Welcome to Ethereum, a bustling virtual metropolis and fully functional digital civilization. Here you can conduct transactions, sign contracts, develop applications, and even buy and sell artwork—all without relying on the physical realm. Created by Vitalik Buterin in 2015, Ethereum is much more advanced compared to the original structure of Bitcoin. Today, Ethereum is a bit like ancient Rome—it’s “Turing-complete,” meaning it can solve any computational problem as long as there are enough resources and the correct instruction. This is the basis for Ethereum’s unique programming language, Solidity, which allows developers to build sophisticated applications on its blockchain. In this article, we’ll take a stroll through this bustling digital metropolis and explore its unique architecture and future roadmap.
The Foundation of Ethereum City
Just as a city relies on infrastructure to support it, the foundation of Ethereum City is its blockchain technology. Think of the blockchain like a city’s road network, connecting everything within Ethereum. This infrastructure is open, transparent, and decentralized—it belongs to all residents, not to a single entity. In Ethereum City, the local currency ether (“ETH”) is the equivalent of a city’s standard currency. ETH is used to conduct transactions, such as buying goods or paying for services. Miners (referred to as “block producers” here) earn it by validating transactions, much like a worker earning a paycheck. Just as the law is critical for maintaining order in a city, smart contracts facilitate transactions in Ethereum City. Like a fair judge, these digital contracts execute automatically when conditions are met, without the need for intermediaries. Stored on Ethereum’s decentralized blockchain, these contracts ensure transparency and immutability, making them more trustworthy. How does Ethereum City keep running? Just as a city needs workers to keep its systems running, Ethereum relies on a professional workforce known as block producers. However, these block producers aren’t mining precious minerals underground—they’re computational workers who validate transactions and add them to Ethereum’s blockchain. Whenever a citizen of Ethereum City conducts a transaction, such as sending ETH or interacting with a smart contract, block producers do their job. They verify these transactions and ensure that everything goes according to plan. Just as all workers need to be compensated, block producers need to be rewarded for their services in maintaining Ethereum’s network security. This is allocated to them from the gas fees paid when executing transactions. These gas fees are paid in ETH. While simple transactions are relatively cheaper than more complex ones, the gas fees to be paid can fluctuate depending on the current network usage level. During periods of high network usage, gas prices can spike sharply as people compete to have their transactions included in the next block, much like physical traffic congestion in a city. The work of these block producers is crucial to the functioning of the city. They provide security to Ethereum by preventing fraudulent activities and maintaining order. Like a city’s police or security personnel, block producers can protect Ethereum from potential “bad actors.” Without block producers, Ethereum City would be vulnerable to attacks and improper behavior, resulting in chaos and destruction.
Features of Ethereum City
1. DeFi: Financial District Just as a city’s financial district has banks, investment firms, and insurance companies, decentralized finance (“DeFi”) comprises a range of financial applications, all of which are built on top of Ethereum’s blockchain. However, unlike traditional financial systems, DeFi operates under the management of smart contracts without a central authority. Below, we will explore some popular DeFi use cases: – Lending platforms – These platforms replace traditional banking services, allowing users to directly borrow from one another. These platforms utilize smart contracts to automate the loan process and enforce the terms of the loan without the need for cumbersome KYC (“know your customer”) processes. Popular lending platforms currently include Aave and Compound. – DEX – These decentralized exchange platforms function as markets, allowing users to trade digital assets directly with one another without intermediaries. These platforms aim to replace CEXs like Binance and Kraken, which are the cryptocurrency equivalents of the New York Stock Exchange, Nasdaq, and others. Specific DEXs that are currently popular include Uniswap and Balancer. 2. DAO: City Council In the Ethereum cityscape, amidst countless structures, there are no central authorities, but there are decentralized organizations known as decentralized autonomous organizations (“DAOs”). Just as a republican nation governs the physical world, DAOs operate based on rules encoded in smart contracts. DAO members can make decisions through voting, with their weight typically determined by the amount of tokens they hold, bringing democracy, transparency, and autonomy to the forefront. DAOs can fundamentally change the way businesses operate, ensuring that all stakeholders have a say and eliminating the need for central control authorities. This democratic, transparent decision-making process is vastly different from traditional hierarchical organizational structures, akin to the difference between republics and monarchies. DAOs, like buildings in a city, can serve multiple purposes. They can be used to manage decentralized venture capital funds, where investment decisions are made by collective members. DAOs can also be used to manage decentralized networks and applications, among other things. Some specific examples of DAOs include Apecoin DAO and BitDAO.
3. NFT: Unique Relics Think of a city as the home of unique relics, like a one-of-a-kind sculpture or rare historical document in a museum. In Ethereum City, these artifacts have been turned into NFTs. Unlike conventional tokens like ETH, which are interchangeable or “fungible,” NFTs are unique and have their own attributes. It’s like having a painting that has only one original copy that can be replicated, but the original will always have unique value.
These unique NFTs utilize the transparency and security features of the Ethereum blockchain, and when purchased or sold, the transaction is recorded on the Ethereum blockchain, just like a property deed is recorded in a city’s records office. This blockchain record proves who owns the NFT, and since the blockchain is transparent and immutable, ownership of the NFT is clear and indisputable, which is what ensures the uniqueness and provenance of the NFT. NFTs can represent a variety of unique projects or content. Digital art has always been one of the most popular uses of NFTs, with artists creating digital artwork and selling it as an NFT. But the uses of NFTs go far beyond digital art. They can represent ownership of virtual real estate in the digital world, unique in-game items in video games, and even ownership of real-world assets (RWAs). It’s like the various unique landmarks and properties you can find in any city, each with its own story and value.
The Upgrade of Ethereum City
While Ethereum City, like any metropolis, has inherent advantages and products, it also faces challenges – the key one being scalability. As the city grows and more citizens join, the current infrastructure struggles to handle transactions quickly and cost-effectively. It’s like a city dealing with traffic congestion due to population growth. Another challenge is the complexity of the city, just as new residents may find it difficult to adjust to a large city, new users often find understanding and using Ethereum challenging. As Ethereum City continues to evolve and welcome more citizens into its city, it is addressing these challenges to ensure that all citizens have a sustainable and inclusive future, with the emergence of Layer 2 solutions.
1. Development of Layer2 The scalability of the Ethereum city is similar to dealing with traffic congestion in a physical city. Just as more roads or public transportation systems can help handle more cars or people, Layer2 is like adding extra lanes or high-speed trains to Ethereum’s infrastructure to handle more transactions. Layer2 is built on top of the Ethereum blockchain (Layer1) and is used to process off-chain transactions. These transactions are only added to the Ethereum main blockchain when users choose to do so on Layer1. This is like taking a fast, direct express train that only stops at the terminal when necessary. Layer2 can help Ethereum city process more transactions faster and at lower costs. By removing transactions from the main blockchain, they reduce the network load and make it more efficient. This is similar to how express trains or highways bypass busy city centers to shorten travel time. Some Layer2 can process hundreds or even thousands of transactions per second, far exceeding Ethereum’s current capabilities. This increased capacity not only speeds up transactions but also lowers transaction costs, making interactions within the Ethereum city cheaper for citizens. Ethereum City is developing and implementing various Layer2s. One of them is “roll-up” , which bundles or “rolls up” many transactions into one, greatly increasing the capacity of the city. They are like a super-efficient bus system, carrying many passengers at the same time; another is “state channel” , which allows participants to exchange multiple transactions off-chain before settling the final state on-chain, similar to setting up tabs at a bar and paying the total bill at the end. Some of the well-developed Layer2 solutions currently include Arbitrum, Polygon, and Optimism. These solutions are helping Ethereum City manage its growth and ensure that it remains a prosperous, efficient, and inclusive digital metropolis. 2. Merge: From PoW to PoS When Ethereum was created, it used the Proof of Work (“PoW”) consensus mechanism to verify new transactions. Although it was revolutionary at the time, it consumed a lot of energy and became a problem for Ethereum’s sustainable development. To change this, the Ethereum Foundation successfully executed “The Merge” in September 2022 to transition to Proof of Stake (“PoS”) consensus, one of the biggest advantages of which is that it significantly reduces its energy consumption, about 99.95%, while still maintaining the network’s security. 3. Upgrade Blueprint In addition to the upgrades Ethereum has already undergone, there is still a long way to go for the Ethereum Foundation to achieve its ultimate goal. To achieve this goal, Vitalik proposed a series of upgrades, which also set the team on a journey of upgrades for many years:
The Surge: Upgrade related to scalability through aggregation and data sharding The Scourge: Upgrade related to resistance to MEV scrutiny, decentralization, and protocol risk The Verge: Upgrade related to easier verification of blocks The Purge: Upgrade related to reducing computational costs of running nodes and simplifying protocols The Splurge: Other upgrades not fitting into previous categories.
As we conclude our tour of this digital city of Ethereum, we can see that it has grown from a crypto project to a bustling metropolis in the blockchain world and has attracted countless developers and companies to build innovative applications and services on its platform, thanks to its solid foundation based on Turing completeness. Just as Rome was not built in a day, Ethereum is constantly growing and its dedicated developer community is constantly working to improve its infrastructure, capacity, and security. The journey of Ethereum 2.0 and its PoS consensus mechanism, sharding, and scaling solutions marks the beginning of a new era in Ethereum’s history, just as the transition from republic to empire was a major event in Rome’s history. However, it is worth noting that as we tour the city of Ethereum, we are merely scratching the surface. Just as Rome has centuries of history and culture, Ethereum has layers of complexity and innovation that are still being discovered and developed.
Original link: https://medium.com/@hjsoh90/decentralized-wonderland-journey-through-ethereum-city-266af16d04f6 Original title: Decentralized Wonderland: Journey through Ethereum city Original author: Hjsoh Translation: Huohuo
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