What is Ethereum blockchain?
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Ethereum is an open-source blockchain platform that allows for the creation and deployment of decentralized applications (DApps) and smart contracts. It was proposed by Vitalik Buterin in late 2013 and launched in 2015.
Unlike traditional systems, Ethereum enables developers to create applications that rely on the blockchain’s distributed computing power. Smart contracts, which are self-executing contracts with the terms of agreement directly written into code, play a significant role in Ethereum. These contracts automatically execute transactions and enforce the agreed-upon rules without relying on a central authority.
Additionally, Ethereum has its native cryptocurrency called Ether (ETH), which is used as a means of exchange within the network. ETH can be traded on various cryptocurrency exchanges and is often used to pay for transaction fees and to incentivize network participants.
Ethereum’s blockchain technology not only facilitates peer-to-peer transactions but also supports the development of decentralized finance (DeFi) applications, decentralized exchanges, gaming platforms, and more. Its programmable nature and robust ecosystem have made Ethereum one of the most influential and widely adopted blockchain platforms in the world.
How does Ethereum work?
Ethereum works through a decentralized network of computers that collectively maintain and validate the Ethereum blockchain. Here is a simplified explanation of how Ethereum functions:
- Blockchain: Ethereum operates on a distributed public ledger known as the blockchain. This blockchain contains a record of all transactions and smart contracts that have ever taken place on the network. These records are grouped into blocks and linked together in a chronological order, creating an immutable and transparent history.
- Nodes: The Ethereum network consists of thousands of nodes, or computers, that participate in maintaining the blockchain’s integrity. These nodes store a copy of the entire blockchain and work together to validate transactions and execute smart contracts.
- Consensus Mechanism: Ethereum currently uses a consensus mechanism called Proof-of-Work (PoW), although it is transitioning to a more energy-efficient mechanism called Proof-of-Stake (PoS). In PoW, miners compete to solve complex mathematical problems to validate transactions and add new blocks to the blockchain. Miners are rewarded with Ether for their efforts. In PoS, validators are chosen to create new blocks based on the number of Ether they hold and are willing to “stake” as collateral.
- Transactions: Users interact with the Ethereum network by creating transactions. These transactions can involve sending Ether from one address to another or interacting with smart contracts. Transactions contain information such as the sender, recipient, amount, and optional data.
- Smart Contracts: One of Ethereum’s key features is the ability to create and execute smart contracts. Smart contracts are self-executing agreements with predefined rules and conditions. They are written in Solidity (Ethereum’s programming language) and reside on the blockchain. When certain conditions are met, such as a specific date or the receipt of a certain amount of Ether, the smart contract automatically executes its predefined actions.
- Gas: To prevent abuse and prioritize transactions, Ethereum uses a concept known as gas. Gas is a unit of measurement that represents the computational effort required to execute a transaction or a smart contract. Each operation within a transaction or smart contract consumes a specific amount of gas. Users must pay for gas in Ether, with the amount determined dynamically based on the complexity of the operation.
Overall, Ethereum’s decentralized nature, blockchain technology, consensus mechanism, transactions, and smart contracts work together to create a platform for building decentralized applications and executing programmable agreements.
Validation process of Ethereum?
The validation process in Ethereum involves the verification and confirmation of transactions and smart contracts on the network. Here’s an overview of how validation works in Ethereum:
- Transaction Propagation: When a user initiates a transaction on the Ethereum network, it is broadcasted to multiple nodes. These nodes propagate the transaction across the network, ensuring that it reaches a sufficient number of nodes for validation.
- Node Verification: Each node that receives the transaction independently verifies its validity. Verification involves checking the transaction’s syntax, digital signatures, and ensuring that the sender has enough balance to perform the transaction. The node also validates that the transaction adheres to the network’s rules and protocols.
- Inclusion in Mempool: Valid transactions are added to the mempool, which is a pool of pending transactions. Nodes store these transactions until they are selected to be included in a block and added to the blockchain.
- Block Creation: Miners (in a Proof-of-Work system) or validators (in a Proof-of-Stake system) collect a set of valid transactions from the mempool and propose a new block for the blockchain. They include these transactions in the block along with other relevant information, such as a reference to the previous block, a timestamp, and a nonce (in PoW).
- Consensus: The proposed block is broadcasted to the network, and other nodes validate the block’s integrity and authenticity. Consensus mechanisms like Proof-of-Work or Proof-of-Stake ensure that the majority of participants agree on the validity of the proposed block. This agreement is reached through mining (PoW) or the selection of validators (PoS), depending on the chosen consensus mechanism.
- Block Confirmation: Once the consensus is reached, the validated block is added to the blockchain, becoming a permanent part of the Ethereum network’s history. This process links the new block to the previous blocks, forming an immutable chain of blocks.
- Transaction Finality: After a transaction is included in a confirmed block, it is considered final and cannot be reversed. The transaction details and the updated state of account balances are recorded on the blockchain, reflecting the completion of the transaction.
This validation process ensures that transactions and smart contracts on the Ethereum network are verified, agreed upon by the majority, and permanently recorded on the blockchain.
How are transactions verified?
Transactions in Ethereum are verified through a series of steps to ensure their validity and integrity. Here’s a breakdown of how transactions are verified:
- Syntax Verification: When a transaction is received by a node, the first step is to verify its syntax. Nodes check if the transaction is properly formatted according to the Ethereum protocol. This includes verifying that all the necessary transaction fields are present and correctly structured.
- Digital Signature Verification: Each transaction in Ethereum is signed by the sender using their private key. Nodes verify the digital signature accompanying the transaction to ensure that it matches the public key associated with the sender’s address. This step confirms that the transaction was created and signed by the legitimate owner of the sender’s address.
- Nonce Validation: Ethereum employs a nonce, a unique number used to prevent transaction replay attacks. The nonce ensures that transactions are delivered and executed in the correct order. Nodes verify that the nonce provided in the transaction matches the nonce associated with the sender’s address. This prevents the same transaction from being replayed or executed multiple times.
- Sufficient Balance Check: Before a transaction can be executed, nodes verify that the sender’s address has enough balance to cover the transaction amount, including any transaction fees. This step prevents users from spending more Ether than they possess, ensuring that transactions can be properly executed.
- Gas Limit Check: Transactions in Ethereum include a gas limit, which is the maximum amount of computational resources (gas) the transaction is allowed to consume. Nodes validate that the gas limit provided in the transaction is within the acceptable range defined by the network’s gas limit rules. This prevents abuse or excessive resource consumption by transactions.
- Execution and State Change Validation: If a transaction passes all the above checks, it is considered valid and can be executed. The transaction’s effects on the account balances and the state of the Ethereum Virtual Machine (EVM) are evaluated. If the transaction interacts with a smart contract, the smart contract’s code is executed, and any resulting state changes are validated.
By following these verification steps, nodes ensure that transactions adhere to the rules and protocols of the Ethereum network. Valid transactions are then propagated, included in blocks, and ultimately added to the blockchain, forming a decentralized and immutable record of transactions on the Ethereum network.
How are transactions verified for validity?
Transactions in Ethereum are verified for validity through several checks and processes. Here’s an overview of how transactions are verified for validity:
- Transaction Structure: Nodes first check the transaction’s structure to ensure that it is properly formatted according to the Ethereum protocol. This includes verifying that all required fields are present, such as the sender’s address, recipient’s address, transaction data, and signature.
- Nonce Verification: Every Ethereum account has a nonce, which is a sequential number that ensures the order and uniqueness of transactions sent from that account. Nodes verify that the nonce specified in the transaction matches the current nonce of the sender’s account. This prevents replay attacks and ensures that transactions are executed in the correct order.
- Account Balance: Before a transaction is considered valid, nodes verify that the sender’s account has a sufficient balance to cover the transaction’s value and any associated transaction fees. If the sender’s account balance is inadequate, the transaction is deemed invalid and rejected.
- Signature Validation: Transactions in Ethereum are digitally signed using the sender’s private key. Nodes verify the signature to ensure the authenticity and integrity of the transaction. By comparing the provided signature with the sender’s public key, nodes can confirm that the transaction was indeed signed by the rightful owner of the sender’s address.
- Gas and Gas Limit: Each transaction in Ethereum specifies a gas limit, which represents the maximum amount of computational resources (gas) the transaction is allowed to consume. Nodes verify that the gas limit provided in the transaction is within the block’s gas limit and that the sender has enough funds to cover the estimated gas cost. This step prevents out-of-gas situations and helps prioritize transactions based on their gas price.
- Code Execution (For Smart Contract Transactions): If a transaction interacts with a smart contract, the validity of the transaction also involves executing the smart contract’s code. The code execution verifies if the transaction meets the conditions specified by the smart contract, such as satisfying specific requirements or triggering certain actions. The smart contract’s code execution determines if the transaction is considered valid within the context of the contract’s rules and logic.
By undertaking these verification steps, nodes ensure that transactions are valid, secure, and adhere to the rules and protocol of the Ethereum network. Valid transactions can then be propagated, included in blocks, and ultimately added to the blockchain.
