- Smart Contracts
Smart contracts on Ethereum enable us to execute arbitrary computations on the blockchain. A smart contract is a piece of code that facilitates, verifies, or enforces the negotiation or execution of a digital contract. For us to reach consensus, a trusted entity must run this code.
II. Ethereum
Ethereum is a decentralized platform designed to run smart contracts. It is a distributed computer spread across many nodes around the world that executes the code people feed in it, without any possibility of downtime, fraud, censorship, or third party intervention.
Here’s a review of the similarity and differences between Ethereum and Bitcoin:
There are two kinds of Ethereum accounts: Externally Owned Accounts contain an address that allows people to send them ether and a balance of ether Contract Accounts contain an address, persistent storage, and code which is executed by transactions or function calls Ethereum smart contracts generally serve four main purposes: Store and maintain data Manage contract or relationship between untrusting users Provide functions to other contracts Complex authentication III. Ethereum Virtual Machines
The Ethereum Virtual Machine enables the Ethereum blockchain to be programmable. Ethereum Smart Contracts are written in high level programming languages like Solidity, which have to be compiled down to Ethereum Virtual Machine (EVM) code. Every node runs EVM as part of its block verification procedure. Once the contract code is compiled to EVM code, every node in the Ethereum network executes the code. Nodes then come to consensus on the new system state. Note: Ethereum is redundantly parallel; its main goal is not to optimize computational efficiency, but to enable distributed and trustless computation.
As in Bitcoin, the nodes come to consensus using Proof-of-Work, removing the need for a trusted third party. Miners in Ethereum competitively create blocks by executing EVM code and searching for a solution to a mining puzzle.
The developers of Ethereum implemented ‘gas’ to protect against the Denial of Service (DoS) Attack, where an attacker includes an infinite loop in the smart contract to disable nodes from executing any other contracts. Gas is what fuels a given contract. You can think of purchasing gas as the price you have to pay to use this distributed, trustless computational power. This disincentivizes DoS attacks because attackers would have to pay an absurdly large amount of ether to execute this attack.
Ethereum is implemented as a distributed state machine, and transactions on the network change the global state of the system. In the transaction execution, or “state transition function,” nodes in Ethereum come to consensus on the network state, and their code execution on the EVM changes the global state from the previous state to the new state. The function looks like this:
