Ethereum is a public blockchain that was designed by Vitalik Buterin in 2013 as an enhancement to the incumbent Bitcoin blockchain, by including transaction-based state management with business logic scripting using a special-purpose programming language and a virtual machine called the Ethereum Virtual Machine (EVM).
The following diagram outlines the basics of block creation in Ethereum:
In the next section, we will look at a brief description of Ethereum.
A brief overview of Ethereum
This section offers historical background on the Ethereum cryptocurrency, along with factual information on its current state as well as the technical and architectural limitations perceived by experts in the market:
- Motivation: The main motivation behind Ethereum was to support building decentralized applications on the powerful medium of blockchain. Unable to convince the Bitcoin community of the need for a scripting language, Vitalik and a like-minded group of people created Ethereum.
- Facts: The project was open sourced with an initial release date of July 30, 2015. The research and development upgrades to the Ethereum network is managed under the Ethereum Foundation, financially supported by the initial crowd sale of the Ether (ETH) token from July to August 2014. Around 105 million ETH has been minted so far. Ethereum has one major fork called Ethereum Classic (the original Ethereum blockchain that denied the DAO hard fork and retained the original unaltered state of the Ethereum network). At the time of writing this book, each ETH is valued at around USD 156.00. The Ethereum blockchain network also incentivizes the validating nodes by charging users who make transactions on DApps or transfer ETH with a small fee, which is awarded to the winning block maker. The rules of creating blocks and the acceptance of blocks are specified by consensus algorithms called PoW or Proof of Stake (PoS). We will explore PoW and PoS in more detail in the upcoming sections of this chapter.
- Criticism: The Ethereum community has had to face some of the earliest criticism due to the hard-fork decision taken by the team, thereby contradicting some of the ideology and values of blockchain, such as immutability and immunity from human political dynamics. The network was later criticized and heavily scrutinized by the regulatory authorities due to the alleged Ponzi schemes offered by the Initial Coin Offerings (ICOs) without a stable product or service.
With this basic understanding of Ethereum, let's move on to look at the Hyperledger platform.