I've Finally Read the Ethereum Whitepaper

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Written by

CryptoMasterMiner

DeFi Yield Farmer Liquidity Provider Crypto Lender, Miner, Investor & Blogger

1 year ago

In community: Cryptocurrency and Blockchain(7b7f)

Topics: Ethereum, Investing, Defi, Cryptocurrency, Finance

the Ethereum Whitepaper. While I Finally Read the Bitcoin Whitepaper back in April of this year, I've taken even longer to read Vitalik Buterin's 2013 vision of what crypto could be after reviewing Satoshi Nakamoto's work from five years earlier.

While Bitcoin brought us "peer-to-peer electronic cash" with its launch, Ethereum brought us the true power of the blockchain.

Ethereum: A Next-Generation Smart Contract and Decentralized Application Platform

The title above says it all. Ethereum was about much more than simply acting as a currency, it was to serve as a platform on which contracts and applications could be built upon. While Bitcoin brought us the digital asset with no centralized authority and no value backing, Ethereum sought to utilize the promise of blockchain technology that Bitcoin brought about but in a limited fashion. Essentially, Ethereum was to be seen as software that allowed for the use of smart contracts and other programs layered on top of it.

Satoshi's blockchain was the first credible decentralized solution. And now, attention is rapidly starting to shift toward this second part of Bitcoin's technology, and how the blockchain concept can be used for more than just money.

- Vitalik Buterin | Ethereum Whitepaper

After the title, the next bit of key information is the Table of Contents which breaks down the organization of the whitepaper and all the concepts covered. To set things up, Buterin reviews Bitcoin first giving us a brief history lesson before diving into his vision for Ethereum. After this, he breaks down applications that can be built before going over miscellaneous items and wrapping things up.

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

Ethereum

The second section of the whitepaper, a section simply labeled Ethereum, is where Buterin gets to the "meat" of his vision.

The intent of Ethereum is to create an alternative protocol for building decentralized applications, providing a different set of tradeoffs that we believe will be very useful for a large class of decentralized applications, with particular emphasis on situations where rapid development time, security for small and rarely used applications, and the ability of different applications to very efficiently interact, are important. Ethereum does this by building what is essentially the ultimate abstract foundational layer: a blockchain with a built-in Turing-complete programming language, allowing anyone to write smart contracts and decentralized applications where they can create their own arbitrary rules for ownership, transaction formats and state transition functions.

- Vitalik Buterin | Ethereum Whitepaper

It is this section, particularly the passage above, that is the must-read part of Vitalik's work. The young lanky Canadian of Russian and Montenegrin descent forever altered the crypto landscape by changing it from a store of value to a technology that would house applications well beyond even what he could have envisioned at the time. The 20-year-old known as "Vitaly" aimed to improve on Bitcoin, something he jumped on very early as a co-founder of Bitcoin Magazine in 2011. It was his failure in 2013 to convince the Bitcoin community to support decentralized applications and smart contracts on the Bitcoin network that ultimately lead him to conceive of Ethereum a year later and use a crowdfunding model to fund the project.

Much of the whitepaper is fairly technical so I found myself skimming through much of it, unlike Satoshi's masterpiece. It is, after all, written by a programmer who is explaining a new software language he has developed.

Even his explanations of things, such as the blockchain and mining process differences between Bitcoin and Ethereum above, come out in technical terms that are rather dry to the reader.

The Ethereum blockchain is in many ways similar to the Bitcoin blockchain, although it does have some differences. The main difference between Ethereum and Bitcoin with regard to the blockchain architecture is that, unlike Bitcoin, Ethereum blocks contain a copy of both the transaction list and the most recent state. Aside from that, two other values, the block number and the difficulty, are also stored in the block.

- Vitalik Buterin | Ethereum Whitepaper

Decentralized Autonomous Organizations

One of the things I most admire about the Ethereum Whitepaper is that it not only outlines his vision for Ethereum but also his vision for what a decentralized company should look like. The concept of the DAO not only shaped the way the Ethereum organization would be modeled, it also served as the model for many future crypto organizations and spills outside of the crypto industry. If one of the major purposes of crypto from Satoshi's viewpoint was decentralization, Buterin extended this idea with his proposed business model.

While Buterin didn't invent the idea of a DAO, he put a well-thought-out process behind it including voting mechanics, distributed shares, etc. This section of the whitepaper is brief, yet effectively poignant.

Applications

Ethereum would have many potential applications that could be built upon it. I'm not sure if he could have envisioned things like NFTs or Yield Farms, but he did lay out some ideas of his own including:

Savings wallets
Crop insurance
A decentralized data feed
Smart multi-signature escrow
Cloud computing
Peer-to-peer gambling
Prediction markets
On-chain decentralized marketplaces

Crypto coins and tokens can be built on their own blockchain, but Ethereum allowed cryptocurrencies to be built upon their network using the ERC-20 standard. This allows for rapid development and for new coins/tokens to take advantage of the decentralization of the Ethereum blockchain, the security it provides, and other benefits including the use of smart contracts.

Conclusion

In his conclusion, Buterin admits that Ethereum was originally conceived to be a better version of cryptocurrency of which I'm sure he was referring primarily to Bitcoin. As you read through the paper, you also see how Namecoin had some influence on Ethereum's concepts along with other coins already in existence such as Ripple and Litecoin. As he continues, you get a sense of how the concept evolved as he was working on it. You can always start with a pretty good idea and evolve that into something truly special. My impression is that while Buterin began building something to compete with Bitcoin, he then saw the potential to build something that programmers like himself could build upon, and the ever-evolving Ethereum we know today emerged.

What is more interesting about Ethereum, however, is that the Ethereum protocol moves far beyond just currency. Protocols around decentralized file storage, decentralized computation and decentralized prediction markets, among dozens of other such concepts, have the potential to substantially increase the efficiency of the computational industry, and provide a massive boost to other peer-to-peer protocols by adding for the first time an economic layer. Finally, there is also a substantial array of applications that have nothing to do with money at all.

- Vitalik Buterin | Ethereum Whitepaper

While Bitcoin is fairly static, which is somewhat of an ode to the sheer brilliance of its original design, Ethereum has been built to change and adapt as the world around it changes. It is about the underlying technology, almost with the value of ETH being of secondary concern. It will be interesting to see if Ethereum will ever overtake Bitcoin in terms of market capitalization or if a new coin built on new concepts will be done day rule the cryptocurrency landscape. Only time will tell...

The biggest event to hit crypto this year, unless you were personally invested in FTX or Celsius, was the "merge" taking Ethereum from proof-of-work to proof-of-stake to become much more environmentally friendly and less inflationary. Next up will be "sharding" aimed at expanding Ethereum's storage capacity and reducing network fees. Eventually, "Ethereum 3.0" will bring about even more changes in its continual attempt to improve over time.

I consider the Bitcoin Whitepaper a must-read for anyone who gets involved with crypto to understand the underlying concepts of digital currencies, the Ethereum Whitepaper is important in understanding blockchain technology which could well be the real value that crypto brings about. Ethereum placed down the foundations of the third generation of the internet, called Web3, which is driving so much of the innovation that exists today.
Thank you Vitalik Buterin!

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