What does Ethereum really mean to us? Is it just another cryptocurrency imitating bitcoin or is it just a distributed software platform that can run various applications on a public blockchain? As a software developer, I can assure you that Ethereum is much bigger than how it is currently defined in the standard Wikipedia article.

Take your time to read the following definition. Pause, close your eyes, and think about it. The following definition broadcasts a subtle but very powerful message. It says to us:

Here is a 24/7 computing system, which you can have with zero upfront cost. You can copy it, use it, imitate it, tinker with it, play with it, and tweak it to meet your needs. Not only that, you can invent your own personalized currency with it and offer it whoever is willing to own it. In return, you will provide them with some service, which is permanently...

Why do we need to build something that is decentralized by nature at all?

To understand this, let me walk you through a real-world use case based on a centralized economy with a central authority of control.

Sofia is the owner of a pub in Cardiff, UK. To penetrate the liquor market, she decides to allow her loyal consumers—most of whom are heavy drinkers—to drink now but pay later (DNPL). She keeps track of the pints consumed on a ledger. Sofia's DNPL business model gets rave reviews from her clients, new consumers flood into Sofia's pub, and soon she has the largest sales, volume of any pub in Cardiff.

By providing her clients with freedom from immediate payment, Sofia gets no resistance when she substantially increases her prices for whisky and rum, the most consumed beverages. Her sales, volume increases massively.

A young...

In Chapter 1, Blockchain Basics, we studied how an Ethereum blockchain is represented as a giant Merkle tree with the leaves of the tree being the state of execution of a code. We also learned that blockchains are distributed ledgers with a web 3.0 framework.

Figure 2.4 depicts such a framework for an Ethereum technological stack. Things are going to get tricky now, so please pay close attention:

Let us start with the mist browser, which will be easiest to understand. This is the user-facing layer of the Ethereum platform. If you are a smartphone user and have used Android or iOS phones, you can think of a mist browser...

As we have wrapped up our under-the-hood session on swarm, whisper, and EVM, let us move on to the remaining elements of the Ethereum tech stack, which are hardware clients and the internet. The hardware clients will be covered in greater detail in the Ethereum mining section. As of now, it is sufficient to know that normal commodity hardware like CPUs and GPUs are used as hardware clients for Ethereum.

Let us now discuss the internet layer of the Ethereum tech stack, which is basically the Ethereum blockchain. As we have already discussed the blockchain structure for Ethereum in Chapter 1, Blockchain Basics, here we will cover only the logical positioning of Ethereum blockchain over the surface web.

We will revisit the blockchain structure when we discuss the Ethereum block architecture, later in this chapter.

The internet as we know is mainly the...

As we discussed in the previous section, Ethereum is a platform for decentralized applications. That means that we can write programs that can execute in a decentralized manner, where there is no central server or central entity that is going to execute our programs. The programs are going to be executed on many different computers, and this means that there is no way to take down such a decentralized application. In order to write such applications, we need to develop smart contracts, and smart contracts are written in a programming language called solidity. So, on the Ethereum blockchain, if you want to write a smart contract you need to learn solidity. Solidity is Turing complete. So, what does that mean? To understand this, we need to go back 60 or 70 years.

During that time, people had different calculation machines. The problem was...

Before we dive into the details of Ethereum block architecture, we need to revisit the blockchain structure of Ethereum. In Chapter 1, Blockchain Basics, we learned that an Ethereum blockchain is a Merkle tree where the leaves represent execution states of a code. For the sake of simplicity, a finer detail was suppressed. The Merkle tree of Ethereum is not a binary Merkle tree, as we saw for the bitcoin blockchain. You see, binary Merkle trees are great data structures when it comes to authenticating information that is in a list format, that is, a series of data chunks placed one after another. For such a transaction tree, it really doesn't matter how long it takes to edit the tree after it gets created. This is because the transactions remain in a form of one frozen tree which can only keep growing.

Ethereum, on the other hand, is...

An Ethereum client refers to any node which can parse and verify the Ethereum blockchain and execute smart contracts on top of it. As we have seen in the early sections of this chapter, the main purpose of user-faced clients is to authorize user credentials and provide an interface to conduct various operations. They also provide interfaces to create transactions and mine blocks, which is crucial for blockchain interaction. Figure 2.16 illustrates the classification of Ethereum client interfaces:

A wallet provides a service of sending, storing, and receiving funds. The main parameters of a good wallet service are security and trust. Users must feel that their funds are secure and the administrator of the wallet will not steal the funds. Such wallets are known as hot wallets, because...