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Cristian Garner
Cristian Garner

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Ethereum: A Secure Decentralised Generalised Transaction Ledger


This is a summary of the Ethereum Yellow Paper with my personal thoughts included. You can read the full paper here:

First of all, the Ethereum Yellow paper is deeply technical and it's useful only in case you want to build an Ethereum client from scratch if you only want to learn more about Ethereum in a more conceptual or usability way I recommend reading the white paper instead:

Bitcoin was created with one goal in mind, transactions of values between peers in a trusted and decentralized way. Ethereum instead was created with the key goal to facilitate ANY kind of transactions between individuals who would otherwise have no means to trust one another in some cases due to inefficient legal systems, geographical ubication or corruption.

Ethereum's Blockchain is heavily inspired on the Bitcoin's, it uses the proof-of-work as a medium to reduce spam. The main difference it's that it has a global state where information is saved, often Ethereum is referenced as "The World Computer", blocks are composed by a series of transactions which has information about the sender, receiver, nonce (to prevent double transactions), the amount sent and gas.

There are two types of accounts, users and smart contracts (in reality programs), the main difference is that smart contracts don't have a private and public key and when they are created have the data related to their execution. Smart contracts can be executed by users or other smart contracts, in order to execute them is needed to pay an execution fee named Gas, the gas is a mechanism of protection for reducing infinite resources consumption by mistake or malicious actors, actors that want to use a smart contract need to pay a gas with a limit per block, not allowing infinite loops and the stalling of the network. Because of the implementation of Gas, it's said that Ethereum implements a Quasi Complete Turing Machine.

Ethereum was designed to be a Proof of Stake blockchain from the start, but the technology wasn't ready, to promote the migration to Proof of Stake it was implemented an internal mechanism named difficulty bomb which will increase the difficulty of mining.

Just as Bitcoin, Ethereum was designed to be as accessible as
possible to as many people as possible with the idea that mining would be a simple swap from electricity to Ether. Bitcoin has a plague known as ASICs, which use specialized hardware to mine, to prevent ASICs Ethereum implements a different proof-of-stake algorithm named Ethash contrast.

In conclusion, I can say that Bitcoin has a better structure for storing value, but for the implementation of decentralized applications and finances, Ethereum is the best solution.

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