What is Ethereum?
Ethereum is a decentralized blockchain platform that facilitates the development and implementation of decentralized applications (DApps) and smart contracts, with the ultimate goal of offering an alternative to centralized systems. Transaction fees are paid for using Ether (ETH), the platform's native coin, while the cost of transactions is regulated using an internal pricing mechanism called gas.
The Ethereum Virtual Machine (EVM) provides a secure, isolated, and uniform environment for executing smart contracts and enforcing the rules of the Ethereum protocol. Enabled by Ethereum, Web3 has a broad range of use cases, including the creation of DeFi protocols, peer-to-peer marketplaces, non-fungible token (NFT) exchange platforms, decentralized social networks, and decentralized autonomous organizations (DAOs).
The Ethereum blockchain was first proposed in 2013 by Vitalik Buterin, and its development was funded through an online crowdsale in July-August 2014. Ethereum was launched on July 30, 2015, with 11.9 million coins sold during the crowdsale, accounting for approximately 13 percent of the circulating supply. Ethereum underwent a hard fork in 2016 that resulted in two separate chains, Ethereum (ETH) and Ethereum Classic (ETC). In 2022, Ethereum transitioned from the energy-intensive Proof of Work (PoW) consensus mechanism to the more secure and energy-efficient Proof of Stake (PoS) mechanism.
The Merge took place on September 15, 2022, joining the original Proof of Work execution layer with the Beacon Chain Proof of Stake consensus layer to form a unified PoS network and eliminate the need for block mining. 'Eth2' was a phrase used to describe a set of Ethereum protocol upgrades, including the network's transition to Proof of Stake. This term has since been deprecated in favor of the term 'consensus layer'.
During its PoW phase, the Ethereum network used the hash algorithm Ethash, a modified version of the Dagger-Hashimoto algorithm. Ethash was designed to be memory-hard to prevent the use of ASICs and encourage the decentralization of mining. However, the Ethash algorithm was criticized for its high energy consumption and its reliance on GPU mining, which can lead to centralization. After transitioning to PoS, Ethereum no longer uses Ethash. Ethereum's PoS mechanism is known as "Gasper," defining how validators propose blocks, how and when attestations are made, and slashing conditions. Gasper is a combination of Casper the Friendly Finality Gadget (Casper-FFG) and the LMD-GHOST fork choice algorithm.
Within Gasper, Casper is responsible for upgrading certain blocks to "finalized" so that new participants in the network can be confident that they are syncing the canonical chain. Finality refers to the state where a block on the blockchain cannot be reverted or changed without a consensus failure or a significant attack on the staked ether. Once a block is finalized, it is considered permanent information on the blockchain. The finality of a block on Ethereum is achieved through a two-step upgrade procedure that helps to ensure its certainty and validity. LMD-GHOST stands for "latest message-driven greedy heaviest observed sub-tree". Validators assess each block using this rule before adding the heaviest block to its canonical chain.
To become a validator on the Ethereum network, users are required to stake 32 ETH to activate the validator software. Once activated, the validator node will become responsible for tasks such as storing data, processing transactions, and adding new blocks to the blockchain.