Ethereum Delirium: The Big List of Things You Should Know

In an effort to better understand Ethereum’s potential for disruption, I’ve aggregated this list of things you should know about the digital currency.

“The intent of Ethereum is to create an alternative protocol for building decentralized applications, providing a different set of tradeoffs that we believe will be very useful for a large class of decentralized applications, with particular emphasis on situations where rapid development time, security for small and rarely used applications, and the ability of different applications to very efficiently interact, are important. Ethereum does this by building what is essentially the ultimate abstract foundational layer: a blockchain with a built-in Turing-complete programming language, allowing anyone to write smart contracts and decentralized applications where they can create their own arbitrary rules for ownership, transaction formats and state transition functions. Smart contracts can also be built on top of the platform, with vastly more power than that offered by Bitcoin scripting because of the added powers of Turing-completeness, value-awareness, blockchain-awareness, and state.” -Ethereum White Paper

Ethereum: What is it, how is it different than Bitcoin, what are the use-cases, and what’s the vision?

  • The main difference between Ethereum and Bitcoin with regard to the blockchain architecture is that, unlike Bitcoin, Ethereum blocks contain a copy of both the transaction list and the most recent state.
  • In general, there are three types of applications on top of Ethereum.
    • The first category is financial applications, providing users with more powerful ways of managing and entering into contracts using their money. This includes sub-currencies, financial derivatives, hedging contracts, savings wallets, wills, and ultimately even some classes of full-scale employment contracts.
    • The second category is semi-financial applications, where money is involved but there is also a heavy non-monetary side to what is being done; a perfect example is self-enforcing bounties for solutions to computational problems.
    • Finally, there are applications such as online voting and decentralized governance that are not financial at all.
  • Token systems are surprisingly easy to implement in Ethereum.
  • Theoretically, Ethereum-based token systems acting as sub-currencies can potentially include another important feature that on-chain Bitcoin-based meta-currencies lack: the ability to pay transaction fees directly in that currency.
  • Ethereum applications include:
    • Savings wallets.
    • Crop insurance.
    • IOT.
    • Farm-to-table produce.
    • Electricity sourcing and pricing.
    • Decentralized data feed.
    • Smart multisignature escrow.
    • Cloud computing.
    • Peer-to-peer gambling.
    • Prediction markets.
    • On-chain decentralized marketplaces.
  • Ethereum implements a simplified version of GHOST which only goes down seven levels. Specifically, it is defined as follows:
    • A block must specify a parent, and it must specify 0 or more uncles.
    • An uncle included in block B must have the following properties:
      • It must be a direct child of the kth generation ancestor of B, where 2 <= k <= 7.
      • It cannot be an ancestor of B.
      • An uncle must be a valid block header, but does not need to be a previously verified or even valid block
      • An uncle must be different from all uncles included in previous blocks and all other uncles included in the same block (non-double-inclusion)
    • For every uncle U in block B, the miner of B gets an additional 3.125% added to its coinbase reward and the miner of U gets 93.75% of a standard coinbase reward.
  • An important note is that the Ethereum virtual machine is Turing-complete; this means that EVM code can encode any computation that can be conceivably carried out, including infinite loops.
  • The Ethereum network includes its own built-in currency, ether, which serves the dual purpose of providing a primary liquidity layer to allow for efficient exchange between various types of digital assets and, more importantly, of providing a mechanism for paying transaction fees.
  • For convenience, and to avoid future argument (see the current mBTC/uBTC/satoshi debate in Bitcoin), the denominations for Ether are pre-labeled:
    • 1: wei
    • 1012: szabo
    • 1015: finney
    • 1018: ether
  • In the future, it is likely that Ethereum will switch to a proof-of-stake model for security, reducing the issuance requirement to somewhere between zero and 0.05X per year.
  • The current intent at Ethereum is to use a mining algorithm where miners are required to fetch random data from the state, compute some randomly selected transactions from the last N blocks in the blockchain, and return the hash of the result. This has two important benefits.
    • First, Ethereum contracts can include any kind of computation, so an Ethereum ASIC would essentially be an ASIC for general computation – ie. a better CPU.
    • Second, mining requires access to the entire blockchain, forcing miners to store the entire blockchain and at least be capable of verifying every transaction. This removes the need for centralized mining pools; although mining pools can still serve the legitimate role of evening out the randomness of reward distribution, this function can be served equally well by peer-to-peer pools with no central control.
  • One common concern about Ethereum is the issue of scalability.
  • Like Bitcoin, Ethereum suffers from the flaw that every transaction needs to be processed by every node in the network.
  • The Ethereum protocol was originally conceived as an upgraded version of a cryptocurrency, providing advanced features such as on-blockchain escrow, withdrawal limits, financial contracts, gambling markets, and the like via a highly generalized programming language.
  • The Ethereum protocol moves far beyond just currency: Protocols around decentralized file storage, decentralized computation and decentralized prediction markets, among dozens of other such concepts, have the potential to substantially increase the efficiency of the computational industry, and provide a massive boost to other peer-to-peer protocols by adding for the first time an economic layer.
  • With Ethereum, there is a substantial array of applications that have nothing to do with money at all.
  • The concept of an arbitrary state transition function as implemented by the Ethereum protocol provides for a platform with unique potential.
  • Ethereum is open-ended by design.
  • Any number of peer-to-peer gambling protocols, such as Frank Stajano and Richard Clayton’s Cyberdice, can be implemented on the Ethereum blockchain.
  • Ethereum multisig is asynchronous – two parties can register their signatures on the blockchain at different times and the last signature will automatically send the transaction.
  • EVM technology can be used to create a verifiable computing environment, allowing users to ask others to carry out computations and then optionally ask for proofs that computations at certain randomly selected checkpoints were done correctly.
  • Ethereum: the ‘World Computer’ that would decentralize – and some would argue, democratize – the existing client-server model.
  • With Ethereum, servers and clouds are replaced by thousands of “nodes” run by volunteers from across the globe (thus forming a “world computer”).
  • The vision is that Ethereum would enable people anywhere around the world to compete to offer services on top of the infrastructure.
  • Ethereum is an open-source, public, blockchain-based distributed computing platform featuring smart contract (scripting) functionality, which facilitates online contractual agreements.
  • Ethereum provides a decentralized Turing-complete virtual machine, the Ethereum Virtual Machine (EVM), which can execute scripts using an international network of public nodes.
  • Ethereum also provides a cryptocurrency token called “ether”, which can be transferred between accounts and used to compensate participant nodes for computations performed.
  • Ethereum was proposed in late 2013 by Vitalik Buterin, a cryptocurrency researcher and programmer.
  • Development of Ethereum was funded by an online crowdsale July–August 2014.
  • Ethereum went live on 30 July 2015, with 11.9 million coins “premined” for the crowdsale. This accounts for approximately 13% of the total circulating supply.
  • In 2016, Ethereum was forked into two blockchains as a result of the collapse of The DAO project. The two chains have different numbers of users, and the minority fork was renamed to Ethereum Classic, while the majority fork has retained the name Ethereum.
  • Vitalik Buterin, a programmer involved with Bitcoin, 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.
  • The Ethereum software project was initially developed in early 2014 by a Swiss company, Ethereum Switzerland GmbH (EthSuisse).
  • Several prototypes of the Ethereum platform were developed by the Ethereum Foundation, as part of their Proof-of-Concept series, prior to the official launch of the Frontier network. The last of these prototypes culminated in a public beta pre-release known as “Olympic”. The Olympic network provided users with a bug bounty of 25,000 ether for stress testing the limits of the Ethereum blockchain.
  • After Olympic, the Ethereum Foundation announced the beginning of the Frontier network to mark the tentative experimental release of the Ethereum platform in July of 2015. 
  • Ethereum earned notable media coverage in 2016 when a decentralized autonomous organization called The DAO, a set of smart contracts developed on the platform, raised a record USD$150M in a crowdsale to fund the project.
  • After The DAO fork, Ethereum subsequently forked two times in the fourth quarter of 2016 to deal with other attacks.
  • The Ethereum Virtual Machine (EVM) is the runtime environment for smart contracts in Ethereum.
  • The formal definition of the EVM is specified in the Ethereum Yellow Paper by Gavin Wood.
  • 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, Python, Ruby, Rust, and WebAssembly.
  • In Ethereum, smart contracts are treated as autonomous scripts or stateful decentralized applications that are stored in the Ethereum blockchain for later execution by the EVM. Instructions embedded in Ethereum contracts are paid for in ether (or more technically “gas”) and can be implemented in a variety of Turing complete scripting languages.
  • Smart contracts are high-level programming abstractions that are compiled down to EVM bytecode and deployed to the Ethereum blockchain for execution.
  • In Ethereum, all smart contracts are stored publicly on every node of the blockchain.
  • As of January 2016, the Ethereum protocol could process 25 transactions per second.
  • In September 2016, Buterin presented proposals to increase Ethereum’s scalability.
  • Bloomberg describes Ethereum as “shared software that can be used by all but is tamper proof.”
  • Ethereum is used as a platform for decentralized applications, decentralized autonomous organizations and smart contracts, with “dozens of functioning applications” built on it.
  • In March 2017, various blockchain start-ups, research groups, and Fortune 500 companies announced the creation of the Enterprise Ethereum Alliance (EEA)— a nonprofit organization with over 116 enterprise members.
  • The purpose of the EEA is to coordinate the engineering of an open-source 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.
  • Members of the Enterprise Ethereum Alliance (EEA) include:
    • ConsenSys
    • Cornell University’s research group
    • Toyota Research Institute
    • Samsung SDS
    • Microsoft
    • Intel
    • J.P. Morgan
    • Merck & Co.
    • DTCC
    • Deloitte
    • Accenture
    • Banco Santander
    • BNY Mellon
    • ING
    • National Bank of Canada
  • J.P. Morgan Chase is developing a blockchain, on top of Ethereum, dubbed “Quorum.”
  • 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.
  • January, 2014: Ethereum was formally announced by Vitalik at the The North American Bitcoin Conference in Miami, Florida, USA.
  • April, 2014: Gavin Wood published the Ethereum Yellow Paper that would serve as the technical specification for the Ethereum Virtual Machine (EVM).
  • The Ethereum Foundation (Stiftung Ethereum) was established June 2014 in Zug, Switzerland.
  • November, 2014: ETH DEV organized the DEVCON-0 event, which brought together Ethereum developers from around the world to Berlin to meet and discuss a diverse range of Ethereum technology topics.
  • April, 2015: the DEVgrants program was announced, which is a program that offers funding for contributions both to the Ethereum platform, and to projects based on Ethereum.
  • In early 2015, an Ethereum Bounty Program was launched, offering BTC rewards for finding vulnerabilities in any part of the Ethereum software stack.
  • The Ethereum security audit began at the end of 2014 and continued through the first half of 2015.
  • The second developers’ conference DEVCON-1 took place in the city of London at the beginning of November 2015.
  • The moment when blockchain technology became mainstream: Microsoft announced that it would offer Ethereum on its new Blockchain as a Service offering on the Microsoft Azure cloud platform.
  • The Ethereum subreddit is the most inclusive Ethereum forum, where most of the community discussion is happening, and where core devs are also active. This is your forum of choice for generic discussion of news, media coverage, announcements, brainstorming.
  • Specialized Ethereum subreddits:
    • /r/EthTrader – Ether trading, price and market.
    • /r/EtherMining – Ether mining discussion.
    • /r/Ethmarket – Marketplace for individuals looking to exchange goods and services for Ether.
    • /r/Ethinvestor – News and prospects for Ethereum investors. Following the long term trends in the Ethereum marketplace.
    • /r/ethereumism/ – A bit more ism, ostic, ical, ist and tinfoil hats, pyramids and crystal ball type of views – the ethereal side of Ethereum.
  • As of September 2016, the leading Ethereum implementations are go-ethereum and Parity.
  • The cpp-ethereum codebase lives on Github.com in the cpp-ethereum repository.
  • May 5, 2017: The price of ether, the cryptocurrency that powers the world’s second-largest blockchain platform, Ethereum, passed $100 to reach a new all-time high.
  • As of early May, 2017, Ether volume accounted for 20% of total cryptocurrency market volume, below Bitcoin (46%), but ahead of Litecoin (11.38%).
  • Is the ether supply infinite? No.
  • According to the terms agreed by all parties on the 2014 ether presale, issuance of ether is capped at 18 million ether per year (this number equals 25% of the initial supply). This means that while the absolute issuance is fixed, the relative inflation is decreased every year. In theory, if this issuance was kept indefinitely then at some point the rate of new tokens created every year would reach the average amount lost yearly (by misuse, accidental key lost, death of holders etc) and there would reach an equilibrium.
  • Sometime in 2017 Ethereum will be switched from Proof of Work to a new consensus algorithm under development, called Casper, that is expected to be more efficient and require less mining subsidy.
  • If you just want to test the technology, you probably don’t need real ether. Download the latest Wallet app and switch to the Test Network.
  • Every 12 seconds, on average, a new block is added to the blockchain with the latest transactions processed by the network and the computer that generated this block will be awarded 5 ether.
  • If you are serious about mining on the live Ethereum network, and getting real ether rewards, then you should use a dedicated computer with very powerful graphic cards in order to run the network. $AMD $NVDA
  • “Ethereum would never be possible without Bitcoin—both the technology and the currency—and we see ourselves not as a competing currency, but as complementary within the digital ecosystem. Ether is to be treated as ‘crypto-fuel,’ a token whose purpose is to pay for computation, and is not intended to be used as or considered a currency, asset, share or anything else.”
  • There are many ways in which you can use Bitcoins within the Ethereum ecosystem:
    • Trade BTC for ETH: multiple third party companies are working to make the exchanging of ether and bitcoins as easy and seamless as possible. If so desired one could trade bitcoins for ether with the purpose of executing contracts and trade it back immediately in order to keep their value pegged and secured by the bitcoin network. The latest version of the wallet includes an automatic conversion between ether and Bitcoin.
    • Use a pegged derivative: Ethereum is a great tool for creating complex trading between multiple parties. If you have a source for the price of Bitcoin that all parties trust, then it’s possible to create an ethereum based currency whose value is pegged to the market value of Bitcoin. This means that you could trade bitcoins to a token that is guaranteed to always trade back to the same amount of bitcoins while still being fully compatible with other ethereum contracts.
    • Use a Bitcoin relay to convert a 2 way peg: the bitcoin relay is a piece of code that allows you to sidechain a bitcoin into ethereum. This means that you can use Bitcoin’s native limited scripting capability to lock a bitcoin into a contract that is directly connected to an ethereum contract, which can then issue an ethereum based token that is guaranteed to be backed by bitcoin. The relay is under development and as implementations are tested and proved to be secure, we will list them here.
  • Ethereum addresses don’t have built-in checks on them yet. That means that if you mistype an address, your ether will be lost forever.
  • Anytime you create a transaction in Ethereum, the string that is returned is the Transaction Hash. You can use those to keep track of a transaction in progress, or the amount of gas spent in a past transaction using eth.getTransaction() and eth.getTransactionReceipt.
  • Ethereum, created mid-2015, is Bitcoin’s strongest rival… But can Ethereum deliver on the hype surrounding its complicated technology, as well as recover from the recent spectacular failure of the DAO, to usurp Bitcoin’s primacy?
  • Ethereum’s primary innovation was to expand into a fully-featured programming language such as JavaScript, which Ethereum’s language closely resembles. This is what is meant by Ethereum being “Turing-complete.”
  • Ethereum appears to have a clear advantage in terms of blockchain scalability.
  • Literally anyone can code a smart contract which runs on top of Ethereum. Therein lays both opportunity and danger.
  • June 9th, 2017: Ethereum Price Rise To $265 Signals The Cryptocurrency Asset Class Has Arrived
  • Ethereum has some important characteristics which give it a competitive advantage:
    • The first of which relates to transaction times. It currently takes about 12 minutes on average to confirm a Bitcoin transaction, while it takes Ethereum is only around 12–15 seconds to do so. Ethereum’s “GHOST” protocol can process greater data loads and in greater speeds than Bitcoin’s peer-to-peer cryptographic protocol. This advantage cannot be understated.
    • Secondly, Ethereum has the ability to run “smart contracts,” which are code functions which can handle legal functions, data storage, information processes and more. Bitcoin, not so much (although this may be changing soon). This gives Ethereum the prime advantage of added utility over just being a currency. Should Bitcoin not keep pace with Ethereum in this arms race, Ethereum could see better adoption rates.
  • Ethereum is not just a digital currency. It is a blockchain-based platform with many aspects. It features smart contracts, the Ethereum Virtual Machine (EVM), and it uses its currency called ether for peer-to-peer contracts.
  • Ethereum’s smart contracts use blockchain stored applications for contract negotiation and facilitation. The benefit of these contracts is that the blockchain provides a decentralized way to verify and enforce them. The decentralized aspect makes it incredibly difficult for fraud or censorship. Ethereum’s smart contracts aim to provide greater security than traditional contracts and bring down the associated costs.
  • Ethereum allows you to create digital tokens that can be used to represent virtual shares, assets, proof of membership and more. These smart contracts are compatible with any wallet, as well as exchanges that use a standard coin API. You can copy the code from Ethereum’s website and then use your tokens for many purposes, including the representation of shares, forms of voting and also fundraising. You can either have a fixed amount of tokens in circulation or have a fluctuating amount based on predetermined rules.
  • One great feature of Ethereum is that it gives developers a means to raise funds for various applications.
  • More than two-thirds of all available bitcoin have already been mined, with the majority going to early miners. Ethereum raised its launch capital with a presale and only about half of its coins will have been mined by its fifth year of existence.
  • The reward for mining Bitcoin halves about every four years and it is currently valued at 12.5 bitcoins. Ethereum rewards miners based on its proof-of-work algorithm called Ethash, with 5 ether given for each block.
  • Ethash is a memory hard hashing algorithm, which encourages decentralized mining by individuals, rather than the use of more centralized ASICs as with Bitcoin.
  • Bitcoin and Ethereum cost their transactions in different ways. In Ethereum, it is called Gas, and the costing of transactions depends on their storage needs, complexity and bandwidth usage. In Bitcoin, the transactions are limited by the block size and they compete equally with each other.
  • Ethereum features its own Turing complete internal code, which means that anything can be calculated with enough computing power and enough time. Bitcoin does not have this capability. While there are certainly advantages to the Turing-complete, its complexity also brings security complications, which contributed to the DAO attack.
  • Core dev Vlad Zamfir: “Ethereum isn’t money, safe, or scalable.”
  • Ethereum can be used to build Decentralized Autonomous Organizations (DAO). A DAO is fully autonomous, decentralized organization with no single leader. DAO’s are run by programming code, on a collection of smart contracts written on the Ethereum blockchain. The code is designed to replace the rules and structure of a traditional organization, eliminating the need for people and centralized control. A DAO is owned by everyone who purchases tokens, but instead of each token equating to equity shares & ownership, tokens act as contributions that give people voting rights.
  • Start-ups working Ethereum:
    • Weifund provides an open platform for crowdfunding campaigns that leverages smart contracts. It enables contributions to be turned into contractually backed digital assets that can be used, traded or sold within the Ethereum ecosystem.
    • BlockApps is looking to provide the easiest way for enterprises to build, manage and deploy blockchain applications. From proof of concept to full production systems and integration with legacy systems, Blockapps provides all the tools necessary to create private, semi-private and public industry-specific blockchain applications.
    • Provenance is using Ethereum to make opaque supply chains more transparent. By tracing the origins and histories of products, the project aims to build an open & accessible framework of information so consumers can make informed decisions when they buy products.
    • Augur is an open-source prediction & forecasting market platform that allows anyone to forecast events and get rewarded for predicting them correctly. Predictions on future real world events, like who will win the next US election, are carried out by trading virtual shares. If a person buys shares in a winning prediction, they receive monetary rewards.
  • “If you think the internet has affected your life, Ethereum will have that same pervasive influence on our communications, on our entire information infrastructure. It’s going impact all aspects of our existence” –  Joseph Lubin, CEO of Consensys
  • Ethereum & The Internet of Things: As money is transformed into truly digital – that is, literally code – a number of activities that previously could not be undertaken become possible. The most promising is machine to machine payments, better known as IoT.
  • Ethereum requires no accounts, just a public address or a smart contract address. It requires no third party and, more interestingly, while humans need a private key to authenticate and verify public addresses, machines – that is smart contracts – are automatically authenticated and verified by Ethereum’s global node network.
  • Ethereum: Machines can now hold and exchange value. In combination with sensors, cloud computing, data analytics, wireless technology and other advances in computer science, the IOT has arrived.
  • March 2016: within less than a year of its existence, Ethereum achieved a record-breaking marketcap of over $1B.
  • A potential use for Ethereum is coding solutions for complex scientific tasks, such as distributed astrophysical computations or protein folding for pharmaceutical companies.
  • Through the use of the Dagger Hashimoto algorithm, Ethereum created a way to permit simple home computers to mine ether efficiently.
  • Ethereum allows for applications with theoretically unlimited computational power, unattainable by even the most advanced supercomputers.
  • “Ethereum relates to blockchains like java relates to relational databases: you store your data in the database and build your application in java. One of the key differences is that Blockchains and the Ethereum platform are not running on one but several distributed servers. They offer some unique features like for example the fact that transactions in a blockchain cannot be reverted, whereas all databases offer transactions handling and rollback mechanisms.” – Benedikt

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