This document summarizes the state of Ethereum and cryptocurrency mining in 2014. It discusses features enabled by Ethereum like decentralized applications and smart contracts. It outlines progress made in technical areas like client implementations and applications built on Ethereum. It also discusses challenges remaining around efficiency, security, and client implementations. The document concludes that Ethereum is at the halfway point and more work is needed to address remaining issues.

1. State of Ethereum
And Mining

2. ● People want features
○ Issue coins
○ Decentralized exchange
○ Financial contracts
● Solution: feature coins
● Problem: what if people want to do
more?
Cryptocurrency in 2013

3. ● Generalized cryptoledger
● Built-in programming language
● Create any feature that you want
● Also supports DACs/DAOs/DAs
Ethereum

4. ● Special type of account
● Has:
○ Code
○ Ether
○ Storage (key/value database)
Contracts

5. ● Idea: when a message is sent to a
contract, code executes
● Code can:
○ Read/write storage
○ Send ether
○ Send other messages (ie. recursive VM)
Contracts

6. Name registry: Currency:
Examples

7. The Ethereum Blockchain

8. Ethereum in 2014
● Decentralized applications (Đapps)
● More than just money

9. ● HTML/JS webpage, ETH JS API
Đapps: contracts with GUIs

10. ● Whitepaper
● Protocol fully implemented
● 4 clients (Go, C++, Py, Java)
● 2 clients compatible for 1900 blocks
● Serpent, LLL, Mutan
● Basic browser
● Fully functional third-party dapps
Progress so far (technical)

11. ● Financial
○ Kickstarter (38 LoC)
○ Denny’s Lotto
● Academic Publishing
○ CryptoSwartz
● Governance
○ People’s Republic of ĐOUG
○ Project Eris
○ BitVote
Third-Party Development

12. Progress so far (non-technical)
● CCRG prelim (Toronto, Waterloo, Texas,
Nicosia)
● Regulatory (Swiss, almost US)
● Sale website, cold storage policy
(almost)
● 40+ meetup groups

13. What needs to be done (technical)
● EtherBrowser
○ Likely Chromium-based
● Efficiency upgrades
○ JIT compilation
● Security audits
● Light client implementation
● Mobile implementation

14. What needs to be done (non-technical)
● Finalize pre-sale tasks
● CCRG formal setup
● Education resources
● Translation
● 960 more meetup groups?

15. Conclusion
● Ethereum at halfway point
● Current version theoretically near-
viable but buggy (eg. 2009 BTC)
● “Hard” work still remains
(we’re only half-done…)

16. Decentralization, n. The security assumption that a
nineteen year old in Hangzhou and someone maybe in
the UK, and maybe not, have not yet decided to
collude with each other.
Mining

17. ● I have 100 BTC
○ Tx 1 sends 100 BTC to A
○ Tx 2 sends 100 BTC to B
● Both are published, which one confirms?
● Correct answer: the one that appears
first
● Problem: need distributed timestamp
● Solution: blockchain
Blockchain

18. Mining
● Miners attempt to produce blocks
● Each block references previous block
● Block making function 1/1020
success rate
● One random miner succeeds every 10 min
● Longest blockchain (one with most PoW)
wins

19. 51% Attacks
● Problem: one entity has >50% hashpower
● Attack 1: reverse transactions
● Attack 2: exclude others, monopolize
○ Weaker version at 25%: selfish-mining
● Attack 3: censor transactions

20. Pools
● Mining is a lottery
● One ASIC has 15% chance of success
● Pools: mine for me, I pay you 0.00025 BTC
per block
● Problem: pool centralization

21. Pools

22. ● Bad argument: no, majority miner has
aligned incentives
● Better argument: users can quit pools
○ Unknown: will they?
Is centralization bad?

23. ● Problem: centralized pools allow mining
without validation
● Idea: protocol requires blockchain
accesses
● Goal: make P2Pool economically viable
Solution 1: force blockchain storage

24. ● Problem: small pools have high variance
● Idea: users mine into multiple pools
simultaneously
● Goal: allow even small pools to fully
absorb variance
Solution 2: Multi-PPS

25. ● Original intent: mining decentralized,
democratic
● Problem: specialized hardware
● Now: mining hardware all produced by a
few centralized firms
ASICs

26. ● 25% of hashpower made in one factory in Shenzhen
● First floor: 25% of Litecoin hashpower
How bad?

27. ● Argument: CPU production very
centralized too
● Counterpoint: CPU usage and control still
local
● ASIC production now centralized, usage
still decentralized
● Will this change?
Is this a problem?

28. The First Grand Equation

29. ● Centralized maintenance, storage cheaper
● Decentralized energy free… up to a point
ASIC Decentralization: The Argument

30. ● 2011: Scrypt
○ Problem: memory-hard to verify
● 2013 Oct: Momentum
○ Problem: Pollard cycle finding algo
● 2013 Dec: Dagger
○ Problem: shared memory
● Now: Cuckoo (length-42 cycles)
Anti-ASIC 1: Memory-Hardness

31. ● Strategy: randomly generate a mining
function every block
● Idea: optimal ASIC for “any function” IS a
CPU
● Problem: how
● Problem 2: some specialization always
possible
○ But: does that matter?
Anti-ASIC 2: Generalized Computation

32. The Second Grand Equation
● Idea: use of computer hardware free… up
to a point

33. End