A blockchain is a public database that is updated and shared across many computers in a network. Block refers to data and state being stored in consecutive groups known as blocks.
If you send ETH to someone else, the transaction data needs to be added to a block to be successful.
Chain refers to the fact that each block cryptographically references its parent.
In other words, blocks get chained together.
The data in a block cannot change without changing all subsequent blocks, which would require the consensus of the entire network.
At its core, a blockchain is a replicated deterministic state machine
Explanation
A state machine is a computer science concept whereby a machine can
have multiple states, but only one at any given time. There is a state,
which describes the current state of the system, and transactions, that
trigger state transitions.
Each block added to the chain updates the state based on the transactions it includes.
The initial state of a blockchain is defined by the Genesis Block.
Every computer in the network must agree upon each new block and
the chain as a whole. These computers are known as nodes.
Nodes ensure everyone interacting with the blockchain has the same
data. To accomplish this distributed agreement, blockchains need a
consensus mechanism.
The reason is that most of the complications (mining, hashing,
elliptic-curve cryptography, peer-to-peer networks, etc.) are just there to
provide a certain set of features and promises for the platform.
Once you accept these features as given, you do not have to worry
about the underlying technology.
A blockchain is a globally shared, transactional database.
This means that everyone can read entries in the database just by participating in the network.
If you want to change something in the database, you have to create a so-called transaction which has to be accepted by all others nodes.
The word transaction implies that the change you want to make is either not done at all or completely applied.
Furthermore, while your transaction is being applied to the database, no other transaction can alter it.
If a transfer from one account to another is requested, the transactional nature of the database ensures that, if the amount is subtracted from one account, then it is always added to the other account.
If due to whatever reason, adding the amount to the target account is not possible, the source account is also not modified.
Furthermore, a transaction is always cryptographically signed by the sender (creator).
This makes it straightforward to guard access to specific modifications of the database.
Furthermore, a transaction is always cryptographically signed by the sender (creator).
This makes it straightforward to guard access to specific modifications of the database.
One major obstacle to overcome is what (in Bitcoin terms) is called a “double-spend attack”.
What happens if two transactions exist in the network that both want to empty an account? Only one of the transactions can be valid, typically the one that is accepted first.
The problem is that “first” is not an objective term in a peer-to-peer network.
So, how to solve that?
The abstract answer to this is that you do not have to care.
A globally accepted order of the transactions will be selected for you, solving the conflict.
The transactions will be bundled into what is called a “block” and the they will be executed and distributed among all participating nodes.
If two transactions contradict each other, the one that ends up being second will be rejected and not become part of the block.
These blocks form a linear sequence in time and that is where the word “blockchain” derives from.
As part of the “order selection mechanism” (which is called “mining” or “validation”) it may happen that blocks are reverted from time to time, but only at the “tip” of the chain.
The more blocks are added on top of a particular block, the less likely this block will be reverted. So it might be that your transactions are reverted and even removed from the blockchain, but the longer you wait, the less likely it will be (also known as finality).
Ethereum currently uses a proof-of-stake-based consensus mechanism.
Anyone who wants to add new blocks to the chain must stake at least 32 ETH (Ethereum’s network token) into the deposit contract and run validator software.
They then can be randomly selected to propose blocks that other validators check and add to the blockchain.
In this model, there is usually only one chain, but network latency and dishonest behavior can cause multiple blocks to exist at the same position near the head of the chain.
To resolve this, a fork-choice algorithm selects one canonical set of blocks.
The blocks selected are the ones that form the heaviest possible chain, where 'heavy' refers to the number of validators that have endorsed the blocks (weighted by the ETH they have staked).
There is a system of rewards and penalties that strongly incentivize participants to be honest and online as much as possible.
Practical example - Etherscan （https://etherscan.io/）
Ether (ETH) is the native cryptocurrency of Ethereum. The purpose of
ETH is to allow for a market for computation.
Such a market provides an economic incentive for participants to verify and execute transaction requests and provide computational resources to the network.
Any participant who broadcasts a transaction request must also offer some amount of ETH to the network as a bounty.
The network will award this bounty to whoever eventually does the work of verifying the transaction, executing it, committing it to the blockchain, and broadcasting it to the network.
The amount of ETH paid corresponds to the resources required to do the computation.
These bounties also prevent malicious participants from intentionally clogging the network by requesting the execution of infinite computation or other resource-intensive scripts, as these participants must pay for computation resources.
ETH is also used to provide crypto-economic security to the network in
three main ways:
it is used as a means to reward validators who propose blocks or call out dishonest behavior by other validators;
It is staked by validators, acting as collateral against dishonest behavior — if validators attempt to misbehave their ETH can be destroyed;
it is used to weight 'votes' for newly proposed blocks, feeding into the fork-choice part of the consensus mechanism.
There are two kinds of accounts in Ethereum which share the same address space: External Accounts that are controlled by public-private key pairs (i.e. humans) and Contract Accounts which are controlled by the code stored together with the account.
The address of an external account is determined from the public key while the address of a contract is determined at the time the contract is created (it is derived from the creator address and the number of transactions sent from that address, the so-called “nonce”).
Ethereum is a blockchain with a computer embedded in it. It is the foundation for building apps and organizations in a decentralized, permissionless, censorship-resistant way.
In the Ethereum universe, there is a single, canonical computer (called the Ethereum Virtual Machine, or EVM) whose state everyone on the Ethereum network agrees on.
Everyone who participates in the Ethereum network keeps a copy of the state of this computer.
Additionally, any participant can broadcast a request for this computer to perform arbitrary computation.
Whenever such a request is broadcast, other participants on the network verify, validate, and carry out ("execute") the computation.
This execution causes a state change in the EVM, which is committed and propagated throughout the entire network.
Requests for computation are called transaction requests
Cryptographic mechanisms ensure that once transactions are verified as valid and added to the blockchain, they can't be tampered with later on.
The same mechanisms also ensure that all transactions are signed and executed with appropriate "permissions".
In practice, participants don't write new code every time they want to request a computation on the EVM.
Rather, application developers upload programs into EVM state, and users make requests to execute these programs with varying parameters. We call the programs uploaded to and executed by the network Smart Contracts.
At a very basic level, you can think of a smart contract like a sort of vending machine: a script that, when called with certain parameters, performs some actions or computation if certain conditions are satisfied.
For example, a simple vendor smart contract could create and assign ownership of a digital asset if the caller sends ETH to a specific recipient.
Any developer can create a smart contract and make it public to the network, using the blockchain as its data layer, for a fee paid to the network.
Any user can then call the smart contract to execute its code, again for a fee paid to the network.
Thus, with smart contracts, developers can build and deploy arbitrarily complex user-facing apps and services such as: marketplaces, financial instruments, games, etc.
Upon creation, each transaction is charged with a certain amount of gas that has to be paid for by the originator of the transaction.
While the EVM executes the transaction, the gas is gradually depleted according to specific rules.
If the gas is used up at any point, an out-of-gas exception is triggered, which ends execution and reverts all modifications made to the state in the current call frame.
This mechanism incentivizes economical use of EVM execution time and also compensates EVM executors (i.e. miners / stakers) for their work.
Since each ethereum block has a maximum amount of gas, it also limits the amount of work needed to validate a block.
The gas price is a value set by the originator of the transaction, who has to pay [gas_price * gas] up front to the EVM executor. If some gas is left after execution, it is refunded to the transaction originator.
In case of an exception that reverts changes, already used up gas is not refunded.
Since EVM executors can choose to include a transaction or not, transaction senders cannot abuse the system by setting a low gas price.
The more you pay per gas, higher the chance of your transaction to be included in the next block.
Tokens can represent virtually anything in Ethereum:
reputation points in an online platform
skills of a character in a game
lottery tickets
financial assets like a share in a company
a fiat currency like USD
an ounce of gold
and more...
Many Ethereum development standards focus on token interfaces.
These standards help ensure smart contracts remain composable.
For example: when a new project issues a token, following the standard grants that it remains compatible with existing decentralized exchanges.
ERC-20 - A standard interface for fungible (interchangeable) tokens, like voting tokens, staking tokens or virtual currencies.
ERC-721 - A standard interface for non-fungible tokens, like a deed for artwork or a song.
ERC-1155 - Token standard that allows for creating both fungible and non-fungible Tokens like CryptoPunks. This standard allows for more efficient trades and bundling of transactions – thus saving gas costs.
The ERC-20 introduces a standard for Fungible Tokens, in other words, they have a property that makes each Token be exactly the same (in type and value) as another Token.
For example, an ERC-20 Token acts just like the ETH in Ethereum network, meaning that 1 Token is and will always be equal to all the other Tokens.
The ERC-20 token standard, proposed by Fabian Vogelsteller in November 2015, is a Token Standard that implements an API for tokens within Smart Contracts.
Example functionalities ERC-20 provides:
transfer tokens from one account to another
get the current token balance of an account
get the total supply of the token available on the network
approve whether an amount of token from an account can be spent by a third-party account
If a Smart Contract implements all the standard methods and events, it can be called an ERC-20 Token Contract.
Once deployed, it will be responsible to keep track of the created tokens on the blockchain.
A Non-Fungible Token (NFT) is used to identify something or someone in a unique way.
This type of Token is perfect to be used on platforms that offer collectible items, access keys, lottery tickets, numbered seats for concerts and sports matches, etc.
This special type of Token has amazing possibilities so it deserves a proper Standard, the ERC-721 came to solve that!
The ERC-721 introduces a standard for NFT, in other words, this type of Token is unique and can have different value than another Token from the same Smart Contract, maybe due to its age, rarity or even something else like its visual.
All NFTs have a numerical variable called tokenId, so for any ERC-721 Contract, the pair contract address, the tokenId must be globally unique.
That said, a dapp can have a "converter" that uses the tokenId as input and outputs an image of something cool, like zombies, weapons, skills or amazing kitties!
The ERC-721 token standard, proposed by William Entriken, Dieter Shirley, Jacob Evans, Nastassia Sachs in January 2018, is a Non-Fungible Token Standard that implements an API for tokens within Smart Contracts.
It provides functionalities like to transfer tokens from one account to another, to get the current token balance of an account, to get the owner of a specific token and also the total supply of the token available on the network.
Besides these it also has some other functionalities like to approve that an amount of token from an account can be moved by a third party account.
If a Smart Contract implements all the standard methods and events it can be called an ERC-721 Non-Fungible Token Contract.
Once deployed, it will be responsible to keep track of the created tokens on the blockchain.