Crash course on Ethereum

In May 2016, DAO (Decentralized Autonomous organisation) contract in Ethereum platform raised a record $150 million in crowd sale. But unfortunately, on June 18, 2016, the DAO was hacked and $50 million worth of ETH were stolen. This sparked a serious debate in the Ethereum community which resulted in splitting of two groups — Ethereum (ETH) and Ethereum Classic (ETC) on July 2nd 2016. ETC classic group argued for blockchain immutability, saying the code is law and cannot be altered. By August 2016, Ethereum foundation, developers, partners and majority of miners dissociated themselves with ETC. Since then, Ethereum has increased its security measures. By 2017, it was listed in majority of exchanges and it started its bullish run.

There are mainly two types of accounts in Ethereum

1. Externally owned accounts which are controlled by private key and

2. Smart contracts which are controlled by their individual software codes.

Externally owned accounts are used for value transfer. It can be used for storing ETH or sending ETH from one account to another or to a smart contract. Unlike accounts, smart contracts can’t initiate new transactions on their own. They can initiate transactions only as a response i.e. when they receive a transaction from the externally owned account. But contract can talk with other contracts via “messages” or internal transactions.

Concept of Gas

Every computation that occurs in the Ethereum network incurs a fee. This fee is paid in a value called “Gas”. For each and every transaction, the sender needs to specify a gas limit and gas price. Gas limit represents the maximum gas the sender is willing to spend on the transaction. Gas price is basically the amount of ETH you are willing to spend on every unit of Gas for a successful transaction. Gas price is measured in Gwei where 1 Gwei = 1E-9 ETH

For instance, let’s say you want to transfer 1 ETH to your friend. You set the gas limit as 51,000 and gas price as 30 Gwei. This means that you are willing to spent 51,000 x 30 = 1,530,000 Gwei for the transaction or 0.00153 ETH (0.15% of total transaction amount). But remember, this represents the maximum you are willing to spend for the transaction. In actual scenario, this can be either be more than enough or may not be enough, based on network congestion. If the transaction operation causes less gas, all the unused gas is returned back to the sender. If the necessary gas is not provided, then the transaction “runs out of gas” and is considered invalid. The ETH is returned back to the sender but the ETH consumed for gas is not refunded.

The amount spent on gas is given to the miners as incentive to run the node and validate the block. So higher the gas price you are willing to pay, the greater the amount miners will be incentivised hence higher the chances of getting it validated. In other words, if you want to send a transaction super quick within minutes or even seconds, you must set your Gas high.

Total supply as of Feb 2018: Approx. 98 million

Total Supply breakdown (as of Feb 2018):

Genesis (60M Crowdsale+12M Other): 72,009,990.50 Ether

+ Mining Block Rewards: 24,270,034.22 Ether

+ Mining Uncle Rewards: 1,555,931.75 Ether

= Current Total Supply 97,835,956.47 Ether

An uncle is a referred to as a network block which would normally be considered an orphan. An orphaned block is one which is not included in the main blockchain. The block time (time in which the next block is added) for Ethereum is very small (~15 seconds) compared to Bitcoin (~10 mins). This results in fast transactions but also results in lot of blocks which will not be added to the main blockchain. This may sound very bizarre at first, as it allows “orphaned” blocks to still yield a reward for miners, but this has its own pros and cons. This is another example of how Ethereum is very different from Bitcoin. In Bitcoin mining, an uncle doesn’t yield any reward.

One of the key problems Ethereum is trying to solve is scalability. “Sharding” is one of the key milestones to be achieved and the community is eagerly awaiting for the same. Simply put, it is a way of partitioning data into subsets, the idea is that each node will only have to store a small chunk of the total network. This results in faster transactions and lighter blocks.

Other developments in pipeline include eWASM, for running in Ethereum web browser and stateless clients to sync the clients with network seamlessly and quickly.

Popular Ethereum wallets include Hardware wallets like Ledger Nano S, and Trezor. Other popular wallets include MyEtherwallet, Exodus, Jaxx and Mist.

Overall, we are still in infancy and there is a long and exciting road ahead for Ethereum.

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