A cryptocurrency is a digital or virtual currency designed to work as a medium of exchange. It uses cryptography to secure and verify transactions as well as to control the creation of new units of a particular cryptocurrency. Essentially, cryptocurrencies are limited entries in a database that no one can change unless specific conditions are fulfilled. Here, in this chapter, the authors demystify Ethereum cryptocurrency. Initially, they introduce the said topic. While explaining, they follow a layered approach and explain each layer that is contributing in transactions. Eventually, they show the challenges for Ethereum cryptocurrency.
TopIntroduction
Ethereum is a public, open source, blockchain based, the decentralized platform on which distributed applications can be built and run without any interference or scam from a third party (Rouse, 2017; “What is Ethereum. Guide for Beginners”, 2018). It came into existence in the year 2015 by the 19 years old, Vitalik Buterin, thought up a new platform based on his research to transform the internet entirely. He is a programmer from Toronto. Let us start with decentralization. It means that no individual has exclusive control over data or processes. “A decentralized system is one that allows multiple parties to make their own separate decisions”. Blockchain relies on decentralization because transactions are enrolled by all users on the blockchain network.
Simply, like Bitcoin (Vujicic, Jagodic, & Randic, 2018), Ethereum is a decentralized (Laurence, 2017; Rosic, 2019), public blockchain network technology that allows coders to build and deploy distributed applications, but we can differentiate Bitcoin and Ethereum on the basis of purpose and capability. The bitcoin blockchain network is used to document control of cryptocurrency, although, the Ethereum blockchain network gives emphasis on executing the programming code of any distributed application. So far, we discuss that the backbone of Ethereum is the blockchain network, so, what actually a blockchain technology is? and how does it works?
As we know, the internet is a platform, multiple different types of applications are built on top of it like email, telnet, www and etc. In a similar fashion, blockchain technology is a recently evolved new type of internet where you can build and deploy lots of distinct applications. Bitcoin and Ethereum (Aung & Tantidham, 2017) are two applications of blockchain technology. In the recent era, almost all people are relying on the bank to accomplish a transaction. But blockchain technology itself provides us with third-party facilities. It acknowledges the buyer and supplier to communicate securely, quickly and directly by using cryptography.
Blockchain technology (Rosic, 2019; Bauerle, 2019) can be considered as a digital ledger that is used to store all transactions taking place on a peer-to-peer network. Also, stored information circulated via blockchain is encrypted and stored in every circumstance, means it can't be altered. There is no need for any central, certifying authority. Moreover, it can also share contracts, records and other kinds of information along with money transfer across multiple registered providers without the risk of a confidentiality breach.
Figure 1. Block diagram of blockchain technology
Here, Figure 1. has shown the design pattern of the blockchain. Blocks in blockchain usually contain block header and block body. Block body takes care of the history of transactions and block header display various information like a variant, Merkle root, nonce, etc. The variant field is used to track software upgrades. Merkle root stores the hash value of the current block. Moreover, block header also keeps the value of timestamp, block size and number of transactions. The nonce field helps in the hash generation and, in the proof-of-work algorithm. We consider block time approx. 10 minutes for Bitcoin, and approx. 17.5 seconds for Ethereum. The value of block time depends upon the propagation time needed to reach a block to all miners, and time taken by all miners to approach a consensus. Eventually, Blockchain recent state is used to support the Ethereum execution.