Core components of Ethereum

Published in

Bots and Blocks

5 min readJun 6, 2017

“I was born in 1994 in Russia and moved to Canada in 2000, where I went to school. I happily played World of Warcraft during 2007–2010, but one day Blizzard removed the damage component from my beloved warlock’s Siphon Life spell. I cried myself to sleep, and on that day I realized what horrors centralized services can bring.”
… “ I gave each agent a utility function and let them independently act to maximize their own objectives.”
— Vitalik Buterin, co-founder of Ethereum

And the rest my dear friends is going to be history.

Welcome to the world of Ethereum, a platform based on blockchain with decentralisation as the core feature. This means transactions with no mediators or middlemen.

Now let us understand what the various components of Ethereum are:

Blockchain:

These days all transactions are being stored in data centres that belong to entities, thus giving that entity full power to manipulate it. This has a lot of risks associated with it.

What we need is transparency and no middlemen, and this is what blockchain provides us. A distributed database, spread across multiple nodes(computing device), used to maintain a continuously growing list of records, called blocks, that can be viewed by anyone.

Decentralized Computing:

Over the past few years the majority of computing has been done through centralized networks, a central server that holds and distributes information. So whenever a client (web-surfer) requests some information, the server decides whether to accept the client’s request or not, thus having total control over the information with the client having none.

Decentralised Computing, on the other hand, removes the need of having such a controlled environment. It instead relies on peers — a larger number of servers — that process data in exchange for small rewards. The workload is distributed, the environment is free from the whims of single-point authorities and the computing power of all the devices in the network are efficiently harnessed. It holds the promises of being faster and more secure than its centralized counterparts.

Torrent networks are a good example of existing decentralized computing, and it seems that Ethereum will leave a mark too.

Contract:

The contract is a primary feature of Ethereum. A contract can be used for multiple purposes. For example a contract can be written to sell a commodity or a contract can be written representing an exchange between two different commodities. To extend the idea, a contract can be created for representing shares of a particular individual in a company. There are a number of other possibilities.

Technically speaking, a contract is a collection of code (its functions) and data (its state) that resides at a specific address on the Ethereum blockchain and is essentially Turing-complete. A contract in Ethereum is written in the Solidity programming language.

Decentralized Application (DApp):

Decentralized applications or DApps are computer applications that operate over a blockchain (or have their own blockchain) enabling direct interaction between end users and providers (e.g. connecting buyers and sellers in some marketplace, owners and storers in file storage).

In Ethereum’s purview, a DApp can be anything that enables transactions over the Ethereum framework, typically interfacing with users via an HTML/Javascript web application using a Javascript API to communicate with the blockchain.

Ether:

Ether is a necessary element — a fuel — for operating the distributed application platform Ethereum. Every time a contract is executed, Ethereum consumes tokens which is termed as ‘gas’ to run the computations.

Ether can be used for executing contracts or manage transactions over Ethereum. To put it another way, ether is the incentive ensuring that developers write quality applications (wasteful code costs more), and that the network remains healthy (people are compensated for their contributed resources).

According to the terms agreed by all parties on the 2014 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.

ICO:

Initial Coin Offering (ICO) is an unregulated means by which funds are raised for a new cryptocurrency venture. It is used by startups to bypass the rigorous and regulated capital-raising process required by venture capitalists or banks. In an ICO campaign, a percentage of the cryptocurrency is sold to early backers of the project in exchange for legal tender or other cryptocurrencies, but usually for Bitcoin.

Wallet:

As described by ethereum.org, an Ethereum Wallet is a gateway to decentralized applications on the Ethereum blockchain. It allows you to hold and secure ether and other crypto-assets built on Ethereum, as well as write, deploy and use smart contracts.

DAO:

The DAO (Decentralised Autonomous Organisation) is described as ‘existing simultaneously nowhere and everywhere and operating solely with the steadfast iron will of immutable code’. It is a combination of computer code, a blockchain, smart contracts, and people.

Some believe that it is designed to serve as a kind of venture capital fund for the cryptocurrency community, but it definitely is much more than that. It is a full fledged company which interestingly is simply a software that runs on a blockchain.

Solidity:

As their homepage describes, Solidity is a contract-oriented, high-level language whose syntax is similar to that of JavaScript and it is designed to target the Ethereum Virtual Machine (EVM).

Basically, it is a programming language which allows developers to create smart contracts.

Overall, Ethereum is presented as a platform that provides the opportunity to create a contract that will hold a contributor’s money until any given goal (or date) is reached. And when it is, the funds either return back to their contributors or, in case of success, are automatically given out to the project developers/owners. This enables crowdfunding, crowdsales and auctions without any third party to trust and with a predictable dispersal of possible outcomes.

I have tried to cover all the major components here. If I missed anything, or you would like some more details on anything, feel free to contact me ❤

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