Simply put, Ethereum is a world computer that anyone can access and build applications on. All state and data are distributed and publicly accessible. Ethereum supports smart contracts in which developers can write code to program the transfer of digital value. With its native cryptocurrency, Ethereum, or ETH, sent and received globally without interference from any third parties. Examples of decentralized applications (DApps) built on Ethereum include token offerings, NFT, decentralized financial applications, loan agreements, decentralized exchanges, and more.
Ethereum and Turing complete
At the beginning of bitcoin's design, in order to limit malicious applications to distributed networks, stack virtual machines only support simple transaction script verification, and the scripting language lacks Turing completeness, which severely limits the development of bitcoin network universality.
At the end of 2013, programmer and bitcoin enthusiast Vitalik Buterin began thinking about further expanding the functionality of Bitcoin and Mastercoin, a superposition protocol that extends Bitcoin to provide basic smart contracts. In October 2013, Vitalik proposed a more general approach to the Mastercoin team, which allowed Mastercoin's professional contract language to be replaced with flexible and scriptable contracts. While the Mastercoin team was impressed, the proposal was too radical to fit into their development path, and it never came to pass.
In December 2013, Vitalik began sharing a white paper describing the idea behind Ethereum: a Turing-complete programmable and general-purpose blockchain. Vitalik and Gavin then refined and developed this idea, building ethereum's protocol layer together.
The first Ethereum block was mined on July 30, 2015. The world computer began to serve the world, and just like Satoshi Nakamoto, Vitalik and Gavin didn't just invent a new technology, they combined it with existing technology in novel ways, and provided open source code to prove their ideas to the world.
From generic blockchain to decentralized applications (DApps)
Ethereum started as a general-purpose blockchain that could be used for a variety of purposes, and soon the vision of Ethereum expanded into a platform for programed decentralized applications (DApps). Dapps represent a broader perspective than "smart contracts". A DApp is at least a smart contract and a Web user interface. More broadly, a DApp is a Web application based on open, decentralized, point-to-point infrastructure services.
The DApp consists of at least the following parts:
In addition, many Dapps include other decentralized components, such as:
What is Gas
On Ethereum, all transactions and smart contract execution require a small fee. This fee is called gas. In technical terms, Gas is a measure of the amount of computational effort required to perform an operation or smart contract. The more complex an operation is to perform, the more gas is required to complete the operation. Gas is all paid for in ether.
Gas prices may fluctuate from time to time depending on network requirements. If more people interact on the Ethereum blockchain, such as transacting in Ethereum or performing smart contract operations, gas prices could rise due to limited computing resources on the network. Conversely, the market price of gas falls when the network is underutilized.
Increasing on-chain applications made the Ethereum network extremely congested, and the energy consumption caused by POW mining forced ethereum to make changes, and the transition to Ethereum 2.0 began in December 2020.
Ethereum 2.0, also known as "Serenity", is a major upgrade designed to make projects faster, more efficient, and more scalable by moving the Ethereum network from proof of work to proof of equity.
Ethereum's new proof of stake (PoS), known as "Casper," requires participating users to lock up their Ethereum coins to become miners, rather than using expensive specialized mining equipment. Each pledgee needs to lock up 32 Ether coins or join a pledge pool and combine their Ether coins with others to participate in the creation of new blocks on the Ethereum PoS blockchain. The Ethereum 2.0 upgrade is being rolled out in multiple phases. Include:
Phase 0 was launched in December 2020. Beacon was a separate Ethereum blockchain that introduced a proof of interest system. Responsible for creating new blocks, verifying transactions, rewarding mortgages and managing them is called "sharding chains".
In the next major development phase, Ethereum's Beacon chain will bridge to the main Ethereum network and replace the current proof-of-work algorithm with proof of equity. After the merger of Ethereum and Eth 2.0, network stakeholders called "verifiers" will start producing blocks on behalf of miners and verify transactions to ensure network security.
After the merge, the next task for Ethereum developers will be to enable sharding, which creates multiple mini-blockchains. Each shard will be responsible for verifying its own set of transactions, rather than each transaction being verified by the entire network. The Beacon chain acts as the primary coordinator between these shards, randomly assigning validators to each shard.
With PoS and sharding enabled, ethereum developers are expected to make further adjustments to enhance network security. This includes adding anonymity to mask the identity of the verifier behind the block proposal. It also includes the use of new technologies such as the verifiable delay function (VDF) to further ensure randomness of the validator assignment and to make it harder for malicious users to disrupt the network.