Introduction to Ethereum
Ethereum is NOT a blockchain. It’s NOT a cryptocurrency either! It’s actually a protocol (a set of rules or procedures) like “HTTP” or “HTTPS”.
Multiple independent blockchains run on the Ethereum protocol. When most people talk about Ethereum, they are talking about Mainnet — the primary public Ethereum production blockchain. This is where actual-value transactions occur on the blockchain. The native crypto of this Ethereum is Ether (ETH).
One of the greatest blockchain innovations is the Ethereum Virtual Machine (EVM).
EVM is “the environment in which all ‘Ethereum’ accounts and smart contracts live”. Smart contracts are programs that run automatically when some pre-defined conditions are met.
The sole purpose of the Ethereum protocol is to keep “the continuous, uninterrupted, and immutable operation” of the EVM. At any given block, Ethereum has only one “canonical” or unique state. EVM defines the rules for computing new valid states from one block to another.
EVM exists as a single entity maintained by a large number of connected computers (nodes) running an Ethereum client e.g. Geth or OpenEthereum. A client is a software that enables nodes to read blocks on the blockchain and smart contracts.
The most popular Ethereum standards are ERC-20 (for fungible tokens like stablecoins) and ERC-721 (for non-fungible tokens). Then there are ERC-777 (improving ERC-20) and ERC-1155 (which contains both fungible and non-fungible assets).
Gas refers to the unit that measures the amount of computational effort required to execute specific operations on the Ethereum network.
Each Ethereum transaction requires a fee called “gas” because each transaction consumes computational resources. The gas fee is paid in ETH and denoted in gwei (0.000000001 ETH).
Block time is the time it takes to mine a new block (a bunch of transactions). The average Ethereum block time is 12 to 14 seconds.
Ethereum started the concept of decentralized finance (DeFi) and today an amazing multi-billion dollar ecosystem has evolved around it:
- $100+ billion of fiat pegged & algorithmic stablecoins.
- Innovative projects like Uniswap, Chainlink, Aave, Unstoppable Domains, Basic Attention Token, Polygon, and OpenSea.
- Asset-backed cryptos like tokenized stocks.
Consensus mechanism: Proof of work