Welcome crypto dummiez!
If you are new here, this substack is focused on educating those that know nothing about crypto and blockchain technology.
Today’s post will be fairly short, we will go over some basic operations that occur within the Ethereum ecosystem.
If you’ve been reading and following these posts since the beginning, many of these concepts will seem like review and have been covered in previous posts discussing blockchain and basic operations. If these ideas are fairly new to you, fear not! You are in the right place!
With that being said, let’s get started!
Ethereum Operations
One of the key elements of Ethereum and blockchain technology, is the transfer of assets/value. With Ethereum, things like sending money to a friend or family member is equivalent to the transfer of ETH from one recipient to another.
The sender must specify the target address of the receiver and the amount in ETH to be sent.
Users can send money to friends and family via a decentralized ecosystem using Ether.
The amount in ETH specified is sent to the target address, and gas fees are collected by miners validating and verifying transactions on the network. To break this down let’s use the example of mailing a letter. In order for your mail to be received and delivered, paid postage stamps are required. This is the equivalent of paying gas on transactions in the Ethereum network.
Ethereum Nodes
Individual users or business entities are identified as nodes on the network. They are a key component to the blockchain and are responsible for either: initiating transactions or picking on added work to be done in the network (AKA miners).
In the Ethereum ecosystem, participants nodes are the everyday user on the network like you and me, when we initiate transactions by sending ETH to friends or family.
Ethereum Full Nodes, are users that host the software needed for transaction initiation, transaction validation, mining, block creation, smart contract execution, and the EVM (Ethereum Virtual Machine). These users go above and beyond to tackle ‘extra work’ on the blockchain.
EVM Operations
Smart contracts are the backbone of Ethereum, they transform the blockchain into a world of decentralized opportunity for developers to build and design applications. Smart contracts are designed, developed, compiled, and deployed on the EVM.
There can be various smart contracts active and deployed on the EVM. Many applications can run on the Ethereum network, there are various dApps that are active in the ecosystem today. Protocol’s such as Uniswap, 1inch, and balancer have seen a tremendous amount of growth as more people learn how to navigate the cryptoverse.
When initiating a transaction, if the target address is a smart contract, the corresponding execution code is activated and executed on the EVM.
Users can interact with decentralized applications through smart contracts.
Input needed for the execution of a smart contract is taken from the payload field of the transaction. Ether is used to interact with active smart contracts on the network.
The blockchain keeps a record of all users that have interacted with the contracts deployed on the network. It maintains the state hash + the receipt hash for all smart contracts that have been deployed.
Smart contracts open the door to a decentralized ecosystem built on top of Ethereum. Developers can build and deploy their own lending systems, exchanges, and games right on top of the EVM using smart contracts.
Miners
Mining is the process used to secure the network by validating transactions, collecting them to form a block, verifying them, and then broadcasting them across the network.
It is a process carried out by nodes on the network known as miners.
Validating transactions on the network requires:
checking the time stamp
nonce combination
availability of fees for execution
Miner nodes receive, gather, verify and execute transactions on the network. They are incentivized for their work in the native currency of the blockchain, in this case, Ether.
Miners on the Ethereum network can also be responsible for executing certain code to carry out smart contract functions. They are also responsible for validating and broadcasting verified transactions.
Miners play a crucial role in the Ethereum ecosystem, they take on extra computational work and compete to solve cryptographic equations that validate and verify transactions on the network.
Next week we dive into the Incentive model for block creation! We will go into much greater details about the world of miners, and the way the structure works.
Hope to see you all next week dummiez!