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You're reading from  Mastering Blockchain.. - Third Edition

Product typeBook
Published inAug 2020
Reading LevelBeginner
PublisherPackt
ISBN-139781839213199
Edition3rd Edition
Languages
Solidity
Tools
Blockchain
Concepts
Cryptocurrency
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Author (1)
Imran Bashir
Imran Bashir
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Imran Bashir

Imran Bashir has an M.Sc. in Information Security from Royal Holloway, University of London, and has a background in software development, solution architecture, infrastructure management, and IT service management. He is also a member of the Institute of Electrical and Electronics Engineers (IEEE) and the British Computer Society (BCS). Imran has extensive experience in both the public and financial sectors, having worked on large-scale IT projects in the public sector before moving to the financial services industry. Since then, he has worked in various technical roles for different financial companies in Europe's financial capital, London.
Read more about Imran Bashir

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Ethereum 101

This chapter is an introduction to the Ethereum blockchain. We will introduce the fundamentals and various theoretical concepts behind Ethereum. A discussion on the different components, protocols, and algorithms relevant to the Ethereum blockchain is also presented.

We cover different elements of Ethereum such as transactions, accounts, the world state, the Ethereum Virtual Machine (EVM), and the relevant protocols so that readers can develop strong technical foundations before exploring more advanced concepts in later chapters. The main topics we will explore in this chapter are as follows:

  • The Ethereum network
  • Components of the Ethereum ecosystem
  • The Ethereum Virtual Machine (EVM)
  • Smart contracts
  • Trading and investment

Let's begin with a brief overview of the foundation, architecture, and use of the Ethereum blockchain.

Ethereum – an overview

Vitalik Buterin (https://vitalik.ca) conceptualized Ethereum (https://ethereum.org) in November, 2013. The core idea proposed was the development of a Turing-complete language that allows the development of arbitrary programs (smart contracts) for blockchain and Decentralized Applications (DApps). This concept is in contrast to Bitcoin, where the scripting language is limited and only allows necessary operations.

The first version of Ethereum, called Olympic, was released in May, 2015. Two months later, a version of Ethereum called Frontier was released in July. Another version named Homestead with various improvements was released in March, 2016. The latest Ethereum release is called Muir Glacier, which delays the difficulty bomb (https://eips.ethereum.org/EIPS/eip-2384). A major release before that was Istanbul, which included changes around privacy and scaling capabilities.

The difficulty bomb is a difficulty adjustment mechanism that...

The Ethereum network

The Ethereum network is a peer-to-peer network where nodes participate in order to maintain the blockchain and contribute to the consensus mechanism. Networks can be divided into three types, based on the requirements and usage. These types are described in the following subsections.

The mainnet

The mainnet is the current live network of Ethereum. Its network ID is 1 and its chain ID is also 1. The network and chain IDs are used to identify the network. A block explorer that shows detailed information about blocks and other relevant metrics is available at https://etherscan.io. This can be used to explore the Ethereum blockchain.

Testnets

There is a number of testnets available for Ethereum testing. The aim of these test blockchains is to provide a testing environment for smart contracts and DApps before being deployed to the production live blockchain. Moreover, being test networks, they also allow experimentation and research. The main...

Components of the Ethereum ecosystem

The Ethereum blockchain stack consists of various components. At the core, there is the Ethereum blockchain running on the peer-to-peer Ethereum network. Secondly, there's an Ethereum client (usually Geth) that runs on the nodes and connects to the peer-to-peer Ethereum network from where blockchain is downloaded and stored locally. It provides various functions, such as mining and account management. The local copy of the blockchain is synchronized regularly with the network. Another component is the web3.js library that allows interaction with the geth client via the Remote Procedure Call (RPC) interface.

The overall Ethereum ecosystem architecture is visualized in the following diagram:

Figure 11.6: Ethereum high-level ecosystem

A list of elements present in the Ethereum blockchain is presented here:

  • Keys and addresses
  • Accounts
  • Transactions and messages
  • Ether cryptocurrency/tokens
  • The...

The Ethereum Virtual Machine (EVM)

The EVM is a simple stack-based execution machine that runs bytecode instructions to transform the system state from one state to another. The word size of the EVM is set to 256-bit. The stack size is limited to 1,024 elements and is based on the Last In, First Out (LIFO) queue. The EVM is a Turing-complete machine but is limited by the amount of gas that is required to run any instruction. This means that infinite loops that can result in denial-of-service attacks are not possible due to gas requirements. The EVM also supports exception handling should exceptions occur, such as not having enough gas or providing invalid instructions, in which case the machine would immediately halt and return the error to the executing agent.

The EVM is an entirely isolated and sandboxed runtime environment. The code that runs on the EVM does not have access to any external resources such as a network or filesystem. This results in increased security, deterministic...

Smart contracts

We discussed smart contracts at length in the previous Chapter 10, Smart Contracts. It is sufficient to say here that Ethereum supports the development of smart contracts that run on the EVM. Different languages can be used to build smart contracts, and we will discuss this in the programming section and at a deeper level in Chapter 14, Development Tools and Frameworks and Chapter 15, Introducing Web3.

There are also various contracts that are available in precompiled format in the Ethereum blockchain to support different functions. These contracts, known as precompiled contracts or native contracts, are described in the following subsection.

These are not strictly smart contracts in the sense of user-programmed Solidity smart contracts, but are in fact functions that are available natively to support various computationally intensive tasks. They run on the local node and are coded within the Ethereum client; for example, parity or geth.

Native contracts...

Summary

This chapter started with a discussion on the history of Ethereum, the motivation behind Ethereum development, and Ethereum clients. Then, we introduced the core concepts of the Ethereum blockchain, such as the state machine model, the world and machine states, accounts, and types of accounts. Moreover, a detailed introduction to the core components of the EVM was also presented, along with some of the fundamentals of Ethereum trading and investing.

In the next chapter, we will continue to explore more Ethereum concepts. We will look at more ideas such as programming languages, blockchain data structures, blocks, mining, and various Ethereum clients.

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Published in: Aug 2020Publisher: PacktISBN-13: 9781839213199
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Author (1)

author image
Imran Bashir

Imran Bashir has an M.Sc. in Information Security from Royal Holloway, University of London, and has a background in software development, solution architecture, infrastructure management, and IT service management. He is also a member of the Institute of Electrical and Electronics Engineers (IEEE) and the British Computer Society (BCS). Imran has extensive experience in both the public and financial sectors, having worked on large-scale IT projects in the public sector before moving to the financial services industry. Since then, he has worked in various technical roles for different financial companies in Europe's financial capital, London.
Read more about Imran Bashir

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