An technical overview of Ethereum that provides a full picture starting from the original problem of building a distributed ledger and mining up to smart contracts. Please note that there are no llamas in this presentation.

1. By Alex Komyagin

2. Why cryptocurrencies?
● Decentralization
● Transparency
● Money laundering
● Because we can

3. The idea
1. Have private keys as wallets and use public keys as addresses
○ A spending transaction needs to be signed
2. Store transactions in a
distributed decentralized store
3. PROFIT!!!

4. What is blockchain?
It is a continuously growing list of records, called blocks, which are linked and
secured using cryptography (from Wiki)
● Immutable
● Secure by design
● Managed by a distributed P2P network
○ Every node has a local copy
○ Every node performs block validation
○ Every node works on the longest tree
○ Every node generates(mines) new blocks
● DDoS attacks and fake transactions are avoided by
requiring Proof-of-Work

6. Blockchain is more than Bitcoin
● You can use blockchain as a distributed database of any type of records or
assets
○ Perhaps we could even store code there
● Options:
○ Fork Bitcoin, e.g. Namecoin (DNS registry)
○ Write your own from scratch
● How about a generic framework?

7. What is Ethereum?
● A framework for building new blockchain-based applications
● A turing-complete distributed VM
○ Smart contracts - vending machine
○ Code is written in Solidity (a strange child of Java, C and the 90’s)
○ Every node runs the code
■ Infinite loops are prevented by gas limit
● Subtle technological differences
○ Memory complex PoW
○ Uncles are rewarded by the miner of the block
● Great marketing

9. Types of clients
● Full client
○ Has a full copy of the blockchain
○ Processes and validates all transactions
○ Mines new blocks (optional)
● Light client
○ For small devices
○ Downloads block headers by default
○ Verifies only what needs to be verified
○ DHT is used in place of the local storage
■ State is encoded as a Patricia trie

10. Mining

11. How does mining work?
● Miners “compete” to generate a valid block
○ Miners select transactions based on the expected reward (fees, gas, etc)
○ Transactions are posted via RLPx
● Proof of Work
○ DAG - a ~2GB dataset that is occasionally updated
○ ETHash(DAG, Block header, Block nonce) < Target
■ Can’t use Bitcoin ASICs
■ Target is dynamically adjusted to control the difficulty and keep the same ratio of 4-5
blocks per minute
● Miner gets 5 ethers per mined block
○ Uncles get 4.375 ETH (2 uncles per block)
● Miners work on the branch with the highest difficulty
○ This is where the 51% of resources needed to control the blockchain came from

13. Mining is not really profitable
● Requires high-end expensive GPU’s
● Participation in mining pools
○ For slower nodes it can take years to solve the PoW problem
○ Can it be a threat to decentralization?
● Ethereum might be switching to “Proof of Stake” in the near future

14. Future challenges
● Volatility
● Capped market
● Mining will soon become completely non-profitable or obsolete
● Regulation
● Time for transaction confirmation (12 blocks)
● What for?
○ Ethereum seems like a good bet because it’s a decentralized computer rather than just a
currency

15. Thank you

16. Links
https://www.cryptocompare.com/wallets/guides/how-do-digital-signatures-in-bitcoi
n-work/
https://ethereum.stackexchange.com/questions/5888/relationship-between-transac
tion-trie-and-receipts-trie
http://gavwood.com/Paper.pdf
https://github.com/ethereum/wiki/wiki/White-Paper
https://github.com/ethereum/devp2p/blob/master/rlpx.md