Introduction to Ethereum and Bitcoin
Bitcoin and Ethereum (specifically Ether) are the two most prominent cryptocurrencies in the blockchain ecosystem.
- Bitcoin: Often referred to as Blockchain 1.0, it introduced decentralized currency through a transaction-based ledger.
- Ethereum: Known as Blockchain 2.0, Ethereum expanded on Bitcoin's foundation by introducing an account-based ledger and smart contracts.
Key Differences Between Bitcoin and Ethereum
| Feature | Bitcoin | Ethereum |
|---|---|---|
| Ledger Type | Transaction-based | Account-based |
| Block Time | ~10 minutes | ~15 seconds |
| Supply | Capped at 21 million | Infinite (with controlled issuance) |
| Consensus | Proof-of-Work (PoW) | Ghost Protocol → Proof-of-Stake (PoS) |
| Mining Puzzle | Compute-intensive (ASIC-friendly) | Memory-intensive (ASIC-resistant) |
| Transaction Fees | Calculated per byte (Satoshis) | Gas fees (measured in Gwei) |
| Smart Contracts | Not supported | Native support |
👉 Explore the differences in-depth
Ethereum Accounts: Structure and Security
Ethereum utilizes an account model, which simplifies tracking balances compared to Bitcoin’s UTXO system. Each account has:
- Balance: Current Ether holdings.
- Nonce: Counter to prevent replay attacks.
Account Types
Externally Owned Accounts (EOA):
- Controlled by private keys.
- Can initiate transactions.
Contract Accounts (CA):
- Controlled by code.
- Execute transactions only when triggered by EOA calls.
Preventing Replay Attacks
Ethereum uses nonces—a transaction counter embedded in each transfer—to ensure transactions cannot be duplicated maliciously.
Ethereum’s Data Structures: The Backbone of Efficiency
Ethereum’s state is maintained through four core trees:
- State Tree: Tracks all account balances and storage roots.
- Storage Tree: Holds data tied to smart contracts.
- Transaction Tree: Records all transactions in a block.
- Receipts Tree: Stores outcomes of transactions (e.g., event logs).
Modified Patricia Trie (MPT)
Ethereum employs MPT for optimized data storage:
- Path Compression: Saves space by merging redundant nodes.
- Merkle Proofs: Enables lightweight verification of transactions.
👉 Learn how MPT enhances scalability
Smart Contracts: The Game Changer
Definition: Self-executing contracts with terms written into code.
Use Cases:
- Decentralized finance (DeFi) protocols.
- Automated agreements (e.g., escrow services).
Limitations: Not all real-world contracts can be encoded due to complexity.
FAQs About Ethereum
Q: Why does Ethereum transition to Proof-of-Stake?
A: PoS reduces energy consumption and improves scalability compared to PoW.
Q: How are gas fees determined?
A: Gas prices fluctuate based on network demand and are bid on by users.
Q: Can Ethereum accounts be hacked?
A: While EOAs are secure if private keys are safeguarded, faulty smart contracts may be exploited.
Q: What’s the role of ‘uncle blocks’?
A: They incentivize miners for near-miss blocks, improving chain security.
Conclusion
Ethereum’s innovations—smart contracts, account models, and efficient data structures—position it as a cornerstone of Web3.0. Its ongoing upgrades (like PoS) aim to address scalability while maintaining decentralization.