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Ethereum Whitepaper | Crash Guide

Etherium whitepaper

December 4, 2020 | 

JOHN K MWANIKI |  0 Comments| 

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The crypto world credits Satoshi Nakamoto for the crypto revolution. His whitepaper Bitcoin; a peer-to-peer electronic cash, changed the financial landscape. But there is more to crypto markets.

Ethereum has one over Bitcoin in that it is the real blockchain revolution. While Bitcoin might be successful, Ethereum supports the development of other projects. It provides an underlying platform where others don't have to worry about starting from scratch. Already, it's been behind several blockchain projects. The latest is a series of decentralized finances (Defi).

Vitalik Buterin published Ethereum whitepaper in 2013. It was the second crypto whitepaper released after Bitcoin. It has since kept its place as the second most valuable digital currency.

Its success draws interest to the whitepaper. Follow this crash guide for the basics to know about the Ethereum whitepaper.

Introduction 

Ethereum is all about creating an alternative protocol for building decentralized applications. It seeks to provide the operating platform for decentralized applications. It manages the rapid development and secures the smaller decentralized applications. It does this by providing a foundational layer for anyone to write smart contracts

The platform allows the projects to create their own rules and transaction formats. It allows for the creation of different projects depending on the codes applied.

Ethereum Whitepaper Philosophy

The Ethereum Whitepaper designs the digital currency in the following principles;

  • Simplicity 

Ethereum works for various groups of people. For that, it relies on simplicity for ease of access. Any average person should be able to use the system to develop various concepts.

The simplicity helps it achieve its goal of democratizing cryptos. It thus discourages any optimization causing complexity, unless unavoidable. 

  • Universality 

Ethereum stands apart for its ability to support any blockchain system. Its design is from a Turing-complete scripting language instead of essential features. Whether a currency, interlocking contracts, or any other thing, Ethereum has got you.  

  • Modularity 

The Ethereum system is more about the crypto ecosystem more than itself. It builds a protocol that is modular and detachable. It allows one to develop programs without relying on modifications from Ethereum. It can operate without any underlying platform interference. It also allows project features that are not in Ethereum.

  • Agility 

The Ethereum whitepaper is not static. It mirrors the ever-evolving crypto ecosystem. So far, the document has undergone several changes to match new developments. This is all part of the document. It allows modifications, most so for scalability and security improvements. 

  • Non-discrimination and non-censorship

Ethereum supports the crypto mantra of moving away from centralized. It does not seek to become an authority over the projects on its platform. It provides for no regulatory mechanisms. Anyone can use the platform to create a concept of choice.

Ethereum Mining

A centralized currency relies on a single entity to ensure its security. The entity provides regulations to avoid double-spending and other issues. This is different from Ethereum, which is a decentralized system. It seeks consensus from users to ensure the validity of transactions.  

The transactions within the Ethereum ecosystem works in nodes. It produces a node every ten minutes, with each having a timestamp from the previous one. They then combine to make continuous blocks leading to a blockchain. 

Every block needs validation before it becomes part of the chain. A valid block must have a reference from the previous block. Its timestamp must be greater than that of the previous one. It should also yet be less than 2 hours into the future. 

The block should also have a valid proof of work. Only the block that meets all the requirements enters the chain. It requires special machines to check the validity of the chain. The ones responsible for certifying them being the miner.

Ethereum mining is like that of Bitcoin. They ensure the security of the platforms. For that, miners in the system get incentives for their role. They also earn more from transaction fees in case of larger transactions.

Ethereum mining is lucrative. The past year has seen at some point its miners earn more than those of Bitcoin

Merkle Tree 

The digital currency scalability has every block stored in a multi-level structure. The block has a header that contains the timestamp. It also has previous block hash and nonce records. All these details on transactions combine for storage on the Merkle tree.

The Merkle tree also has other binary nodes. A user can only download a single node from the chain relevant to their applications. They will end up with all the verifications. 

The Merkle tree helps in stopping malicious transactions. Any unverified node in the Merkel tree changes the whole bunch of nodes in the tree. The protocol then notices a strange hash. For that, the next block would fail to pick up; hence transaction fails. It is the application of the proof of work.

The Merkel tree is the determinant of blockchain sustainability. A single tree is around 15GB and keeps growing after some time. This has seen the move of mining from phones to computers and now in special mining machines

Ethereum Applications 

Ethereum is one of the most successful cryptos due to several applications. The Ethereum Whitepaper allows it to support transactions of a different nature.

The first type is the financial application. This allows users to enter and fulfill varying contracts through the token. Some of the financial aspects include hedging contracts and derivatives. It also has saving wallets and employment contracts. 

The other application is semi-financial. This involves the use of money on a non-monetary application. For example, the use in clearing computational problems.

It also works in non-financial applications like online voting and governance. As the crypto world grows, Ethereum Whitepaper grows to accommodate other transactions.

Decentralized File Storage 

Data security has become one of the top tech challenges. People are looking for ways to store data while also having space. This had brought the upsurge of cloud storage. These services, though, are costly and not as secure.

Ethereum Whitepaper supports decentralized storage. It allows the user to decrypt data for storage. They can then recover them at need. 

Bottom Line 

The Ethereum whitepaper is such an exhaustive document. It needs time to understand. Use this guide to learn some of the essential information you need to know.

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