Ethereum Ecosystems

In this chapter, we'll be covering several important aspects of the blockchain. For example, among other interesting topics, we will look at the technology inventions that made an organized, decentralized network of computers possible, and we will explore the economics behind it all to help you solve the important question, why is this technology worth real money? This will help you to become an expert in this field of decentralized applications. You'll be able to explain, better than ever, how it all works together so that you're able to direct your future clients in the right direction, because you'll understand exactly what's going on in the Ethereum blockchain behind all those layers of protocols, technology, and cryptography, and you'll subconsciously solve the burning questions that concern you about this invention.

In this...

Introducing the Ethereum chain specification

The Ethereum chain specification is a format used to describe how the Ethereum blockchain should look. It describes what parameters, components, and elements it should have to actually be considered an Ethereum blockchain, so that you can create your own private Ethereum blockchains with different properties for testing your applications or forking a new version of Ethereum. The spec defines what you need to create your own blockchain. For instance, WhaleCoin used the Ethereum specification to create a new blockchain with the same core technology, but with their own modifications, thanks to the Ethereum chain spec.

It is important to have a clear specification that tells us how to create our own Ethereum-like blockchain, because hard forks are an elemental part of every blockchain, and because advanced developers may feel that they...

Blockchain technology

The technology that makes blockchain a reality is a complex set of inventions working together to achieve the common goal of a global source of agreements. To understand how they all tie together, it's good to break the technology down into four main pieces so that we can see the layers where all the decentralized applications run:

What makes Ethereum possible is a set of tools and protocols that are widely used in the community. You'll be able to use those tools for personal projects whenever you want to implement advanced mechanisms that would be very hard to recreate from scratch.

Application layer

The application layer is the one where external programs interact with the blockchain. It...

Blockchain consensus

The Ethereum blockchain is working on a network of thousands of computers connected with each other exchanging information. Now, in order to guarantee that they all are processing the same transactions and working for the same goals as a combined group of efforts, we need something to reach agreements, which is called consensus, so that they all agree on the result. It's the best way to combine the efforts to benefit the whole.

In the following diagram, you can see how all the computers are running the same mining software while agreeing on a single protocol that provides them with a reward for their computing power:

Introducing blockchain consensus

Compared to a standard voting process, where all...

Blockchain economics

The interesting thing about cryptocurrencies is the fact that they combine technology with real assets that have value in the real world. For the first time in history, we are able to create digital money that runs completely on its own. Historically speaking, money was always backed by a centralized government where they controlled the supply and demand. They were the only ones capable of printing money in order to control inflation.

Understanding inflation

In simple terms, inflation is the increase in price that all assets in the economy suffer. For instance, a house in 1890 would normally cost about $10,000 dollars, but the same house now costs about $350,000 dollars, even though it got older –...

Blockchain metrics

Blockchain metrics are important measurable features of the blockchain that can help you understand its state, so that you are able to determine how good the Ethereum blockchain is doing and what the adoption rate is, so that you're able to predict the future when it comes to pricing, developments, and adoption rates.

Number of transactions

The number of transactions in a blockchain is the most important metric, since it shows the usage of the technology in everyday situations. Transactions represent activity. The more transactions, the more people actively using the blockchain for investing in projects, running dApps and using smart contracts.

It doesn't make sense to have billions of users if...

Summary

In this chapter, we've learned a great deal of things related the mechanisms that integrate blockchain technology with real-world scenarios, such as exchanges and adoption rates. You are now capable of using powerful tools to improve the quality of your decentralized applications and smart contracts, while also being able to predict future price movements based on the most important metrics about Ethereum. In the first section, you saw how the Ethereum blockchain is defined using a specific set of rules known as the chain spec, then you learned about the different parts that make such impressive technology possible, including the many applications built on each layer. Finally, you saw how Ethereum consensus, economics, and metrics work to help you understand why Ethereum is such a valuable coin, while also seeing the way many nodes cooperate toward a singular objective...