Why Ethereum - HackMD

# Why Ethereum ![ethereum-1](https://hackmd.io/_uploads/ByOwrbP2p.jpg) I spent some time reading the first chapter of Andreas M. Antonopoulos and Gavin Wood's book, Mastering Ethereum, and I can state that, in essence, it is about Why Ethereum *We will be concentrating on what I refer to as the "three Musketeers" in this article.* <div style="padding: 40px"> The Birth of Ethereum A General-Purpose Blockchain A General-Purpose Blockchain </div> However, let us first see the meaning of the word Ethereum before turning our attention to the *three Musketeers*. There are numerous definitions of Ethereum; nevertheless, this is a basic definition that I developed based on the literature I've perused. :::info :bulb: **Ethereum** is a blockchain netwrok that enables developers to build powerful decentralized applications with built-in economic functions. While providing high availability, auditability, transparency, and neutrality, it also reduces or eliminates censorship and reduces certain counterparty risks. ::: ![bitcoin-vs-ethereum-1](https://hackmd.io/_uploads/r17fJbP3T.png) It would be impossible to discuss Ethereum or blockchain technology without mentioning Bitcoin. I'm assuming that because you're here, you've heard of Bitcoin and other cryptocurrencies before. Let's see the **``differences** between ==Ethereum== and ==Bitcoin==. Though both operate on blockchains, Ethereum and Bitcoin serve distinct purposes. Bitcoin prioritizes secure, decentralized digital currency transactions, while Ethereum aspires to be a world computer. * Shared Ground: Both leverage peer-to-peer networks, consensus mechanisms, and digital currencies. ##### Diverging Paths: * Bitcoin: Focuses on Bitcoin as the primary currency for financial transactions. * Ethereum: Utilizes Ether as a utility token to fuel platform usage. * Programmability: Bitcoin's limited scripting contrasts with Ethereum's Turing-complete language, enabling complex programs and smart contracts. Ethereum transcends mere currency, offering a programmable platform for diverse applications, laying the groundwork for a future powered by decentralized innovation. Now that we have a basic understanding of the Ethereum network, let's explore the three musketeers. ## The Birth ![istockphoto-1149246206-170667a](https://hackmd.io/_uploads/Hyq8oWvhp.jpg) The world of innovation thrives on solving real problems, and Ethereum's emergence is a prime example. It arose from a need to expand upon the groundbreaking concepts introduced by ***Bitcoin***, venturing beyond the realm of pure cryptocurrency applications. However, developers faced a critical dilemma: either build upon the existing Bitcoin framework or embark on the creation of a new blockchain altogether. Opting for ***Bitcoin*** presented a challenge. Its inherent design choices imposed limitations, requiring developers to find workarounds. The restricted nature of transaction types, data formats, and storage capacity hindered the potential applications that could be directly built on ***Bitcoin***. Any project requiring more diverse functionality would necessitate additional layers outside the blockchain, essentially negating several benefits of utilizing a public blockchain in the first place. For projects yearning for greater freedom and flexibility while remaining within the on-chain realm, constructing a new blockchain emerged as the sole viable option. However, this path came at a significant cost – the immense effort required to establish the necessary infrastructure and conduct thorough testing. In essence, ==Ethereum's birth== stemmed from the desire to overcome the constraints imposed by Bitcoin's design, paving the way for a more versatile and expansive blockchain platform capable of supporting a wider range of applications. #### The stages of development Ethereum's development unfolds in a meticulously planned manner, divided into four distinct stages: * Frontier * Homestead * Metropolis * Serenity :::info Each stage introduces significant changes, sometimes through "hard forks" that alter functionality without backward compatibility. ::: ## A General-Purpose Blockchain ![125375768818_network](https://hackmd.io/_uploads/HJMW0bv3T.jpg) * ##### Ethereum: A World-Wide computer built on consensus > Ethereum builds upon the concept of a distributed state machine like Bitcoin, but extends it to manage a broader range of data beyond just currency ownership. This allows for the creation of a "world-wide computer" operating under consensus, enabling the execution of arbitrary programs and the storage of their resulting state changes in a secure and transparent manner * ##### Components of Ethereum > > P2P Network: Ethereum operates on its own dedicated network, accessible via TCP port 30303, utilizing the ÐΞVp2p protocol for communication between nodes. > Consensus Mechanism: > > Consensus Rules: Defined in the "Yellow Paper," these rules guide how the network reaches agreement on the current state of the system. > Transactions: > > Structure: Ethereum transactions carry information such as sender, recipient, value, and additional data. > State Management: > > Ethereum Virtual Machine (EVM): This virtual machine processes state transitions by executing bytecode instructions from smart contracts. > Smart Contracts: Written in high-level languages and compiled to bytecode for EVM execution. > Data Storage: > > Local Database: Each node stores the system state and transactions in a local database (often LevelDB), organized using a Merkle Patricia Tree for efficient verification. > Consensus Algorithm: > > Current: Ethereum currently employs Nakamoto Consensus (Proof of Work - PoW) similar to Bitcoin, but plans to transition to Proof of Stake (PoS) in the future, codenamed Casper. > Security: > > Economic Security: Currently, Ethereum relies on PoW (Ethash) for security, but this will be replaced by PoS in the future. > Clients: > > Interoperable Implementations: Several client software options exist, with Go-Ethereum (Geth) and Parity being the most prevalent. ### Future: Web 3.0: The Dawn of Decentralized Applications In 2004 the term "Web 2.0" came to prominence, describing an evolution of the web toward user-generated content, responsive interfaces, and interactivity. Web 2.0 is not a technical specification, but rather a term describing the new focus of web applications. The concept of DApps is meant to take the World Wide Web to its next natural evolutionary stage, introducing decentralization with peer-to-peer protocols into every aspect of a web application. The term used to describe this evolution is web3, meaning the third "version" of the web. First proposed by Dr. Gavin Wood, web3 represents a new vision and focus for web applications: from centrally owned and managed applications, to applications built on decentralized protocols. In later chapters we’ll explore the Ethereum web3.js JavaScript library, which bridges JavaScript applications that run in your browser with the Ethereum blockchain. The web3.js library also includes an interface to a P2P storage network called Swarm and a P2P messaging service called Whisper. With these three components included in a JavaScript library running in your web browser, developers have a full application development suite that allows them to build web3 DApps.