Ushering in the world of Ethereum
Vitalik Buterin, the founder of Ethereum, addressed the limitations of Bitcoin discussed earlier quite differently. While working on Bitcoin, he recognized that Bitcoin’s stack-based scripting is very limited and lacks the functionality and capability for application development beyond the transfer of cryptocurrency ownership. He saw it as a huge opportunity and began writing his own whitepaper in 2013.
In his famous Ethereum whitepaper (https://github.com/ethereum/wiki/wiki/White-Paper), Vitalik laid out his vision and intent to build a blockchain that includes the following:
- A built-in Turing-complete programming language
- A smart contract and decentralized application platform, allowing anyone to define, create, and trade all types of cryptocurrencies and crypto assets
Similar to Bitcoin, Ethereum is built on blockchain technology. It has all of the critical characteristics of a blockchain. It is a shared distributed ledger on top of a decentralized P2P network. It works in a similar way to that discussed in the Bitcoin and cryptocurrency section earlier in this chapter. Unlike Bitcoin, which is a decentralized state transition system with limited decentralized computing capability via Bitcoin scripting, Ethereum is a decentralized computing and data platform featuring Turing-complete smart contract functionality.
Ethereum introduced a few new and critical concepts, including the smart contract, EVM, and account. We will cover them in detail in the rest of this book.
Smart contract
A smart contract is a piece of programming code that is stored and executed on the blockchain. Ethereum now has a Turing-complete language, Solidity, which enables developers to develop and deploy smart contracts. In addition to moving ether (the cryptocurrency of the Ethereum network) between accounts, Ethereum smart contract code can support more modern program language constructs such as loops and perform much more complex computations, including data access, cryptographic algorithms, and function calls. Each such operation has a gas price associated with it. That is how Ethereum calculates the transaction cost of running smart contracts and, through a gas limit, protects smart contracts from infinite loops or programming errors.
A smart contract is like a scripted agreement between interacting parties; the code built into the contract is stored on the Ethereum blockchain and cannot be tampered with or removed. This greatly increases the credibility of legal documents.
EVM
The EVM is the runtime environment for smart contracts in Ethereum. It is a virtual operating system deployed as an Ethereum client to all network nodes across the globe. Similar to the Java Virtual Machine (JVM) in the Java world, contract code is compiled into bytecode, which is loaded into the EVM as part of contract creation.
Account
There is no concept of accounts in Bitcoin. Instead, Bitcoin uses the concept of UTXO to keep track of money transfers and account balances. Ethereum introduces the concept of the world state and account. The world state comprises a mapping of all accounts and their public addresses. To facilitate both state transactions and decentralized computing, Ethereum introduces two types of accounts: Externally Owned Accounts (EOAs), controlled by private keys, and contract accounts, controlled by their contract code.
