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Ethereum White Paper

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    Ethereum White Paper A NEXT GENERATION SMART CONTRACT & DECENTRALIZED APPLICATION PLATFORM By Vitalik Buterin WhenSatoshiNakamotofirstsettheBitcoinblockchainintomotioninJanuary2009,hewas simultaneouslyintroducingtworadicalanduntestedconcepts.Thefirstisthe bitcoin ,adecentralized peer-to-peeronlinecurrencythatmaintainsavaluewithoutanybacking,intrinsicvalueorcentralissuer.So far,the bitcoin asacurrencyunithastakenupthebulkofthepublicattention,bothintermsofthepolitical aspectsofacurrencywithoutacentralbankanditsextremeupwardanddownwardvolatilityinprice. However,thereisalsoanother,equallyimportant,parttoSatoshi'sgrandexperiment:theconceptofaproofof work-basedblockchaintoallowforpublicagreementontheorderoftransactions.Bitcoinasanapplicationcan bedescribedasafirst-to-filesystem:ifoneentityhas50BTC,andsimultaneouslysendsthesame50BTCto AandtoB,onlythetransactionthatgetsconfirmedfirstwillprocess.Thereisnointrinsicwayofdetermining fromtwotransactionswhichcameearlier,andfordecadesthisstymiedthedevelopmentofdecentralized digitalcurrency.Satoshi'sblockchainwasthefirstcredibledecentralizedsolution.Andnow,attentionis rapidlystartingtoshifttowardthissecondpartofBitcoin'stechnology,andhowtheblockchainconceptcanbe used for more than just money. Commonlycitedapplicationsincludeusingon-blockchaindigitalassetstorepresentcustomcurrenciesand financialinstruments( coloredcoins ),theownershipofanunderlyingphysicaldevice( smartproperty ), non-fungibleassetssuchasdomainnames( Namecoin )aswellasmoreadvancedapplicationssuchas decentralizedexchange,financialderivatives,peer-to-peergamblingandon-blockchainidentityand reputationsystems.Anotherimportantareaofinquiryis smartcontracts -systemswhichautomatically movedigitalassetsaccordingtoarbitrarypre-specifiedrules.Forexample,onemighthaveatreasurycontract oftheform AcanwithdrawuptoXcurrencyunitsperday,BcanwithdrawuptoYperday,AandBtogether canwithdrawanything,andAcanshutoffB'sabilitytowithdraw .Thelogicalextensionofthisis decentralizedautonomousorganizations(DAOs)-long-termsmartcontractsthatcontaintheassetsand encodethebylawsofanentireorganization.WhatEthereumintendstoprovideisablockchainwithabuilt-in fullyfledgedTuring-completeprogramminglanguagethatcanbeusedtocreate contracts thatcanbeused toencodearbitrarystatetransitionfunctions,allowinguserstocreateanyofthesystemsdescribedabove,as well as many others that we have not yet imagined, simply by writing up the logic in a few lines of code. Page 1 ethereum.org     Table of contents   ● History ○ Bitcoin As A State Transition System ○ Mining ○ Merkle Trees ○ Alternative Blockchain Applications ○ Scripting ● Ethereum ○ Ethereum Accounts ○ Messages and Transactions ○ Ethereum State Transition Function ○ Code Execution ○ Blockchain and Mining ● Applications ○ Token Systems ○ Financial derivatives ○ Identity and Reputation Systems ○ Decentralized File Storage ○ Decentralized Autonomous Organizations ○ Further Applications ● Miscellanea And Concerns ○ Modified GHOST Implementation ○ Fees ○ Computation And Turing-Completeness ○ Currency And Issuance ○ Mining Centralization ○ Scalability ● Putting It All Together: Decentralized Applications ● Conclusion ● References and Further Reading Page 2 ethereum.org      Page 3 ethereum.org    History Theconceptofdecentralizeddigitalcurrency,aswellasalternativeapplicationslikepropertyregistries, hasbeenaroundfordecades.Theanonymouse-cashprotocolsofthe1980sandthe1990s,mostly reliantonacryptographicprimitiveknownasChaumianblinding,providedacurrencywithahighdegree ofprivacy,buttheprotocolslargelyfailedtogaintractionbecauseoftheirrelianceonacentralized intermediary.In1998,WeiDai'sb-moneybecamethefirstproposaltointroducetheideaofcreating moneythroughsolvingcomputationalpuzzlesaswellasdecentralizedconsensus,buttheproposal wasscantondetailsastohowdecentralizedconsensuscouldactuallybeimplemented.In2005,Hal Finneyintroducedaconceptof reusableproofsofwork ,asystemwhichusesideasfromb-money togetherwithAdamBack'scomputationallydifficultHashcashpuzzlestocreateaconceptfora cryptocurrency, but once again fell short of the ideal by relying on trusted computing as a backend. Becausecurrencyisafirst-to-fileapplication,wheretheorderoftransactionsisoftenofcritical importance,decentralizedcurrenciesrequireasolutiontodecentralizedconsensus.Themainroadblock thatallpre-Bitcoincurrencyprotocolsfacedisthefactthat,whiletherehadbeenplentyofresearchon creatingsecureByzantine-fault-tolerantmultipartyconsensussystemsformanyyears,allofthe protocolsdescribedweresolvingonlyhalfoftheproblem.Theprotocolsassumedthatallparticipantsin thesystemwereknown,andproducedsecuritymarginsoftheform ifNpartiesparticipate,thenthe systemcantolerateuptoN/4maliciousactors .Theproblemis,however,thatinananonymoussetting suchsecuritymarginsarevulnerabletosybilattacks,whereasingleattackercreatesthousandsof simulated nodes on a server or botnet and uses these nodes to unilaterally secure a majority share. TheinnovationprovidedbySatoshiistheideaofcombiningaverysimpledecentralizedconsensus protocol,basedonnodescombiningtransactionsintoa block everytenminutescreatingan ever-growingblockchain,withproofofworkasamechanismthroughwhichnodesgaintherightto participateinthesystem.Whilenodeswithalargeamountofcomputationalpowerdohave proportionatelygreaterinfluence,comingupwithmorecomputationalpowerthantheentirenetwork combinedismuchharderthansimulatingamillionnodes.DespitetheBitcoinblockchainmodel's crudenessandsimplicity,ithasproventobegoodenough,andwouldoverthenextfiveyearsbecome the bedrock of over two hundred currencies and protocols around the world. Page 4 ethereum.org  
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