Architecture of Ethereum

In the modern world, life has become technologically empowered in almost all sectors. Financial sector has not been left behind and currency is swiftly taking new form. It is now reality that, touchable currency is being replaced by virtual currency. Bitcoin concept was first introduced in 2008 and its acceptance in the market has been gaining popularity over time. Bitcoin is generally acceptable in the market although there has been debate on its use and transaction security. To understand Bitcoin clearly, research has been underway resulting to innovation of Blockchain technology [3]. Over the years, it has been growing as more blocks are being added into the market. It offers capabilities such as lower cost of transactions, minimal risks of operations and has high standards of rules and regulation compliance. In Bitcoin market, there are no touchable physical money but just values that are associated with both public and private keys. Similarly, Ethereum is being used as part of Blockchain technology. It is regarded as the largest open source software that can support both distributed applications and SmartContracts. It is possible to run both without any observable interference in terms of fraud or operational downtime. Though Ethereum is growing very fast, Bitcoin is more popular and has a wide share of the market. Ethereum cannot be really regarded as medium of payment but a platform that facilitates creation and distribution of digital currency [2]. To make discussion of digital currency successful, this paper would be organized inform of brief introduction of digital currency, make an in depth analysis of Ethereum ranging from its architecture, its composition and challenges faced in its operations. Additionally, some applications that are supported by Bitcoin such as Token analysis and decentralized file storage would be analyzed. Finally, the differences that arise from both Bitcoin and Ethereum would be of major concern in order to come up with clear understanding of cryptocurrency.

The architecture is usually presumed to be a transaction based state machine which is able to read a series of provided inputs and change it into new state. In this case, a genesis state is used to explain none-existent of the transaction which is a state before a transaction initiation. Once a transaction has been executed over Ethereum, the genesis state makes a transition into final state which is used to give Ethereum its current state [1]. Ethereum state is composed of many transactions which are grouped into blocks. In its mode of operation, a block is also made up of several transactions which are chained from a previous block of transactions.

Features of Ethereum

Figure1: ethereum states- https://medium.com/@preethikasireddy/how-does-ethereum-work-anyway-22d1df506369

Figure 2: Ethereum blocks- https://medium.com/@preethikasireddy/how-does-ethereum-work-anyway-22d1df506369

In order to formulate a successful transaction from one block state to the other, a transaction should be confirmed to be valid. To classify any transaction as a valid, a mining process must be done thoroughly. It is usually done when various computer nodes do expend computer resources with aim of creating valid transactions blocks. A valid block is only created when a one of the network node is considered as a miner. To make transaction valid, miners tries as much as possible to create and validate created blocks of transactions. To make entry into the main block, a dedicated miner must be faster than any other competitive miner [16]. The faster miner gains entry into the main block and get executed accordingly. However, it is important to make sure there is no transaction that creates a series of transaction from one miner without allowing miners an opportunity to execute. Therefore, Ethereum must make required checks to make sure there is a balance of allowing minors into the main block.  

To make Ethereum part of cryptocurrency, it must possess some of features such as; having a transaction zone where application users can be able to execute required decentralized transactions. Its Blockchain is used as a decentralized interconnections where desirable applications can be executed securely and in a convenient way [4]. It must have Ethereum Virtual Machine (EVM) which is regarded as massive but decentralized computers that are able to execute required SmartContracts. Decentralization is used as a means of securing transactions by taking any block of transaction through a series of validation. All these SmartContracts are made up of Bits of codes. To make it a real money transaction, it is initiated when system users tries to execute applications known as dapps. The price associated with Ethereum is much dependent on the computation complexity when running dapps [15]. To make processing power more reliable, Ethereum are run through a block chain with a massive and distributed global infrastructure. It should be able to carry out value exchange between trading parties as well as track property ownership during transaction.

Ethereum block chain technology is faced by some problems such as need to maintain full copy of operational database. This is a real problem during operational processes when many transactions are created by different nodes [14]. Desire to hold a database copy may result to operational deadlocks as it is quite inefficient to run any network. In realistic network operations, cloud computing is structured in such a way that many users can interact with database without any need to keep database copy. Next, network nodes are required to receive constant updates that are related to the current state of Blockchain. Due to this state requirement checks from all interconnected nodes distributed across the globe, transaction process are believed to suffer from network latency. Therefore, Ethereum is subject to slow processing power when compared to other transactions such as Visas. Ethereum can only process 20 transactions per second while visa are able to transact more than 1500 per second [5]. This makes it slow compared to current mode of transactions.        

Challenges of Ethereum

As the concept of bitcoin continue to be popular in the market, its application in our daily lives broadens over time. Bitcoin token systems have a variety of application such as pioneering the future of business economy. Important to note is that, bitcoin token is being used as an asset that steers new forms of business economy. Token system application has made it possible for all willing users to create their own Blockchain Ethereum in just few lines of code [12]. With this type of technology application, it is quite possible to introduce new types of business economy in the market. In its clear analysis, it is quite possible to introduce new concepts of business through use of token systems. Through use of token systems, any person with low level skills is able to introduce new form of assets representative in the cryptocurrency market commonly known as “asset-backed tokens’ [6]. The results of using token system has made possible to trade as well as make transactions in lower costs which have higher liquidity ratio than current market assets such as gold. Implementation of token systems in the business is being used as a medium of exchange that is used to help bitcoin gain more value. Developers are using tokens to create bitcoins with more value because they are easy to exchange. As the development of tokens increase, bitcoin value increases within a very short period of time. An analysis shows that tokens are used as the bridge between developers and advertisers who display tokens as ads that customers have to pay to view them. Therefore, tokens are generally used as a channel that allows flow of capital in the market between token developers and real users of the tokens [13].

Decentralized file storage in bitcoin mimics the concept of distributed file system in real database. Storing any form of information is very expensive as it requires space which can be used to store millions of transaction information [9]. With decentralization, it is possible to have multiple storage points of similar information for ease of access by reducing traffic flow into the servers. In bitcoin market, decentralized file storage makes it possible to distribute value of information into many servers across the world for ease of access. To process a single transaction, a miner initiates a transaction and is entered into many networked computer nodes for processing. Since one transaction require resources to process a valuable information, decentralized file storage makes possible to handle load balancing when processing required bitcoin information exchange. To decentralize bitcoin information, the sense of information ownership is of great importance through private keys [11]. Though information is public, the control of information relies solely on the owner who has all keys and rights to manipulate it. The ownership is not in the sense of data being on personal computer but on different nodes. The data ownership is only on the sense of data control and manipulation while on the network. Basically, distributed file storage in bitcoin makes use of distributed file system in real database to store required bitcoin information [7]. This makes it accessible from all over the globe, available for use at all times and reliable for business purpose whenever needed.

Applications Supported by Bitcoin

Both Ethereum and Bitcoin have some fine differences such as; in bitcoin, the average block time execution is estimated to be about 10 minutes. Contrary, Ethereum block time is projected to be about 12 seconds. The short block time in Ethereum is due to its GHOST protocol which makes it possible to have quicker confirmation time [10]. The next difference is on monetary supply with 2/3^rds of available bitcoin already mined by those knowledgeable individuals. Additionally, there are notable differences on the costing of the two cryptocurrencies. In Ethereum, it is called gas and transaction costs is highly depended on storage needs, their bandwidth usage and complexity. Conversely, bitcoin transactions are highly dependent on sizes of the block and they have equal chances of competing with each other. Finally, Ethereum makes use of its turing internal code which is complete and any requirement can be calculated through use of available computing power and time [8]. Bitcoin does not have such capability as it is taken to be a limitation in security terms.        

Both Bitcoin and Ethereum are cryptocurrencies offering alternative to touchable assets such as gold and traditional currency. Their mode of programming and design are almost similar [8]. Next, both are very valuable currency with bitcoin dominating in reference to market capping. Due to their demand in the market, they are the most valuable and biggest cryptocurrencies in use. Additionally, despite existence of other types of cryptocurrencies, these are the leading form of digital currency [13]. Finally, both Ethereum and bitcoin makes use of proof-of-work-mining which is the concept of transaction processing on blockchain technology. Some of the coins do not need mining but these two must use proof-of-mining for transaction purposes.   

Conclusion

Cryptocurency is a new form of money commonly known as digital money. The two main form of cryptocurrency in use are Ethereum and Bitcoin. Though both are forms of cryptocurrency, Ethereum acts as a platform for creating digital currency applications. Both have notable market share but bitcoin is more popular and is widely recognized compared to Ethereum. Ethereum architecture is designed in such a way that, before a transaction can be processed, it is validated accordingly after confirmation that it has been created by valid miner. Ethereum features are; transaction zone where created transactions are executed and Ethereum Virtual Machine where SmartContracts are executed. Ethereum is faced by issues such as need to keep a copy of the entire database which causes operational limitations. Beside database copy requirements, network nodes are expected to receive regular updates on the state of the current Blockchain. Token systems are used to create capital flow channel between developers and the market. On the decentralized file storage system, it is used in bitcoin to make it accessible and available at all times. Lastly, both bitcoin and Ethereum make use of almost similar programming language but there are notable differences such as market supply and block processing time.

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