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ETHEREUMOur definitive guide to Ethereum

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CONTENTS

WHAT IS ETHEREUM? 3What’s an Ether? 3What can an Ether token be used for? 3

AN ETHEREUM GLOSSARY 4Smart contract 4dApps 4ERC20 4ICOs 4Token economics 4

A BRIEF HISTORY OF ETHEREUM 5Crowdsale 5History of the Ethereum Foundation 5The four phases of Ethereum 5The DAO attack 6Should I invest in Ethereum or Bitcoin? 6Platform comparison 7The bottom line 7

HOW TO MINE ETHEREUM 8What do you need to mine Ethereum? 8How is Ethereum mined? 9

HOW ECONOMISTS DIFFER FROM CODERS: BITCOIN VS ETHEREUM 10How do the communities differ? 10A denial of limitations? 10

ETHEREUM’S CONSTANTINOPLE UPGRADE: A TECHNICAL OVERVIEW 11What is it? 11Ethereum roadmap 11Constantinople enhancements overview 11Moving forward 12

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Distributed smart contracts can be created and deployed on the EVM.

What’s an Ether?The current inflation rate of Ether is around 10% a year but this is looking to go down to 1-2% with future network upgrades. To date, no hard cap has been placed on the Ether supply.

What can an Ether token be used for?Ether tokens can be used for payments between users like Bitcoin, but it also can be used to power smart contracts. The Ether is turned into gas to then power a smart contract on the EVM.

Think of this gas in the same way as gasoline you put in your car – you need a different amount of gas depending on how long your journey is or based on what type of road you are driving on. Smart contracts on the Ethereum EVM work in very much the same way.

WHAT IS ETHEREUM?Ethereum is a decentralised smart contract platform. Like Bitcoin, the Ethereum network has a token (Ether), a blockchain, nodes and miners. Unlike Bitcoin, the blockchain maintains consensus for a ‘virtual computer’ dubbed the Ethereum Virtual Machine (EVM).

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Smart contractsSmart contracts are hard-coded, rules-based contracts enforced solely by code. Smart contracts can be public, which opens up the ability to prove functionality.

dApps A dApp is an application that is run by many users on a decentralised network with open protocols. They are designed to avoid any single point of failure. They typically have tokens to reward users for providing computing power or staking something towards the network. Many dApps run on the Ethereum blockchain.

ERC20The ERC stands for Ethereum Request for Comment and the 20 was the name of the standard proposed. This basic smart contract running on top of the EVM allows you to create a tradable token that can be sent and received between Ethereum wallets. Its most popular use case is to launch ICOs.

ICOs By far the most common use of the Ethereum network has been running an Initial Coin Offering (ICO) – a form of fundraising for a new venture. It’s very simple to create and deploy an ICO on the Ethereum network using the ERC20 smart contract standard. Any project can quickly decide on their own ‘token economics’ and launch a funding campaign to raise funds in Ether that will be swapped in the ICO contract for a share of the project’s tokens.

Token economicsThis relates to the supply, distribution, lock periods and other features of the token. As the token is hosted on the Ethereum network, the project doesn’t need to be concerned by other aspects of a native blockchain such as running nodes or mining.

AN ETHEREUM GLOSSARYWhen it comes to Ethereum, there’s a few phrases that you should understand. We list them below.

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In November 2013, Buterin wrote a white paper proposing Ethereum, and the idea garnered significant interest.

In late 2013, Vitalik Buterin was working on the Mastercoin project. Being an early Bitcoin enthusiast, he envisioned blockchain as more than just a payment system.

The Ethereum core team consisted of Vitalik Buterin, Mihai Alisie, Anthony Di Iorio, and Charles Hoskinson. Buterin presented at a Bitcoin conference held in Miami between 25th-26th January, 2014. The participants gave him a standing ovation and a lengthy Q&A session followed.

CrowdsaleA presale was planned on February 1st, 2014, but this was dropped. A crowdfunding campaign then went live from July 20th to September 2nd, 2014. A total of 60 million Ether (the primary cryptocurrency of the Ethereum

A BRIEF HISTORY OF ETHEREUMIn late 2013, Vitalik Buterin was working on the Mastercoin project. Being an early Bitcoin enthusiast, he envisioned blockchain as more than just a payment system.

platform) were created to sell. This is also known as the Genesis issuance, as these were the first ever Ether tokens created.

The price was 2,000 Ether (ETH) = one Bitcoin (BTC) for the first 14 days of the sale. The price then changed to 1,339 ETH per BTC for the remainder of the campaign.

The first two weeks of the campaign saw over 50 million tokens sold. 31,500 Bitcoins were raised through the crowdsale and 12 million ETH were created. This would be used as funding for the development and other activities.

History of the Ethereum FoundationA non-profit organisation called the Ethereum Foundation was formed on July 6th, 2014 and registered in Zug, Switzerland. This organisation governs the Ethereum project.

The four phases of EthereumThe Ethereum project consists of four major phases.

Frontier (July 30th, 2015):Olympic, a test version of Frontier, was released on May 9th, 2015. The purpose was to test the project and reward those who found issues. The testing was done in four areas.

1. Transaction activity2. Virtual machine usage – responsible

for executing smart contracts3. Mining prowess4. General punishment – stress testing

the platform with smart contracts

Each category had a main prize of 2,500 ETH and many smaller prizes. After the Olympic testing, Frontier was released. With that release, the developers were able to build distributed applications and started mining Ether.

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Homestead (March 14th, 2016):The platform was then enhanced with Ethereum Improvement Proposals (EIP). The upgrade helped the future updates and improved the speed of transactions. The Ethereum Foundation also began to accept funding from various sources in Ether apart from the first treasury created in the beginning.

Metropolis (October 16th, 2017):This phase includes two upgrades.

1. Byzantium 2. Constantinople

The platform improved in terms of scalability, transaction processing, and security through the Byzantium upgrade, which was also a hard fork. The mining reward was decreased to 3 ETH from 5 ETH. The Constantinople upgrade was scheduled for release in early 2019.

Serenity (TBA):In this phase, the Ethereum project will move from proof of work (PoW) to proof of stake (PoS), which uses the Casper consensus algorithm. PoS has significant benefits over PoW in terms of security and being resistant to attacks, and also boosts transaction processing times.

The DAO attackIn 2016, a Decentralised Anonymous Organisation (DAO) was formed on the Ethereum platform. The DAO was similar to a board of directors of a company except the participants were anonymous, and they had to invest Ether to have voting rights.

On June 17th, 2016, an attacker exploited the DAO and stole Ether amounting to $50 million. This wasn’t, however, a vulnerability of the Ethereum platform. It was a result of the DAO developers deploying it without careful auditing.

The Ethereum Foundation came forward to reverse the attack. A soft fork attempt, which doesn’t alter anything on the blockchain permanently, was futile. When a hard fork was performed, the lost funds were recovered.

Generally, a hard fork means deviating from the blockchain from a certain point in an attempt to upgrade it and orphaning the old chain. In some cases, a hard fork is performed by somebody who wishes to create a new platform or a new cryptocurrency with different rules from the existing one.

A faction in the Ethereum community were unhappy with the hard fork and decided to continue following the old blockchain, which is now known as

Ethereum Classic. In the history of Ethereum, several hard forks were deployed to improve and upgrade the protocol, but none of those gave rise to the birth of projects like that of Ethereum Classic.

Should I invest in Ethereum or Bitcoin?Ethereum is often perceived as Bitcoin’s main competition. So when it comes to investment decisions, which cryptocurrency should you choose? We take a look at the important things you need to know and how you should weigh up your decision. So let’s start with

the word ‘invest’. It’s a word typically associated with moving value from one asset class to another with a view of generating a return on investment (ROI) over an expected time.

If your goal is only to make more money, then you are looking to pick the project that you think will go up in value the most. In very simple terms if the demand outgrows the supply of people willing to sell over a given time then you can expect your investment to be profitable. So, both Ethereum and Bitcoin are crypto assets. They both have different aspects of supply and use cases (demand).

Supply Comparison Bitcoin (BTC) Ethereum (ETH)

Circulating Supply 17.3 Million BTC 102 Million ETH

Max Supply 21 Million BTC Unknown

Supply Inflation rate per year

3.8% (Inflation rate halves every 4 year with

next one in 2020).

12.8% (Future inflation rate not clear).

As you can see in the above table, there are some unknowns with the Ethereum maximum supply and inflation rate. The short reason why is because the central development team and other network participants have not yet come to a decision. On the other hand, the supply side of Bitcoin is crystal clear.

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Platform comparisonAlthough Bitcoin and Ethereum are both cryptocurrencies they have very different platforms and use cases.

The base Bitcoin platform has a very simple use case – send Bitcoins between participants in a very secure, reliable and censorship-resistant way. The secure part comes from a robust blockchain of mining hardware (around $1.3 billion value) and nodes (10,000 publicly reachable).

The reliable aspect comes from the fact that the network has been running smoothly 99.992% of the time since inception. The censorship resistance comes from the fact that if you broadcast a transaction with a sufficiently high fee attached (currently around 10 cents) it is near enough impossible to stop the transaction being accepted by the network. These characteristics give it a great ‘store of value’ use case as a platform.

Ethereum, on the other hand, was focused on being a smart contracts platform. It also has mining hardware, nodes, reliability and censorship resistance but no where near as much as the Bitcoin network. Ethereum is, instead, built to be a Smart Contract Platform with many projects and dApps (decentralised applications) being run

on the network. The dApp and smart contract use case is growing each day with more and more contracts being created and users transacting volume through this network.

The bottom lineIt’s hard to pick what the better investment would be between Bitcoin or Ethereum if you are only doing it to make more money. There are unknowns about the supply of Ethereum, the platforms have very different use cases and the demand for each of them (Store of Value vs Smart Contract Platform) is changing each day.

Both assets have shown to be extremely volatile in price over the last few years and, for that reason, both should be considered as being in the high-risk investment category.

Be sure to keep up with the latest news, become part of online communities, and -above all else – do your research before committing to an investment decision.

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Unlike Bitcoin which relies heavily on a peer-to-peer electronic cash system, Ethereum’s blockchain centres on running the program code of a decentralised application. Ethereum depends on its own platform-specific cryptographic token, Ether. However, Ether is more than a digital currency – it can run applications from within the Ethereum network and monetise work.

In the Ethereum blockchain, miners are working to earn themselves freshly minted Ether tokens. This type of crypto token is used to fuel the network, as well as to fund transaction fees and services that exist on the Ethereum network.

HOW TO MINE ETHEREUMIf you do decide to invest in Ethereum rather than Bitcoin, it would be beneficial to learn how to mine the cryptocurrency.

What do you need to mine Ethereum?�� Free mining software: there

is a range of software that can be used. Two good examples are ‘Ethminer’ and ‘Minergate.’ Both of these are compatible with Windows, Linux, and Mac.

�� Temperature monitoring and overclocking software: This is incredibly useful as it’s intended to amend your GPU performance, therefore granting you more hashes per second.

�� Membership to a mining pool: a pool is a group of miners all working toward one objective. They combine their resources to be the first ones to crack the cryptographic puzzle and add a new transaction to the blockchain. The crypto reward is then shared among all members of the pool.

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�� Membership to an online currency exchange: this is important as it is where you will exchange or trade your Ethereum (assuming that is your goal).

�� A cryptocurrency wallet: this is very important, since you will need a safe place to store your tokens.

�� A GPU with enough storage in the VRAM to load a Directed Acyclic Graph (DAG) in: this is a file that’s created after every 30,000 Ethereum blocks are added. As a result, you have to have at least 3 gigabytes of VRAM. It is definitely important to do adequate research before purchasing hardware; ensure that the purchase you are interested in meets all the requirements needed. To a beginner, you may be better off looking into AMD mining cards, which cost significantly less than their NVIDIA counterparts. But, there is a trade off if you opt for one of these two. AMD mining cards are not as powerful, but NVIDIA ones are typically easier to configure and overclock.

How is Ethereum mined?The way that mining Ethereum works is focused on proof-of-work (PoW) algorithms. These algorithms process blocks of data ready to be added to the blockchain. However, the more people that are mining on a network in turn increases the difficulty. Consequently, it becomes harder to solve the cryptographic puzzles and therefore the rewards are more scarce.

Ethereum rewards miners based on their proof-of-work algorithm dubbed Ethash. This algorithm awards 3 Ether to any successful miners, which occurs every 15-20 seconds. Compared to Bitcoin, this is incredibly fast, as Bitcoin only allows for a new block to be added every 10 minutes. Though, Bitcoin’s reward is greater at 12.5 BTC.

The key to Ethereum working so quickly is the GHOST protocol, which allows for quick-fire transactions as opposed to the ‘Gas’ transactions used by the Bitcoin network.

Note: For mining Bitcoin or other altcoins, typically ASICs are essential, but Ethereum has been able to avoid the need for them by increasing the amount of VRAM needed to mine. However, be sure to do your own research and make sure that whatever you opt to buy can efficiently mine for Ether.

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Below, we take a look at the divides between the communities, why they exist, and if there will ever be a bridge between the two.

How do the communities differ?Individuals involved in a form of computer science or coding as a career (not necessarily blockchain related) tend to hold more interest in Ethereum. For Bitcoin maximalists online, whilst there are many coders, there are also many economists from the Austrian school that shout the loudest.

The usefulness of blockchain is still questioned, and there seems to be three main camps.

�� The first is those who are now attempting to attach blockchain to any and every industry.

�� The second is the Bitcoin maximalist camp – a mix between those involved in coding, economists, and philosophers who see blockchain as a useful tool for monetary use but relatively little else.

�� The third is those who see the whole space as totally ridiculous – think Roubini as a prime example of this faction.

Computer scientists lean more towards the Ethereum blockchain as the possibilities it could one day provide are far more extensive than Bitcoin.

A denial of limitations? This isn’t to say that they are not aware of the current limitations of the Ethereum blockchain, just that they view it as a more exciting platform. Yet,

Ethereum does face its own criticisms. Some of this stems from the centralised nature shown during the DAO rollback. Questioning the immutability of Ethereum is the easiest attack vector for BTC maximalists.

For those coders who are interested in the technical side of blockchain rather than the philosophical or economical sides, Ethereum still seems ahead in possibilities.

Who will win this battle remains to be seen. Indeed, it may not even need to be seen as a battle. Unfortunately, too much bad blood has already risen and the members within the communities may continue to clash, especially online, for quite some time yet.

HOW ECONOMISTS DIFFER FROM CODERS: BITCOIN VS ETHEREUM Throughout this guide, we’ve provided an extensive overview of the differences between Bitcoin and Ethereum. And where there are differences in coins, there is often a difference in its community of followers.

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What is it? Constantinople is a complicated upgrade that combines five major Ethereum Improvement Proposals, or EIPs for short, proposed by prominent Ethereum developers.

The Constantinople update is the last piece of the Metropolis upgrade and will bring much needed network improvements, making way for proof-of-stake (PoS) and sharding which will come with the upcoming Serenity upgrade.

Ethereum roadmapBefore we dive deep into the belly of the beast, it’s important to remember Ethereum’s previous and actual roadmap. Since its initial release, it has suffered multiple crucial upgrades.

Each single upgrade below represents an important milestone for the Ethereum network, as it moves from a proof-of-work (PoW) consensus protocol

into proof-of-stake (PoS) with the ultimate goal of being a world computer and home to all the best dApps.

At the time of writing, the most up-to-date Ethereum roadmap looks like this:

Frontier Homestead

July 2015 July 2015

Initial release of Ethereum’s live network

Major network improvements and

code updates

Metropolis Serenity

October 2017 TBA

Byzantium,Constantinople

(2019)

Sharding,proof-of-stake

Constantinople enhancements overviewThere are five major goals Constantinople aims to achieve and each EIP promotes a different change to the protocol:

�� EIP 145: Bitwise Shifting Instructions [efficiency and speed]: This improvement means the execution of shifts in smart contracts will be ten times cheaper.

�� EIP 1052: Smart Contract Verification [speed and energy]: This change allows for smart contracts to verify one another by pulling just the hash of the other smart contract.

�� EIP 1014: CREATE2 [scalability]: This upgrade improves the enablement of state channels, an Ethereum scaling solution based on off-chain transactions.

ETHEREUM’S CONSTANTINOPLE UPGRADE: A TECHNICAL OVERVIEWEthereum is a platform that continues to grow and evolve. Most recently, the Constantinople upgrade has dominated the Ethereum community. But what is it and why does it matter?

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�� EIP 1283: SSTORE [cost]: This change will reduce the gas cost for the SSTORE operation. This reduction enables multiple updates to occur within a transaction more cheaply.

�� EIP 1234 Block Rewards & Difficulty Bomb Delay [the big one]: This is the big change for the network. It is comprised of two components: block reward reduction (from three to two ETH) and difficulty bomb delay.

Each EIP is a layer of improvements on top of previous enhancements done during the Homestead and Byzantium upgrades. The above improvements will help sidechains interact with the Ethereum blockchain (EIP 1014) by making it easier to bridge data in-between networks (EIP 1283), as well as allowing for cheaper smart contract functionality (EIP 145 and 1052) to be implemented.

Moving forwardBy moving forward with Constantinople, the Ethereum Foundation is proving its resilience against adversity an important feature for any project that wishes to survive the volatility of the market. The long-term vision Vitalik imprinted on the Ethereum Foundation team is what is, arguably, most exciting.

“Ethereum 2.0 is a combination of a bunch of different features that we’ve been talking about for several years, researching for several years, actively building for several years that are finally about to come together in one cohesive whole.”

At the end of the day, technology simply creates newer frameworks for humans to communicate and exchange value differently. By developing its network towards a cheaper, more scalable, and decentralised ecosystem, Ethereum is making sure it maintains its value-capture model by remaining a central piece in the cryptocurrency sphere.

We bring you the latest news and insights about Ethereum, its performance on the market, and any major changes. Always stay one step ahead of the market and make the best investment decisions.

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