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Ethereum whitepaper

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Ethereum white paper a next generation smart contract and decentralized application platform vitalik buterin
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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    Bitcoin As A State Transition System Fromatechnicalstandpoint,theBitcoinledgercanbethoughtofasastatetransitionsystem,wherethereis a"state"consistingoftheownershipstatusofallexistingbitcoinsanda"statetransitionfunction"thattakes astateandatransactionandoutputsanewstatewhichistheresult.Inastandardbankingsystem,for example,thestateisabalancesheet,atransactionisarequesttomove$XfromAtoB,andthestate transitionfunctionreducesthevalueinA'saccountby$XandincreasesthevalueinB'saccountby$X.IfA's accounthaslessthan$Xinthefirstplace,thestatetransitionfunctionreturnsanerror.Hence,onecan formally define: APPLY(S,TX) -> S' or ERROR  In the banking system defined above: APPLY({ Alice: $50, Bob: $50 },"send $20 from Alice to Bob") = { Alice: $30, Bob: $70 }  But: APPLY({ Alice: $50, Bob: $50 },"send $70 from Alice to Bob") = ERROR The"state"inBitcoinisthecollectionofallcoins(technically,"unspenttransactionoutputs"orUTXO)that havebeenmintedandnotyetspent,witheachUTXOhavingadenominationandanowner(definedbya 20-byteaddresswhichisessentiallyacryptographicpublickey [1] ).Atransactioncontainsoneormoreinputs, witheachinputcontainingareferencetoanexistingUTXOandacryptographicsignatureproducedbythe privatekeyassociatedwiththeowner'saddress,andoneormoreoutputs,witheachoutputcontaininganew UTXO to be added to the state. Page 5 ethereum.org  

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Oct 13, 2019
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