differ by computational complexity, bandwidth use, and storage needs (in a system known as gas), while bitcoin transactions compete by means of transaction size in bytes.
• Ethereum uses an accounting system where values in Wei (the smallest denomination of 1 Ether, 1 ETH = 10¹⁸ Wei) are debited from accounts and credited to another, as opposed to Bitcoin's UTXO system, which is more analogous to spending cash and receiving change in return.

Supply[edit]

The total supply of Ether was around million as of 16 April In , mining generated million new Ether, corresponding to a 10% increase in its total supply. The shift to Ethereum may curb the total supply of Ether.^[46] There is currently no implemented hard cap on the total supply of Ether.^[47]

Governance[edit]

In October ,^[48] a development governance was proposed as the Ethereum Improvement Proposal (EIP), standardized on EIP^[49] The core development group and community were to gain consensus by a process regulated EIP.^[50][51]

Difficulty bomb[edit]

The difficulty bomb is a mechanism where the difficulty of blockchain mining began increasing in November , from block , This onset is referred to as Ethereum's Ice Age, which was implemented as an incentive for the network to transition from a PoW to a PoS blockchain. A difficulty bomb was scheduled in February but was pushed back by developers.^[52]

Markets and stores[edit]

Ether can be purchased and sold through regular currency brokers, cryptocurrency exchanges, PayPal,^[53] and many cryptocurrency wallets.^[54]

Platform[edit]

Virtual machine[edit]

The Ethereum Virtual Machine (EVM) is the runtime environment for smart contracts in Ethereum. It is a bit register stack designed to run the same code exactly as intended. It is the fundamental consensus mechanism for Ethereum. The formal definition of the EVM is specified in the Ethereum Yellow Paper.^[41][55] EVMs have been implemented in C++, C#, Go, Haskell, Java, JavaScript, Python, Ruby, Rust, Elixir, Erlang, and soon WebAssembly.

Smart contracts[edit]

Ethereum's smart contracts are based on different computer languages, which developers use to program their own functionalities. Smart contracts are high-level programming abstractions that are compiled down to EVM bytecode and deployed to the Ethereum blockchain for execution. They can be written in Solidity (a language library with similarities to C and JavaScript), Serpent (similar to Python, but deprecated), Yul (an intermediate language that can compile to various different backends&#;– EVM , EVM and eWASM are planned), LLL (a low-levelLisp-like language), and Mutan (Go-based, but deprecated). There is also a research-oriented language under development called Vyper (a strongly-typedPython-derived decidable language).

Smart contracts can be public, which opens up the possibility to prove functionality, e.g. self-contained provably fair casinos.^[56]

One issue related to using smart contracts on a public blockchain is that bugs, including security holes, are visible to all but cannot be fixed quickly.^[57] One example of this is the attack on The DAO, which could not be quickly stopped or reversed.^[26]

There is ongoing research on how to use formal verification to express and prove non-trivial properties. A Microsoft Research report noted that writing solid smart contracts can be extremely difficult in practice, using The DAO hack to illustrate this problem. The report discussed tools that Microsoft had developed for verifying contracts, and noted that a large-scale analysis of published contracts is likely to uncover widespread vulnerabilities. The report also stated that it is possible to verify the equivalence of a Solidity program and the EVM code.^[58]

Applications[edit]

Ethereum apps are written in one of seven different Turing-complete languages.^[59] Developers use the language to create and publish applications which they know will run inside Ethereum. The stablecoins Tether and DAI,^[60] and the prediction marketAugur are examples of applications that run on Ethereum.^[61][62]

Use case proposals have included decentralized finance, the internet-of-things, farm-to-table produce, electricity sourcing and pricing, and sports betting.^[63] For example, Breitling issues digital certificates of authenticity to owners of its watches on Ethereum which can be transferred to new owners and help prove authenticity.^[64] During the United States presidential election, the Associated Press published the election results on the Ethereum blockchain to prove the results at any given time were official.^[65] As of , Ethereum is the leading blockchain platform for initial coin offering projects, with over 50% market share.^[66]

Enterprise software[edit]

Ethereum-based software and networks, independent from the public Ethereum chain, are being tested by enterprise software companies.^[67] Interested parties include Microsoft, IBM, JPMorgan Chase,^[40]Deloitte, R3, and Innovate UK (cross-border payments prototype).^[68]Barclays, UBS, Credit Suisse, Amazon, and other companies are also experimenting with Ethereum.^[69][70]

Permissioned ledgers[edit]

Ethereum-based permissioned blockchain variants are used and being investigated for various projects.

• In , JPMorgan Chase proposed developing JPM Coin on a permissioned-variant of Ethereum blockchain dubbed "Quorum".^[71] It is "designed to toe the line between private and public in the realm of shuffling derivatives and payments. The idea is to satisfy regulators who need seamless access to financial goings-on, while protecting the privacy of parties that don't wish to reveal their identities nor the details of their transactions to the general public."^[72]
• The Royal Bank of Scotland has announced that it has built a Clearing and Settlement Mechanism (CSM) based on the Ethereum distributed ledger and smart contract platform.

Performance[edit]

In Ethereum, all smart contracts are stored publicly on every node of the blockchain, which has costs. Being a blockchain means it is&#;secure by design^{[clarification needed]}&#;and is an example of a distributed computing system with high&#;Byzantine fault tolerance. The downside is that performance issues arise in that every node is calculating all the smart contracts in real time, resulting in lower speeds. As of January , the Ethereum protocol could process about 25 transactions per second. In comparison, the Visa payment platform processes 45, payments per second leading some to question the scalability of Ethereum.^[73] On 19 December , Ethereum exceeded one million transactions in a single day for the first time.^[74]

Ethereum engineers have been working on sharding the calculations, and the next step (Ethereum 2) was presented at Ethereum's Devcon 3 in November ^[75]

Ethereum's blockchain uses Merkle trees, for security reasons, to improve scalability, and to optimize transaction hashing.^[76] As with any Merkle tree implementation, it allows for storage savings, set membership proofs (called "Merkle proofs"), and light client synchronization. The network has faced congestion problems, such as in in relation to Cryptokitties.^[77]

Decentralized finance[edit]

Decentralized finance (DeFi) is a use case of Ethereum.^[78] It offers traditional financial instruments in a decentralized architecture, outside of companies' and governments' control, such as money market funds which let users earn interest.^[79] Examples of DeFi platforms include MakerDAO and Compound. Uniswap, a decentralized exchange for tokens on Ethereum grew from $20 million in liquidity to $ billion in ^[80] As of October , over $11 billion was invested in various DeFi protocols.^[81] Additionally, through a process called "wrapping", certain DeFi protocols allow synthetic versions of various assets (such as Bitcoin, gold and oil) to become available and tradeable on Ethereum and also compatible with all of Ethereum's major wallets and applications.^[81]

FT Alphaville editor Izabella Kaminska pointed out in that criminals were using Ethereum to run Ponzi schemes and other forms of investment fraud.^[82] The article was based on a paper from the University of Cagliari, which placed the number of Ethereum smart contracts which facilitate Ponzi schemes at nearly 10% of 1, smart contracts examined. However, it also estimated that only % of transactions on the network were related to such contracts.^[83]

References[edit]