Ethereum 101

Essentially when Ethereum was issued, there was a total supply of ether that was issued, and the rate of issuance as well was decided by the donations gathered on the 2014 presale. There was 60 million ether created, 12 million which was about 20% of the above were created for development fund, and the remaining was for the Ethereum Foundation.

Now, five ethers are created for every block. That’s about every 15 seconds for the miner of the block. Now, it’s important to know that there is five ether that is created by every block. So just be aware of that number in case you see it again. And when it comes to uncles, basically there’s two to three ether that may be sent to another miner. These are called uncles essentially and these are rewards.

The most widely used open-source blockchain is Ethereum. It’s distributed as well. Mainly used for building and implementing smart contract functionality. It’s a decentralized virtual machine. This is known as the Ethereum virtual machine, which is the EVM is an acronym you may want to know as well.

Now, this was initiated by Vitalik Buterin in 2013. Ethereum went live in July of 2015. From a historical perspective, you want to know that Ethereum was live in 2015 in case you see that again. Now, another term you want to know and understand is that ether is a native token of the Ethereum blockchain.

This is used to pay for transaction fees, for miner rewards and other services on the network. now, Ethereum is actually the platform, and it’s very often you see people confuse ether and Ethereum and gas and in reality, they are really different things. Ethereum is actually the open-source platform that is the blockchain technology itself. This is what enables the developers to build and deploy decentralized apps. So Ethereum is a platform, ether is a native token and we’re gonna talk about gas here coming up shortly. Now, Ethereum has four main components.

You have the nodes, you have EVMs, you have smart contracts and DApps. Let’s go ahead and talk about each of these. Ethereum Virtual Machine. This is built into the software running Ethereum protocol. It executes smart contracts. Basically these programs are written in the Solidity programming language, which we will talk about in an upcoming module.

Now, the EVM is essentially contained in the full node of Ethereum, and inside of which it executes these user written programs, which are what? Smart contracts. Now, the EVM code is the programming language in which accounts on the Ethereum blockchain can contain code. EVM code associated with an account is executed every time a message is sent to that account and have the ability to read and write storage and itself send messages.

Now, gas is a completely different term and sometimes it’s confused with ether. So gas is really a measurement of roughly the equivalent for computational steps for Ethereum to essentially execute on the blockchain. Now, every transaction that occurs on the Ethereum network requires essentially an amount of gas to execute.

Basically it’s a fee that you have to be willing to pay to essentially include the transaction in the blockchain itself. In other words, that miner can choose to essentially process a transaction if you are willing to pay a little bit more quicker, and therefore your transaction will be included in the blockchain a little bit quicker. But basically just think of gas as an estimate of how much ether it will cost to perform a specific transaction on the Ethereum blockchain.

Now, developers need to really pay attention to that of course. But just think of it that every operation on the blockchain has a gas expenditure on an EVM. Now, the blockchain is a transaction based state machine.

In computer science, a state machine refers to something that will read a series of inputs but based on those inputs, will transition to a new state. Well, why is that important? Because you need to have a genesis state in the sense that this is the beginning state and what is the actually the ending state? Basically, in a blockchain, right, you have different states to the blockchain, when a transaction is recorded is what? It’s actually appended to the blockchain. Now, that transaction, for that to be valid, has to be processed by a validation process known as blockchain mining.

Now, mining of course is when a group of nodes uses their computing power to create a block of valid transactions. Now, this is pretty similar to Bitcoin, mining is important in Ethereum, because again, this is a permission less blockchain, it is distributed and you need to be able to have those transactions written to the blockchain and Ethereum currently still uses the proof of work algorithm in its blockchain.

Ethereum 101