Ethereum continues to grab the attention of the masses. As cryptocurrency awareness increases, more people are getting active on the Ethereum blockchain, a decentralized application ecosystem.
What is Ethereum, and how does it work?
Ethereum is a blockchain network that makes it possible to use decentralized applications and cryptocurrencies on the same blockchain. Ethereum is often described as one of the key components of Web 3.0.
Ethereum was founded by Russian-Canadian programmer and writer Vitalik Buterin in 2013. In the Ethereum whitepaper, Buterin described the need for Bitcoin to have a scripting language to develop applications. He went on to raise funds to work on developing Ethereum.
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The team behind Ethereum uses several key concepts to create and maintain the Ethereum blockchain.
Ethereum Components
P2P network: A P2P network comprises two or more connected computers that share resources. Ethereum runs on a set of network protocols that are known as devp2p.
Ethereum Virtual Machine: The Ethereum Virtual Machine (EVM) processes Ethereum transactions by executing machine-language instructions known as bytecode. Programming languages such as Solidity are used to create smart contracts that give instructions to the EVM.
Client and node: An Ethereum client is any node that is used to verify the blockchain. Geth is a type of node that acts as a gateway into the Ethereum network. It provides access to the main, test, and private networks.
Consensus algorithm: Consensus algorithms are sets of rules used to validate transactions on the blockchain and determine how nodes agree on the state of information stored on the blockchain. Proof of Work (PoW) and Proof of Stake (PoS) are popular consensus algorithms used on Ethereum.
You may be wondering how the different components of Ethereum work together to create the decentralized application ecosystem that we know today. Read on to find out how the Ethereum ecosystem works.
How Does Ethereum Work
Some of the most important concepts used to make Ethereum are based on economics, cryptography, and smart contracts.
Ethereum depends on various systems, including a governance protocol and automation on the blockchain made possible by smart contracts. The immutable nature of smart contracts means that the input of data on the blockchain cannot be changed or easily tampered with.
Decentralized Applications on Ethereum
Decentralized applications are bridges between the real world and the blockchain. Many decentralized applications function in very similar ways to regular apps, except that data flow and interactions are based on blockchain states. As new data is added to the blockchain, it becomes permanent.
What Is A Blockchain And How Does It Work?
Normal web applications are accessed through browsers. They return information to the web pages by retrieving information from servers. Unlike centralized web applications, decentralized applications ensure that no one can change the code or steal funds from the website.
The Ethereum blockchain is like a worldwide computer with data stored in bundles of distributed ledgers. The bundles of data hold information about the history of all transactions on the network. The use of smart contracts on Ethereum makes it possible to automate the creation and maintenance of tamper-proof transactions on web applications.
