Exploring Ethereum:Whitepaper[1]

"The engineering side of the Ethereum efficacy is 100% an engineering excuse."

Vitalik Buterin

Do check the predecessor to the article:

Exploring Ethereum: Whitepaper[0]

In this article, we will dive deep into the concepts of mining Ethereum, conversations in the Ethereum ecosystem, and the architecture of Ethereum State functions. It is worth noting that this whitepaper was published in the year 2014 by the founder Vitalik Buterin. Thereafter, many changes have been applied to the Ethereum ecosystem and the blockchain paradigm has seen an exponential increase in the number of projects involved. Thus, it is important to note that certain facts and figures included in the original whitepaper might not hold today.

Let's look for the Ethereum blockchain and explore the required ecosystem surrounding it. Nodes in the blockchain continuously produce blocks. This results in an ever-growing blockchain that adds blocks to itself after the necessary verification.

If you want to know more about the Merkle trees and the ever-growing size of the blocks in the blockchain network, you can refer to the blog listed below:
https://medium.com/@mdev.kairav/dissecting-bitcoin-whitepaper-2-411441132cd7

Early-days Altcoins:

Certain other blockchain solutions are worth exploring:
1- Namecoin:

Created in 2010, Namecoin is a decentralized name registration database. In the world of blockchain, addresses and names are referred to as the pseudorandom hash function. The notion is that any individual will be able to use "user_name" to a specific address rather than a collection of characters as a function_name. The issue arises when two individuals or organizations wish to go forward with the same name which is then resolved by applying the 'first-to-file' success parameter. The first registrar succeeds while the second registrar fails.

2-Colored Coins:

The purpose of colored coins is to facilitate the easy creation of digital tokens or coins by the masses(i.e. people). The process includes assigning a specific color to a Bitcoin UTXO, and the protocol of defining the color of the other UTXO to be the same as that of the predetermined UTXO.

3- Metacoins:

The meta coins are the alternate cryptocurrencies and digital tokens built on top of bitcoin. The main narrative here is to not create an independent token or digital currency but to create a protocol on top of the bitcoin blockchain. Thus, the infrastructure and the mining process along with networking are handled by the Bitcoin blockchain.

As seen in the examples above, there were two clear distinct approaches. One approach dealt with the operation of an independent blockchain while the other dealt with creating a protocol on top of the blockchain. Namecoin independently developed its blockchain but it was extremely difficult to implement one's infrastructure for the same. Furthermore, most applications didn't need to warrant their blockchain as their requirements could be easily satisfied by building on the top of the bitcoin blockchain

SPV:

Another issue that emerges while building on the top of the Bitcoin blockchain and taking assistance from its infrastructure is the absence of SPV in the new protocols and tokens. When we engage in transactions on the Bitcoin blockchain, the SPV works as a proxy, eliminating the necessity for checking the entire blocks of transactions involved. The same, however, can not be said regarding the tokens or blockchain built on top of bitcoin. The said characteristic of Bitcoin is not inherited by the subsidiary tokens, further resulting in checking the entire blockchain and all the blocks involved. The protocols involved gathering the data required for verification through a server without checking the entire blockchain, resulting in questionable trust issues.

Bitcoin UTXOs: Explained[Image(1)]
Image credit:https://bitcoinbriefly.com/utxo-consolidation-explained/

UTXOs

UTXOs in Bitcoin can't be owned just by a private key. The elliptic curve signature is accepted as input by the script and the input is verified by the transaction and the address that owns the UTXO, returning 1 if the verification is successful and 0 if not. The scripting in the Bitcoin blockchain allows it to implement a weak version of the smart contract even without any extensions. However, the scripting in Bitcoin does come with its limitations:
1- Lack of Turing-completeness: Intentionally disallowing loops to avoid infinite loops during transactions resulting in space inefficiency.
2- Lack of State- UTXOs function like binary states. There is no internal state stored. Thus it limits the Bitcoin UTXOs as one-off smart contracts. This does limit its functionality and does not allow complex smart contracts to exist on top of it.
3- Blockchain blindness: UTXOs are blind to blockchain data beyond a certain measure. Thus, they are quite unaware of certain aspects of blockchain data such as nonce, timestamp, or previous block hash.

Thus, we have witnessed 3 approaches to building a blockchain: a novel blockchain, building on top of the blockchain, or a meta-protocol application on the blockchain. With Ethereum, there is an alternative framework that offers easier development and better client properties.

In the next article, we will explore the core of the Ethereum blockchain and the relevant features surrounding it.