In the last blog post, we finished by saying that after the release of Bitcoin, researchers’ and programmer’s attention started rapidly to shift towards the implications of the underlying blockchain technology rather than Bitcoin itself, with the objective of adding [i] complex programs and executables and [ii] complex non-financial records to the blockchain distributed database.
The results of these studies coined the term Blockchain 2.0. One of the most prominent examples is the platform Ethereum, which enables the user to benefit from blockchain’s newly (at that time - 2012) added possibilities and to create and interact with smart contracts through the Ethereum platform. Ethereum is a public blockchain-based distributed computing platform that runs smart contracts and it provides a decentralized virtual machine, the Ethereum Virtual Machine (EVM). The main characteristics of the Ethereum virtual machine (EVM) are the following:
- It is computationally “Turing” complete. This means, drastically simplifying, that Bitcoin VM can host simple decentralized applications (only calculator-like functionalities), while EVM can run all kinds of (D)Apps (like the difference between a calculator and a smartphone).
- It has the ability to run any coin/token (cryptocurrency), protocol or blockchain (you can create your own customized blockchain based on Ethereum protocols).
- It executes peer to peer “contracts” using a cryptocurrency called ETHER (Ξ).
Smart contracts are applications that, by using the inherent possibilities offered by blockchain, run exactly as programmed without any possibility of downtime, censorship, fraud or third-party interference, the so-called DApps working on blockchain. Arbitrarily complex decentralized apps in Ethereum can be built by non-specialist programmers entirely within the full security of the protocol. This enables developers to create markets, store registries of debts or promises, move funds in accordance with instructions given in the past (like a will or a future contract) and many other things that have not been invented yet, all without a middle man or counterparty risk.
Denis Gorbachev stated in the document “What is Ethereum?” that “Ethereum, like any advanced system, will mean different things to different people”, so it is worth to explain what Ethereum practically is and what it could do in real-life.
EVM as A World Computer
In a technical sense, Ethereum is a "world computer", a single computer that the whole world can use. It has only a single processor, but as much memory as required. Anybody can upload programs to the Ethereum World Computer and anybody can request to execute a program that has been uploaded. This does not mean that anyone can ask any program to do anything; for example, the authors of the program can specify that requests from anyone but themselves are ignored. In addition, every program has its own permanent storage that persists between executions. Furthermore, as long as it is in demand, the Ethereum World Computer will always be there: it cannot be shut down or turned off. Ethereum World Computer’s main advantage is that it makes certain tasks cheaper and easier to execute. In order to better understand this statement, we will proceed further to the next point presented by Gorbachev.
EVM as an Internet Service Platform
Ethereum is an internet service platform for guaranteed computation that provides the following set of features:
- User authentication, via seamless integration of cryptographic signatures.
- Fully customizable payment logic: easily create a proprietary payment system without any reliance on third parties.
- 100% DDoS (Distributed Denial of Service) resistant up-time, guaranteed by being a fully decentralized blockchain-based platform.
- Interoperability: everything in the Ethereum ecosystem can trivially interact with everything else, from reputation to custom currencies.
- Server free zone: DApps can be deployed on the blockchain without the need for setting up or maintaining servers.
Gorbachev argues the following “Over the last twenty years in particular, we have seen an acceleration in the development of services and infrastructure to make the overhead of working as a team or running businesses simpler and less expensive, mainly thanks to the internet. The likes of eBay, Drivy and Airbnb have made setting up a shop, car rental company or hotel much easier. These are platforms that allow people to realize their idea quickly, as long as the service they want to provide fits the template offered by the platform.” Therefore Ethereum can be seen as a platform for platforms because it enables people to create the infrastructure to easily set up new services on the internet. In addition, any DApp or infrastructure created on Ethereum sits next to other developers’ DApps and can interact with them in a guaranteed and seamless manner. Finally, since there is not a company or indeed any entity in charge of or controlling Ethereum, the cost of running the infrastructure does not include any profit margin, so it is likely to see lower costs.
EVM as Opt-in Social Contracts
Ethereum enables the creation of smart organization, in the sense of groups of entities working together for a particular cause. In the simplest scenario, we have two people working together to achieve a trade, but ultimately, Ethereum could be used to sustain a country’s health records, like it is happening in Estonia, or the decentralized smart grid of the future.