Ethereum
Ethereum is an open-source, public,blockchain-based distributed computingplatform featuring smart contract (scripting) functionality.[3] It provides a decentralizedTuring-complete virtual machine, the Ethereum Virtual Machine (EVM), which can execute scripts using an international network of public nodes. Ethereum also provides acryptocurrency token called "ether", which can be transferred between accounts and used to compensate participant nodes for computations performed.[4] "Gas", an internal transaction pricing mechanism, is used to mitigate spam and allocate resources on the network.[3][5] Colloquially, Ethereum also refers to a cryptocurrency associated with the Ethereum platform, although the technically correct term for the currency is Ether.
Ethereum was proposed in late 2013 by Vitalik Buterin, a cryptocurrency researcher and programmer. Development was funded by an online crowdsale that took place between July and August 2014. [6] The system went live on 30 July 2015, with 11.9 million coins "premined" for the crowdsale.[7] This accounts for approximately 13 percent of the total circulating supply.
In 2016, as a result of the collapse of The DAOproject, Ethereum was split into two separate blockchains – the new separate version became Ethereum (ETH), and the original continued as Ethereum Classic (ETC).[8][9][10]The value of the Ethereum currency grew over 13,000 percent in 2017.[11]
Etymology
Vitalik Buterin picked the name Ethereum after browsing Wikipedia articles about elements and science fiction, when he found the name, noting, "I immediately realized that I liked it better than all of the other alternatives that I had seen; I suppose it was the fact that sounded nice and it had the word "ether", referring to the hypothetical invisible medium that permeates the universe and allows light to travel."[12]
History
Ethereum was initially described in a white paper by Vitalik Buterin,[13] a programmer involved with Bitcoin Magazine, in late 2013 with a goal of building decentralized applications.[14][15] Buterin had argued that Bitcoin needed a scripting language for application development. Failing to gain agreement, he proposed development of a new platform with a more general scripting language.[16]:88
At the time of public announcement in January 2014, the core Ethereum team was Vitalik Buterin, Mihai Alisie, Anthony Di Iorio, and Charles Hoskinson.[17] Formal development of the Ethereum software project began in early 2014 through a Swisscompany, Ethereum Switzerland GmbH(EthSuisse).[18][19] Subsequently, a Swiss non-profit foundation, the Ethereum Foundation (Stiftung Ethereum), was created as well. Development was funded by an online publiccrowdsale during July–August 2014, with the participants buying the Ethereum value token (ether) with another digital currency, bitcoin.[6]While there was early praise for the technical innovations of Ethereum, questions were also raised about its security and scalability.[14]
Milestones
Several codenamed prototypes of the Ethereum platform were developed by the Foundation, as part of their Proof-of-Concept series, prior to the official launch of the Frontier network. "Olympic" was the last of these prototypes, and public beta pre-release.[20][21] The Olympic network provided users with a bug bounty of 25,000 ether for stress testing the limits of the Ethereum blockchain. "Frontier" marked the tentative experimental release of the Ethereum platform in July 2015.[22][23]
"Homestead" was the first to be consideredstable.[24][25] It includes improvements to transaction processing, gas pricing, and security.[26][24][27] Since the initial launch, Ethereum has undergone several planned protocol upgrades, which are important changes affecting the underlying functionality and/or incentive structures of the platform.[28][29]
There are at least two other protocol upgrades planned in the future: "Metropolis" is intended to reduce the complexity of the EVM and provide more flexibility for smart contract developers.[29] Metropolis also adds supports for zkSnarks (from Zcash); with the first zksnarks transaction occurring on testnet on September 19, 2017.[30] "Serenity" should include a fundamental change to Ethereum's consensus algorithm to enable a basic transition from hardware mining (proof-of-work) to virtual mining (proof-of-stake).[29][31]Improvements to scalability, specificallysharding, are also said to be a key objective on the development roadmap.[32][33]
The DAO event
In 2016 a decentralized autonomous organization called The DAO, a set of smart contracts developed on the platform, raised a record US$150 million in a crowdsale to fund the project.[34] The DAO was exploited in June when US$50 million in ether were claimed by an anonymous entity.[35][36] The event sparked a debate in the crypto-community about whether Ethereum should perform a contentious "hard fork" to reappropriate the affected funds.[37] As a result of the dispute, the network split in two. Ethereum (the subject of this article) continued on the forked blockchain, while Ethereum Classic continued on the original blockchain.[38] The hard fork created a rivalry between the two networks.[39]
Hard Forks
Architecture
Ether
The value token of the Ethereum blockchain is called ether. It is listed under the code ETH and traded on cryptocurrency exchanges, and the Greek uppercase Xi character (Ξ) is generally used for its currency symbol. It is also used to pay for transaction fees and computational services on the Ethereum network.[41]
The supply of Ether was projected to increase by 14.75% in 2017, with an algorithm in place to gradually decline to 1.59% by 2065.[42][unreliable source?] However, a new implementation of Ethereum named "Casper" based on proof of stake rather than proof of work is expected to reduce the inflation rate to between 0.5% to 2%.[43][44]
Ethereum Virtual Machine
The Ethereum Virtual Machine (EVM)[45][46] is the runtime environment for smart contracts in Ethereum. The formal definition of the EVM is specified in the Ethereum Yellow Paper, original version by Gavin Wood.[47][better source needed][48] It is sandboxed and also completely isolated from the network, filesystem or other processes of the host computer system. Every Ethereum node in the network runs an EVM implementation and executes the same instructions. Ethereum Virtual Machines have been implemented in C++, Go, Haskell, Java,JavaScript, Python, Ruby, Rust, andWebAssembly (currently under development).[49][50]
Smart contracts
Ethereum's smart contracts are based on computer language, which developers use to program their own functionalities.[51] Smart contracts are high-level programmingabstractions that are compiled down to EVMbytecode and deployed to the Ethereum blockchain for execution. They can be written in Solidity (a language library with similarities to C and JavaScript), Serpent (similar toPython), LLL (a low-level Lisp-like language), and Mutan (Go-based, but deprecated). There is also a research-oriented language under development called Viper (a strongly-typedPython-derived decidable language).[52]
Smart contracts can be public, which opens up the possibility to prove functionality, e.g. self-contained provably fair casinos.[53]
One issue related to using smart contracts on a public blockchain is that bugs, including security holes, are visible to all but cannot be fixed quickly.[54] One example of this is the 17 June 2016 attack on The DAO, which could not be quickly stopped or reversed.[35]
There is ongoing research on how to use formal verification to express and prove non-trivial properties. A Microsoft Research report noted that writing solid smart contracts can be extremely difficult in practice, using The DAO hack to illustrate this problem. The report discussed tools that Microsoft had developed for verifying contracts, and noted that a large-scale analysis of published contracts is likely to uncover widespread vulnerabilities. The report also stated that it is possible to verify the equivalence of a Solidity program and the EVM code.[55]
Performance
In Ethereum all smart contracts are stored publicly on every node of the blockchain, which has trade-offs.[56] Being a blockchainmeans it is secure by design and is an example of a distributed computing system with high Byzantine fault tolerance. The downside is that performance issues arise in that every node is calculating all the smart contracts in real time, resulting in lower speeds.[56] As of January 2016, the Ethereum protocol could process 25 transactions per second.[56] On 19 December 2016, Ethereum exceeded one million transactions in a single day for the first time.[57]
- Micro Raiden was launched November 2017.[58]
- Buterin and Joseph Poon (a co-author ofBitcoin's lightning network whitepaper) announced in 2017 their plan to launch a scaling solution called Plasma which creates "child" blockchains to the "main" parent blockchain.[59] The plasma project is not without skeptics, specifically Vlad Zamfir (Ethereum's lead researcher on proof of stake) has publicly questioned the plasma project's viability.[59]
- Ethereum engineers have been working onsharding the calculations, and the next step (called Ethereum 2) was presented at Devcon 3.[60]
Ethereum's blockchain uses Merkle Patricia trees, for security reasons, to improve scalability, and to optimize transaction hashing.[61]
Proposed uses
Many uses have been proposed for Ethereum platform, including ones that are impossible or unfeasible.[62][63][41] Use case proposals have included finance, the internet-of-things,farm-to-table produce, electricity sourcing and pricing, and sports betting.[41][64] Ethereum is (as of 2017) the leading blockchain platform for initial coin offering projects, with over 50% market share.[65]
Ecosystem
The projects listed in this section are not exhaustive and may be outdated.
Clients and wallets
- Jaxx: Desktop wallet[66]
- KeepKey: Hardware wallet[67]
- Ledger Nano S: Hardware wallet[68]
- Mist: Desktop wallet[69]
- Blockchain Online and iOS/Android Wallet[70]
- Trust Wallet[71]
- TREZOR: Hardware wallet[72]
Decentralized applications
- Digital signatures that ensure authenticity and proof of existence of documents: theLuxembourg Stock Exchange has developed such a system[73]
- Slock.It is developing smart locks[74]
- Digital tokens pegged to fiat currencies: Dai, stablecoin pegged to US dollar.[75]Decentralized Capital.[76] Spanish bankSantander is also involved in such a project[77].
- Digital tokens pegged to gold: Digix[6][78]
- Improved digital rights management for music: Imogen Heap used the technology[79]
- Platforms for prediction markets: Augur, Gnosis[80][81] Stox[82][83]
- Platforms for crowdfunding: the DAO[84][85][34]
- Social media platforms with economic incentives: Backfeed,[86] Akasha[87]
- Decentralized marketplaces:FreeMyVunk,[88] Etheropt,[89] TransActive Grid[90]
- Remittance: Everex[91]
- Online gambling: Etheroll[92]
- Electric car charging management: RWE[93]
- Secure identity systems for the Internet:uPort[94][95]
- Labour economics: Blocklancer,[96]Ethlance[97]
- Video Games: Cryptokitties popularity in December 2017 caused the Ethereum network to slow down.[98]
Enterprise software
Ethereum-based customized software and networks, independent from the public Ethereum chain, are being tested byenterprise software companies.[99] Interested parties include Microsoft, IBM, JPMorgan Chase,[41][100] Deloitte,[101] R3,[102] Innovate UK(cross-border payments prototype).[103][104]Barclays, UBS and Credit Suisse are experimenting with Ethereum blockchain to automate Markets in Financial Instruments Directive (MiFID) II requirements.[105]
Enterprise Ethereum Alliance (EEA)
In March 2017, various blockchain start-ups, research groups, and Fortune 500 companies announced the creation of the Enterprise Ethereum Alliance (EEA) with 30 founding members.[106] By May, the nonprofit organization had 116 enterprise members—including ConsenSys, CME Group, Cornell University's research group, Toyota Research Institute, Samsung SDS, Microsoft, Intel, J.P. Morgan, Cooley LLP, Merck KGaA, DTCC,Deloitte, Accenture, Banco Santander, BNY Mellon, ING, and National Bank of Canada.[107][108][109]
The purpose of the EEA is to coordinate the engineering of an open-source reference standard and private "permissioned" version of the Ethereum blockchain that can address the common interests of enterprises in banking, management, consulting, automotive, pharmaceutical, health, technology, mobile, entertainment, and other industries, while working with developers from the Ethereum ecosystem. Certain members of the alliance have also indicated a desire to investigate and collaborate on hybrid architectures to potentially anchor private blockchains to the public Ethereum blockchain in the future, although concerns remain over the security, compliance, and regulations involved in bridging such permissioned and "permissionless" blockchains.[106]
By July 2017, there were over 150 members in the alliance, including recent additionsMasterCard, Cisco Systems, andScotiabank.[110]
Permissioned ledgers
Ethereum-based permissioned blockchainvariants are used and being investigated for various projects.
- J.P. Morgan Chase is developing a permissioned-variant of Ethereum blockchain dubbed "Quorum."[111] It's designed to toe the line between private and public in the realm of shuffling derivatives and payments. The idea is to satisfy regulators who need seamless access to financial goings-on, while protecting the privacy of parties that don't wish to reveal their identities nor the details of their transactions to the general public.[112]
- Royal Bank of Scotland has announced that it has built a Clearing and Settlement Mechanism (CSM) based on the Ethereum distributed ledger and smart contract platform.[113][114]
Criticisms
A finance blogger on FT Alphaville has pointed out that criminals are using Ethereum to run Ponzi schemes and other forms of investment fraud.[115] The article was based on a paper from the University of Cagliari, which placed the number of Ethereum smart contracts which facilitate Ponzi schemes at nearly 10% of 1384 smart contracts examined. However, it also estimated that only 0.05% of the transactions on the network were related to such contracts.[116]
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