The block chain is the immutable public ledger of a network. Blockchain is “an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way.” (https://en.wikipedia.org/wiki/Blockchain)
Blockchain is not Ethereum and Bitcoin is not a blockchain. An Ethereum node outputs modifications to the existing Ethereum blockchain. Bitcoin nodes also output modifications to its blockchain. Each network has a separate blockchain. For this document, we only talk about the Ethereum Blockchain because by definition an Ethereum Use Case has to touch the Ethereum blockchain.
So, for this website, when I say blockchain, I mean the Ethereum blockchain.
Burned money ceases to exist. It is entirely analogous to burning cash.
Planned for October 2017. The main features are speed and transaction efficiency. This will allow Ethereum to handle yet more transactions, up from its previous 5 or 6 per second. The main added feature is zk-snarks. This allows encryption of aspects of the blockchain content improving privacy options for new software.
DAO Decentralized Autonomous Organization
A DAO is decentralized (because it is on Ethereum), Autonomous because once started it runs on its own without human intervention and an Organization because it acts on multi-faceted groups of rules that it appears as a complex Organization. In fact, a DAO is just a set of smart contracts. But these smart contracts must meet a specific definition.
- It must hold capital (Tokens, ether, something more than just information)
- It must make at least some decisions itself
- It must have low limits on the number of external participants. Some smart contracts by definition Have a specific number of participants. A DAO must not have such limitations. On at least some of its parameters, large numbers of unrelated people must be able to join.
A DAO is a type of set of smart contracts. A DAO can do whatever its creators make it do. The original DAO (of the first DAO hack) accepted Eth and distributed according to elections held everyone who donated. The Aragon DAO runs company entities. The District0x DAO runs marketplaces.
This can mean that the DAO itself is self-governing; it cannot be influenced by outside forces such as politics, government, or corporate lobby. Some sophisticated DAO’s can accept software updates without disrupting its actions. This means a District0x marketplace can change from version 2.1 to version 2.2 without really shutting down.
According to Vitalek a DAO has distributed automation at the centre, humans at the edges. Vitalek described DAO’s and smart contracts and their differences in this post on the Ethereum blog.
Descending Clock Auctions
The Seller sets a Top Price, a Bottom price and a duration. The price slides in a straight line as the duration goes buy. The buyer sees the sliding scale. He can wait, or bid immediately. The sliding scale avoids entering bids that are later outbid. This is frustrating in Ethereum because you lose the gas even in a losing bid. The sliding scale avoids that. When you bid, you expect you will win. If you want a lower price, you must wait and hope no one else bids and takes it before you.
ERC20 is a popular token standard within Ethereum. An ERC20 token has special attributes that allows it to be traded on exchanges. Many exchanges where you could buy Eth or Bitcoin, you could also trade ERC20 tokens. These tokens can have a value, in Eth. Many of the most valuable companies on the Ethereum blockchain have their own tokens and the value of these companies is denoted by the value of their tokens. Examples include OMG, MCO, ANT and LEND. ERC20 stands for Ethereum Request Comment number 20.
An ECR20 token have a common set of attributes that facilitates their trading.
ETH is the currency of Ethereum.
An Ethereum address is a 40 character hex number (such as 0x1d8a08c8c3ce0a852cb4da902754991759f7f625). The Address can contain you wallet, which contains Eth and Tokens. The address can also reference a Smart Contract that is executed, given gas and its required inputs.
Ethereum distributed application/Ethereum Smart Contract
An Ethereum distributed application has a number of unique characteristics.
- The software is distributed among the computers of the Ethereum network. Each node (active computer) on the Ethereum network has the full software for the core application
- The software cannot be turned off. As long as computers are on the Ethereum network, then the software will run when requested.
- The software is stored on the blockchain. The software is public, which means anyone can see the code and anyone can edit it. However the Devs generally maintain one carefully managed copy of the software.
- It is generally written in the Ethereum programming language "solidity", though there are other languages that can achieve the same results
- The software is written and maintained by a team of developers, known as the “devs” or developers
This is the name for the collective of all the Ethereum node computers. The network together does all the processing for Ethereum.
This is a single computer acting as a node on the Ethereum Network. The computer is running Ethereum Network Node software (usually geth or Parity). Most nodes are miners, using multiple graphics cards to create the crypto solutions that secure the individual blocks. While they are mining for the crypto solution for the next block, the nodes put together the contents of each block, “mining” transactions on to the Blockchain. See https://www.ethernodes.org for a view on all the nodes presently active in the Ethereum Network
Ethereum Test Network
The Test Networks are stand alone test Ethereum Networks that allow for testing of smart contracts and new Ethereum Network code. The networks offer free Ethereum through things called "faucets". This means you can make many users and have them interact with your test contracts. There are three test networks; Korvan, Rinkeby and Ropsten.
Ropsten is the main test network. Before new Ethereum Network code is released on the Main net it is released on Ropsten and tested for bugs by many Ethereum developers
Etherscan (https://etherscan.io) is a powerful website for scanning the contents of the Ethereum blockchain. This allows you to find all the transactions a wallet/Ethereum address has had, the balance for that address and a number of other useful information. The website puts the information in readable format (to a degree). It is interesting to think that the entire blockchain can be downloaded on a single computer. This is then available for local search quickly and easily.
The size of the blockchain is difficult to determine. I found one graph here that says it is 300GB in Sept 2017 and growing quickly.
An exchange is a website that allows you to buy and sell cryptocurrency. You need to transfer some real money (called fiat) currency via a wire transfer or credit card. Next you purchase your cryptocurrency. Unless you transfer the cryptocurrency to your own wallet, it is held by the exchange. Since exchanges are user friendly and convenient many people do this. This means that exchanges hold a lot of cash. This has made exchanges the biggest hacking target. Mt Gox is the most famous.
Fear of Missing Out. The irrational fear that impels buying. A big driver in ICO and crypto currency sales.
Money issued by a government, in other words, not cryptocurrency
Frontier is the first big step in the Ethereum Development Plan.
It was the second step, but the previous "Olympic testnet" was just a software test bed. Frontier launched in July 2015 when 1 Eth was worth US$2.19. This was the first step where Ethereum could be used by anyone. When Frontier moved to Homestead an Eth was worth $11.
Each Ethereum transaction is powered by its required gas. Gas is paid by the small amount of Eth for each instruction requires. When you start a transaction you must set the maximum amount of gas you will assign for the transaction. Your transaction will "burn gas" until it finishes or stop unfinished. At the moment, in the Homestead release, the wallet that starts the transaction must pay the Gas. With Byzantium (the next development release) a contract may pay the gas for the people who use it. If you are running a survey, you will not require each voter to pay a few pennies for the privilege.
There are a few reasons for gas.
- First it stops people from infinite loops. The transaction will loop until it runs out of the amount of gas assigned to the transaction, then stop.
- It pays the miners for their electricity to run the transaction. The gas is given to the miners that run your transaction. In this way, they are paid for the electricity they use to facilitate your request. Most of their income comes from mining, but gas is an extra bonus
- DDOS attacks. A Determined Denial of Service attack is where a hacker gets many computers to bombard a website with requests until the website crashes because it cannot respond to the swarm of requests. Running a DDOS attack on the Ethereum network would be ruinously expensive.
Gas varies as the network changes. There is a website that gives the present state of gas; the ETH Gas Station
When a major network update is rolled out it requires that most of the network software must update with it. This means the miner, the wallet and exchange software must also update. The blockchain content does not change. The Ethereum Smart Contract code already released does not change, though the authors might update it to take advantage of new features.
Since it is a distributed system that is not under anyone’s control, everyone is asked to update. If a large number of miners do not update, they could create an effective identical coin using the old software. This happened with Ethereum Classic in July 2016. However, for most planned release updates, such as Metropolis, this is very unlikely.
Because such an update can cause a split in the chain, it is called a “Hard Fork”
Homestead was the first stable Ethereum release on which much of the Ethereum Network we know of was based. It launched in March 2016 when Eth was worth about $11. At its peak(?) Eth value reached almost $400US. Nearly 500,000 transactions took place on some very busy days on Ethereum.
Some major milestones during Homestead;
- DAO Hack July 2016 Birth of Ethereum Classic
- Rise of the ICO’s Jan 2017-
- Ethereum Name Service ENS May 2017
IOT - Internet of Things
Internet of Things - devices connected via the Internet and here via a blockchain.
IPFS stands for the InterPlanetary File System (pretty humble huh?) It is a distributed file system which stores files across many machines. This allows the security of a distributed architecture. You retrieve the file you want from multiple computers in parallel, which often will allow you to download a file faster than you can from one machine, as is done now.
A distributed file system uses many computer just like a blockchain. These are different computers, different nodes than those of Ethereum, but they or their equivalent (Swarm is another that is trying the same thing) will supply the distributed hard drive of the distributed Ethereum world computer.
MetaMask is a Chrome and Firefox extension that allows web pages to connect to the Ethereum Network. You can add multiple wallets on both the main network and the test networks. But it is more than just a wallet. It allows a web page to interface with the Ethereum network easily and fill in the details of transactions the web page wants. The user just has to approve. It is the major connection between the web and Ethereum at the moment.
Miners are the backbone of the network. Their computers are the Ethereum nodes on the network. They provide the distributed security of the network because they are a disparate, unconnected collection of personal computers. Their computers perform all the transactions and computing of the Ethereum Network. When an Ethereum Smart Contract is executed, the code is run on a number of these miner computers. Why do they do this? Not for the good of the general public or to help the Ethereum Foundation. They do it to make money.
Mining is the process where computers on the Ethereum Network compete to find Eth. All the mining computers on the network compete to find a complex math solution. If you keep your computer working long enough, you will find Eth at a set rate. This gives the miners a strong incentive to keep their computer up and running.
Mining is a detailed subject on its own and not directly related to the use cases described in this website. A detailed description is here.
Multi Sig Wallets
A wallet that requires more than one signature. Multi Sigs are actually stand alone smart contracts. Ironically they must be accessed and controlled by standard, individual wallets. Multi Sigs are usually used by a business where the access to the Eth balance requires more than one persons approval. An excellent description is here.
First off, what is a fungible token? Well Eth and all ERC20 tokens are fungible. With a fungible token, you don’t care exactly which Eth you have, because every token is identical and interchangeable. With a NON-fungible token, each token can be different, they need not be interchangeable. The information defining the token specific data is called the token Metadata.
Off Chain means activities that don't take place on the Ethereum Blockchain. They often happen on a website or a centralized server.
On Chain means activities that take place on the Ethereum Blockchain via smart contracts or transaction
Parity MultiSig Wallet Error
This is the biggest recent major theft of Ethereum. A company called Parity created a Multi Signature Wallet that was supposed to keep the contents of the wallets safer than a standard wallet. The wallet was encoded as an Ethereum smart contract. There was a coding error in the contract, which in retrospect was rather simple. The code, as with all Ethereum contracts was publicly available. An attacker found the error and it allowed him to remove 150,000 ETH worth $30M from two wallets.
The transfer was noticed by some coders at Parity and this “White Hat Group” (the good guys) moved $170M out of the wallets (using the same coding error) into standard wallets for safe keeping. By moving the money it became unavailable to the attacker. This money was returned to their owners.
It is important to note that this was not due to an error in the logic of the Ethereum network or its software language but because the language was used in an incorrect way. These software nuances are critical to Ethereum contract security.
A public permissionless blockchain is available to anyone on the Internet (Public) and never requires a password to access (Permisionless). Both Ethereum and BitCoin are pub;lc permissionless blockchains.
A stable coin is one that has a stable (or pegged) value with respect to a fiat currency (usually USD). Tether is the most popular. It keeps a pile of USD (one for each Tether token). However this is centralized and there have been questions on its auditing practices. MakerDAO is another.
Websters defines it as transcending national boundaries, authority, or interests. In the context of Ethereum it mean evolved beyond national borders
The Ethereum programming language, Solidity, allows the creation of tokens, sometimes called coins. When you create a token you can define what it means, its quantity and rules for minting or destruction. It’s your coin. A token can represent nothing at all or the deed for a house. If you create an application in Solidity, you can require that users must use your token. If your application is popular, your token can have real value. Tokens will be very popular in the Ethereum ecosystem because they are flexible and useful. Tokens once created exist even after your Solidity program finishes. They continue to exist immutable on the blockchain. Other programs can read and affect them.