Ethereum vs Solana vs Polygon: A Comprehensive Comparison of Blockchain Platforms

Chapter 2: Deep Dive into Ethereum

Introduction to Ethereum

Ethereum is the second most well-known blockchain platform after Bitcoin, but it is far more versatile. Created by Vitalik Buterin in 2013 and launched in 2015, Ethereum has redefined the landscape of blockchain technology by allowing smart contracts to be executed directly on its network. These smart contracts enable the creation of decentralized applications (DApps) that run without any centralized authority.

In this chapter, we will explore Ethereum in-depth, starting with its core concepts and architecture, before diving into smart contracts, decentralized finance (DeFi), and Ethereum 2.0—a major update to Ethereum’s consensus mechanism. We will also examine the Ethereum Virtual Machine (EVM), its impact on the blockchain ecosystem, and challenges like scalability and high gas fees.

Understanding Ethereum’s Core Concepts

Ethereum is fundamentally different from Bitcoin in its approach and functionality. While Bitcoin was designed solely as a digital currency, Ethereum’s goal is to provide a decentralized platform for building applications and executing smart contracts.

1. Ethereum Virtual Machine (EVM)

The Ethereum Virtual Machine (EVM) is the decentralized computer that runs on the Ethereum network. It is responsible for executing smart contracts and ensuring that transactions are executed correctly and securely across the Ethereum blockchain.

• EVM Execution: The EVM acts as the global state machine, meaning it keeps track of the state of every Ethereum account and contract. Every time a transaction is sent, the EVM updates the global state accordingly.
• Smart Contract Execution: When a user interacts with a smart contract, the EVM processes the input, executes the contract’s code, and updates the state.

Key Features of the EVM:

• Decentralization: The EVM runs on every node in the Ethereum network, ensuring that the network remains decentralized and fault-tolerant.
• Turing-Complete: Ethereum’s smart contracts are Turing-complete, meaning they can compute anything that can be algorithmically defined, making them more flexible than simple scripts.

2. Smart Contracts

At the heart of Ethereum is the concept of smart contracts. Smart contracts are programs that automatically execute the terms of an agreement when certain predefined conditions are met.

How Smart Contracts Work:

• A smart contract is written in Solidity, Ethereum’s native programming language.
• The contract is then compiled into bytecode, which can be executed by the EVM.
• When certain conditions are triggered, the contract automatically executes without the need for intermediaries or manual intervention.

Example of a basic smart contract in Solidity:

solidity

Copy

pragma solidity ^0.8.0;

contract SimpleStorage {

    uint256 public storedData;

    function set(uint256 x) public {

        storedData = x;

    }

    function get() public view returns (uint256) {

        return storedData;

    }

}

In this example:

• set() function allows users to store data.
• get() function returns the stored data.

Smart contracts can handle complex logic, allowing the creation of decentralized applications (DApps) that interact with the Ethereum blockchain.

3. Ethereum Gas and Gas Fees

Gas is the unit used to measure computational work done on the Ethereum network. Every operation that happens on Ethereum—whether it's sending Ether, interacting with a smart contract, or processing transactions—requires gas. Gas ensures that Ethereum’s resources are used efficiently and prevents spam attacks.

• Gas Limit: The maximum amount of gas you are willing to spend on a transaction.
• Gas Price: The price you are willing to pay for each unit of gas. Gas prices are determined by market demand and can fluctuate based on network congestion.

High Gas Fees: One of Ethereum’s biggest challenges has been high gas fees during periods of network congestion. This is a direct result of Ethereum’s Proof-of-Work (PoW) consensus mechanism, which requires significant computational resources. The transition to Proof-of-Stake (PoS) via Ethereum 2.0 aims to mitigate these issues.

Ethereum 2.0: The Future of Ethereum

Ethereum 2.0, also known as Eth2, is a long-anticipated upgrade to the Ethereum network, designed to address its scalability issues and reduce its energy consumption.

Key Features of Ethereum 2.0:

1. Proof-of-Stake (PoS): The most significant change in Ethereum 2.0 is the transition from Proof-of-Work (PoW) to Proof-of-Stake (PoS). PoS allows validators to create new blocks and verify transactions based on the amount of cryptocurrency they hold and are willing to "stake" as collateral, making the process more energy-efficient.
2. Sharding: Ethereum 2.0 introduces the concept of sharding, which divides the blockchain into smaller, more manageable pieces, or "shards." Each shard can process its transactions and smart contracts, allowing the network to scale horizontally.
3. The Beacon Chain: The Beacon Chain is a PoS blockchain that runs in parallel with the current Ethereum network and will eventually replace Ethereum’s PoW consensus mechanism entirely.

Ethereum 2.0 Timeline:

• Phase 0: Launched in December 2020 with the introduction of the Beacon Chain.
• Phase 1 and 1.5: Introduces shard chains and the merger of PoW and PoS networks.
• Phase 2: Full implementation of sharding, scaling Ethereum to handle much more than it can today.

Ethereum 2.0 aims to significantly increase the network’s transaction throughput, reduce costs, and make Ethereum more sustainable.

Decentralized Finance (DeFi) and Ethereum’s Role

One of Ethereum’s most profound impacts on the blockchain ecosystem is the rise of DeFi. DeFi platforms leverage Ethereum’s smart contracts to provide financial services such as lending, borrowing, trading, and insurance, without the need for centralized intermediaries.

• DeFi Protocols: Ethereum has become the backbone of the DeFi movement, with major platforms like Aave, Compound, and Uniswap built on its blockchain.
• Liquidity Pools: Ethereum’s decentralized exchanges (DEXs) and liquidity pools allow users to trade assets directly without relying on centralized exchanges.
• Tokenization: Ethereum’s ERC-20 token standard enables the creation of tokens that represent real-world assets like stocks, real estate, or commodities.

DeFi on Ethereum has grown exponentially in the past few years, with billions of dollars locked in smart contracts. Despite challenges like high gas fees, Ethereum remains the most widely used platform for DeFi applications.

Challenges Facing Ethereum

Despite its success, Ethereum faces several challenges that need to be addressed in its future updates:

1. Scalability

Ethereum's transaction throughput is limited, processing only about 30 transactions per second (TPS). In comparison, Solana can process 65,000 TPS, and Polkadot offers substantial scalability improvements. Ethereum’s scalability issues lead to congestion and high gas fees during periods of high demand.

2. Gas Fees

The high cost of gas has been a significant pain point for Ethereum users. As DeFi and NFTs continue to gain popularity, Ethereum’s network congestion has made it expensive to execute transactions, especially for smaller-scale users.

3. Security

Although Ethereum is one of the most secure blockchain networks, the smart contract code is only as secure as its development. Vulnerabilities in contract code can lead to significant losses. The Ethereum community continues to work on improving contract auditing and security practices.

The Future of Ethereum

The future of Ethereum looks promising, with Ethereum 2.0 addressing many of the challenges outlined above. As the network continues to grow and scale, Ethereum’s role as the leading platform for decentralized applications, DeFi, and NFTs is likely to strengthen.