Introduction

The Ethereum platform enables developers to build powerful decentralized applications with built-in economic functions. While providing high availability, audit-ability, transparency, and neutrality, it also reduces or eliminates censorship and reduces certain counterparty risks. From a more practical perspective, Ethereum is an open source, globally decentralized computing infrastructure that executes programs called smart contracts. It uses a blockchain to synchronize and store the system’s state changes, along with a cryptocurrency called ether to meter and constrain execution resource costs.

Ethereum with some prior experience of cryptocurrencies, specifically Bitcoin. Ethereum shares many common elements with other open blockchains: a peer-to-peer network connecting participants, a Byzantine fault–tolerant consensus algorithm for synchronization of state updates (a proof-of-work blockchain), the use of cryptographic primitives such as digital signatures and hashes, and a digital currency (ether).Ethereum’s purpose is not primarily to be a digital currency payment network. While the digital currency ether is both integral to and necessary for the operation of Ethereum, ether is intended as a utility currency to pay for use of the Ethereum platform as the world computer.

Unlike Bitcoin, which has a very limited scripting language, Ethereum is designed to be a general-purpose programmable blockchain that runs a virtual machine capable of executing code of arbitrary and unbounded complexity. Where Bitcoin’s Script language is, intentionally, constrained to simple true/false evaluation of spending conditions, Ethereum’s language is Turing complete, meaning that Ethereum can straightforwardly function as a general-purpose computer.

History of Ethereum 

All great innovations solve real problems, and Ethereum is no exception. Ethereum was conceived at a time when people recognized the power of the Bitcoin model, and were trying to move beyond cryptocurrency applications. But developers faced a conundrum: they either needed to build on top of Bitcoin or start a new blockchain. Building upon Bitcoin meant living within the intentional constraints of the network and trying to find workarounds. The limited set of transaction types, data types, and sizes of data storage seemed to limit the sorts of applications that could run directly on Bitcoin; anything else needed additional off-chain layers, and that immediately negated many of the advantages of using a public blockchain. For projects that needed more freedom and flexibility while staying on-chain, a new blockchain was the only option. But that meant a lot of work: bootstrapping all the infrastructure elements, exhaustive testing, etc.

Toward the end of 2013, Vitalik Buterin, a young programmer and Bitcoin enthusiast, started thinking about further extending the capabilities of Bitcoin and Mastercoin (an overlay protocol that extended Bitcoin to offer rudimentary smart contracts). In October of that year, Vitalik proposed a more generalized approach to the Mastercoin team, one that allowed flexible and scriptable (but not Turing-complete) contracts to replace the specialized contract language of Mastercoin. While the Mastercoin team were impressed, this proposal was too radical a change to fit into their development roadmap.

In December 2013, Vitalik started sharing a whitepaper that outlined the idea behind Ethereum: a Turing-complete, general-purpose blockchain. A few dozen people saw this early draft and offered feedback, helping Vitalik evolve the proposal.Starting in December 2013, Vitalik and Gavin refined and evolved the idea, together building the protocol layer that became Ethereum.

Ethereum Functionality

The original blockchain, namely Bitcoin’s blockchain, tracks the state of units of bitcoin and their ownership. You can think of Bitcoin as a distributed consensus state machine, where transactions cause a global state transition, altering the ownership of coins. The state transitions are constrained by the rules of consensus, allowing all participants to (eventually) converge on a common (consensus) state of the system, after several blocks are mined.Ethereum is also a distributed state machine. But instead of tracking only the state of currency ownership, Ethereum tracks the state transitions of a general-purpose data store, i.e., a store that can hold any data expressible as a key–value tuple. A key–value data store holds arbitrary values, each referenced by some key.

Key Functions of Ethereum Blockchain

P2P network

Ethereum runs on the Ethereum main network, which is addressable on TCP port 30303, and runs a protocol called ÐΞVp2p.

Consensus rules

Ethereum’s consensus rules are defined in the reference specification, the Yellow Paper 

Transactions

Ethereum transactions are network messages that include (among other things) a sender, recipient, value, and data payload.

State machine

Ethereum state transitions are processed by the Ethereum Virtual Machine (EVM), a stack-based virtual machine that executes bytecode (machine-language instructions). EVM programs, called “smart contracts,” are written in high-level languages (e.g., Solidity) and compiled to bytecode for execution on the EVM.

Data structures

Ethereum’s state is stored locally on each node as a database (usually Google’s LevelDB), which contains the transactions and system state in a serialized hashed data structure called a Merkle Patricia Tree.

Consensus algorithm

Ethereum uses Bitcoin’s consensus model, Nakamoto Consensus, which uses sequential single-signature blocks, weighted in importance by PoW to determine the longest chain and therefore the current state. However, there are plans to move to a PoS weighted voting system, codenamed Casper, in the near future.

Economic security

Ethereum currently uses a PoW algorithm called Ethash, but this will eventually be dropped with the move to PoS at some point in the future.

Clients

Ethereum has several interoperable implementations of the client software, the most prominent of which are Go-Ethereum (Geth) and Parity.

Conclusion.

Ethereum started as a way to make a general-purpose blockchain that could be programmed for a variety of uses. But very quickly, Ethereum’s vision expanded to become a platform for programming DApps. DApps represent a broader perspective than smart contracts. A DApp is, at the very least, a smart contract and a web user interface. More broadly, a DApp is a web application that is built on top of open, decentralized, peer-to-peer infrastructure services. Recent very important update about Ethereum merge is that now Ethereum is no more on Proof-of-Work. Ethereum is now on Proof-of-stake which mean Ethereum mining is not possible now onwards. This is a great initiative towards saving electricity and supporting more Go green.