Ethereum
Ethereum is an open-source, public,blockchain-based distributed computingplatform featuring smart contract (scripting) functionality.[3] Ether is a cryptocurrencywhose blockchain is generated by the Ethereum platform. Ether can be transferred between accounts and used to compensate participant mining nodes for computations performed.[4] Ethereum provides a decentralized Turing-complete virtual machine, the Ethereum Virtual Machine (EVM), which can execute scripts using an international network of public nodes. "Gas", an internal transaction pricing mechanism, is used to mitigate spam and allocate resources on the network.[3][5]
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
Vitalik Buterin at Tech Crunch in 2015.
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]
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.[20] 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.[21][22][23] By July 2017, there were over 150 members in the alliance, including recent additions MasterCard, Cisco Systems, and Scotiabank.[24]
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.[26][27] 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.[28][29]
"Homestead" was the first to be consideredstable.[30][31] It includes improvements to transaction processing, gas pricing, and security.[32][30][33] 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.[34][35]
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.[35] Metropolis also adds supports for zkSnarks (from Zcash); with the first zksnarks transaction occurring on testnet on September 19, 2017.[25] "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).[35][36]Improvements to scalability, specificallysharding, are also said to be a key objective on the development roadmap.[37][38]
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.[39] The DAO was exploited in June when US$50 million in ether were claimed by an anonymous entity.[40][41] The event sparked a debate in the crypto-community about whether Ethereum should perform a contentious "hard fork" to reappropriate the affected funds.[42] 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.[43] The hard fork created a rivalry between the two networks.[44]
Ether
Ethereum price history until December 2017.
Ether is a cryptocurrency whose blockchain is generated by Ethereum, which thereby provides a public distributed ledger for transactions. 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.[46]
Characteristics
As with other cryptocurrencies, the validity of each ether is provided by a blockchain, which is a continuously growing list of records, called blocks, which are linked and secured using cryptography.[47][48] By design, the blockchain is inherently resistant to modification of the data. It is an open,distributed ledger that records transactions between two parties efficiently and in a verifiable and permanent way.[49] Acryptocurrency wallet stores the public and private "keys" or "addresses" which can be used to receive or spend Ether. With the private key, it is possible to write in the blockchain, effectively making an ether transaction.[50] To send ether to an account, you need the public key of that account. Ether accounts are pseudonymous in that they are not linked to individual persons, but rather to one or more specific addresses.[51] Owners can store these addresses in software, on paper and possibly in memory ("brain wallet").
Comparison to bitcoin
Ether is different from Bitcoin (thecryptocurrency with the largest market capitalization as of January 2018) in several aspects:
- Its block time is 14 to 15 seconds, compared 10 minutes for bitcoin.[52]
- Mining of ether generates new coins at a constant rate, while for bitcoin the rate halves every 4 years.[52]
- Transaction fees differ by computational complexity, bandwidth use and storage needs, while bitcoin transactions compete equally with each other.[52]
- Transaction fees are generally considerably lower for ether than for Bitcoin. In December 2017, the median transaction fee for ether corresponded to $0.33, while for bitcoin it corresponded to $23.[53]
Supply
The total supply of ether was Ξ98 million as of January 2018.[54] In 2017, mining generated 9.2 million new ether, corresponding to a 10% increase in its total supply.[55] 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%.[56]
Markets and stores
Ether can be traded by regular currencybrokers, cryptocurrency exchanges, as well as many online cryptocurrency wallets.[57] As of January 2018, at least 150 stores accept ether.[58]
Platform
Virtual Machine
The Ethereum Virtual Machine (EVM)[59][60] 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.[61][better source needed][62] 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).[63][64]
Smart contracts
Ethereum's smart contracts are based on computer language, which developers use to program their own functionalities.[65] 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).[66]
Smart contracts can be public, which opens up the possibility to prove functionality, e.g. self-contained provably fair casinos.[67]
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.[68] One example of this is the 17 June 2016 attack on The DAO, which could not be quickly stopped or reversed.[40]
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.[69]
Applications
Ethereum blockchain applications are usually referred to as DApps (decentralized application), since they are based on the decentralized Ethereum Virtual Machine, and its smart contracts.[5] Many uses have been proposed for Ethereum platform, including ones that are impossible or unfeasible.[70][71][46] Use case proposals have included finance, the internet-of-things, farm-to-table produce, electricity sourcing and pricing, and sports betting.[46][72] Ethereum is (as of 2017) the leading blockchain platform for initial coin offering projects, with over 50% market share.[73]
As of January 2018, there are more than 250 live DApps, with hundreds more under development.[74] Project applications listed in this section are not exhaustive and may be outdated.
- Digital signatures that ensure authenticity and proof of existence of documents: theLuxembourg Stock Exchange has developed such a system[75]
- Slock.It is developing smart locks[76]
- Digital tokens pegged to fiat currencies: Dai, stablecoin pegged to US dollar.[77]Decentralized Capital.[78] Spanish bankSantander is also involved in such a project[79].
- Digital tokens pegged to gold: Digix[6][80]
- Improved digital rights management for music: Imogen Heap used the technology[81]
- Platforms for prediction markets: Augur, Gnosis[82][83] Stox[84][85]
- Platforms for crowdfunding: the DAO[86][87][39]
- Social media platforms with economic incentives: Backfeed,[88] Akasha[89]
- Decentralized marketplaces:FreeMyVunk,[90] Etheropt,[91] TransActive Grid[92]
- Remittance: Everex[93]
- Online gambling: CoinPoker, [94]Etheroll[95]
- Electric car charging management: RWE[96]
- Secure identity systems for the Internet:uPort[97][98]
- Labour economics: Blocklancer,[99]Ethlance[100]
- Video Games: Cryptokitties popularity in December 2017 caused the Ethereum network to slow down.[101]
Enterprise software
Ethereum-based customized software and networks, independent from the public Ethereum chain, are being tested byenterprise software companies.[102] Interested parties include VISA,[103] Microsoft, IBM,JPMorgan Chase,[46][104] Deloitte,[105] R3,[106]Innovate UK (cross-border payments prototype).[107][108] Barclays, UBS and Credit Suisse are experimenting with Ethereum blockchain to automate Markets in Financial Instruments Directive (MiFID) II requirements.[109]
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."[110] 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.[111]
- 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.[112][113]
Performance
In Ethereum all smart contracts are stored publicly on every node of the blockchain, which has trade-offs.[114] 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.[114] As of January 2016, the Ethereum protocol could process 25 transactions per second.[114] On 19 December 2016, Ethereum exceeded one million transactions in a single day for the first time.[115]
- Micro Raiden was launched November 2017.[116]
- 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.[117] 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.[117]
- Ethereum engineers have been working onsharding the calculations, and the next step (called Ethereum 2) was presented at Devcon 3.[118]
Ethereum's blockchain uses Merkle Patricia trees, for security reasons, to improve scalability, and to optimize transaction hashing.[119]
Public Testnets
Ethereum has three active public testnets: Ropsten (Proof of Work secured), Kovan (Parity based Proof of Authority secured), and Rinkeby (Clique Proof of Authority scheme). There is no Proof of Stake secured testnet. Each testnet has its own distinct genesis block, and are fully functional testing grounds for decentralized applications. Testnet ether is not supposed to have market value.
Ethereums
Ethereum-based cryptocurrencies that emerged from forking the Ethereum blockchain:
- Ethereum Classic
- Expanse[120]
- Ethereum Fog[121]
- EtherZero[122]
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