Ethereum is a decentralized, open-source blockchain platform that enables the development and execution of smart contracts and decentralized applications (dapps). Here's a high-level overview of how Ethereum blockchain works:
- Consensus Mechanism: Ethereum currently uses a consensus mechanism called Proof of Stake (PoS), with plans to transition to Ethereum 2.0 using the Beacon Chain and Shard Chains for scalability. Initially, Ethereum used Proof of Work (PoW) similar to Bitcoin.
- Blocks and Transactions: Transactions on the Ethereum network are grouped into blocks. Each block contains a list of transactions, along with other metadata like timestamps and a reference to the previous block, forming a chain of blocks.
- Smart Contracts: Ethereum allows for the creation and execution of smart contracts. These are self-executing agreements with predefined rules and conditions encoded in the contract's programming code. Smart contracts enable the automation and verification of agreements without relying on intermediaries.
- Gas: The Ethereum network utilizes a concept called "gas" to allocate resources and prevent spam and abuse. Gas is a unit representing computational effort required to execute transactions or deploy smart contracts. Each operation has a gas cost associated with it.
- Ethereum Virtual Machine (EVM): The Ethereum blockchain runs on the Ethereum Virtual Machine (EVM), which executes the bytecode of smart contracts. It provides a runtime environment for executing decentralized applications.
- Decentralized Applications (dapps): Ethereum supports the development of dapps, which are applications that utilize the Ethereum blockchain for their backend logic. These applications can interact with smart contracts, access the Ethereum network, and use Ethereum-native tokens (ERC-20 tokens).
- Ethereum Improvement Proposals (EIPs): The Ethereum community can propose and implement improvements to the Ethereum protocol through Ethereum Improvement Proposals (EIPs). These proposals help evolve and enhance the functionality, security, and scalability of the Ethereum network.
- This is a simplified overview of how Ethereum blockchain works. Ethereum's design and features have made it a popular platform for building decentralized applications and executing smart contracts, with a vibrant ecosystem of projects and developers contributing to its growth.