Although Ethereum borrows many ideas that have already been tried and tested for half a decade in older cryptocurrencies like Bitcoin, there are a number of places in which Ethereum diverges from the most common way of handling certain protocol features, and there are also many situations in which Ethereum has been forced to develop completely new economic approaches because it offers functionality that is not offered by other existing systems.The purpose of this document will be to detail all of the finer potentially nonobvious or in some cases controversial decisions that were made in the process of building the Ethereum protocol, as well as showing the risks involved in both our approach and possible alternatives.The Ethereum protocol design process follows a number of principles: These principles are all involved in guiding Ethereum development, but they are not absolute; in some cases, desire to reduce development time or not to try too many radical things at once has led us to delay certain changes, even some that are obviously beneficial, to a future release (eg.

This section provides a description of some of the blockchain-level protocol changes made in Ethereum, including how blocks and transactions work, how data is serialized and stored, and the mechanisms behind accounts.Bitcoin, along with many of its derivatives, stores data about users' balances in a structure based on unspent transaction outputs (UTXOs): the entire state of the system consists of a set of "unspent outputs" (think, "coins"), such that each coin has an owner and a value, and a transaction spends one or more coins and creates one or more new coins, subject to the validity constraints: A user's "balance" in the system is thus the total value of the set of coins for which the user has a private key capable of producing a valid signature.Ethereum jettisons this scheme in favor of a simpler approach: the state stores a list of accounts where each account has a balance, as well as Ethereum-specific data (code and internal storage), and a transaction is valid if the sending account has enough balance to pay for it, in which case the sending account is debited and the receiving account is credited with the value.

If the receiving account has code, the code runs, and internal storage may also be changed, or the code may even create additional messages to other accounts which lead to further debits and credits.The benefits of UTXOs are: The benefits of accounts are: We have decided that, particularly because we are dealing with dapps containing arbitrary state and code, the benefits of accounts massively outweigh the alternatives.bitcoin island llcAdditionally, in the spirit of the We Have No Features principle, we note that if people really do care about privacy then mixers and coinjoin can be built via signed-data-packet protocols inside of contracts.ethereum price technical analysisOne weakness of the account paradigm is that in order to prevent replay attacks, every transaction must have a "nonce", such that the account keeps track of the nonces used and only accepts a transaction if its nonce is 1 after the last nonce used.ethereum 2017 forecast

This means that even no-longer-used accounts can never be pruned from the account state.A simple solution to this problem is to require transactions to contain a block number, making them un-replayable after some period of time, and reset nonces once every period.ethereum inr chartMiners or other users will need to "ping" unused accounts in order to delete them from the state, as it would be too expensive to do a full sweep as part of the blockchain protocol itself.bitcoin america faucetWe did not go with this mechanism only to speed up development for 1.0; 1.1 and beyond will likely use such a system.bitcoin texas holdemThe Merkle Patricia tree/trie, previously envisioned by Alan Reiner and implemented in the Ripple protocol, is the primary data structure of Ethereum, and is used to store all account state, as well as transactions and receipts in each block.best litecoin asic miner

The MPT is a combination of a Merkle tree and Patricia tree, taking the elements of both to create a structure that has both of the following properties: This gives us a way of providing an efficient, easily updateable, "fingerprint" of our entire state tree.bitcoin farming machine/ethereum/wiki/wiki/Patricia-Tree Specific design decisions in the MPT include: RLP ("recursive length prefix") encoding is the main serialization format used in Ethereum, and is used everywhere - for blocks, transactions, account state data and wire protocol messages.quotazione bitcoin/ethereum/wiki/wiki/RLP RLP is intended to be a highly minimalistic serialization format; its sole purpose is to store nested arrays of bytes.Unlike protobuf, BSON and other existing solutions, RLP does not attempt to define any specific data types such as booleans, floats, doubles or even integers; instead, it simply exists to store structure, in the form of nested arrays, and leaves it up to the protocol to determine the meaning of the arrays.

Key/value maps are also not explicitly supported; the semi-official suggestion for supporting key/value maps is to represent such maps as [[k1, v1], [k2, v2], ...] where k1, k2... are sorted using the standard ordering for strings.The alternative to RLP would have been using an existing algorithm such as protobuf or BSON; however, we prefer RLP because of (1) simplicity of implementation, and (2) guaranteed absolute byte-perfect consistency.Key/value maps in many languages don't have an explicit ordering, and floating point formats have many special cases, potentially leading to the same data leading to different encodings and thus different hashes.By developing a protocol in-house we can be assured that it is designed with these goals in mind (this is a general principle that applies also to other parts of the code, eg.Note that bencode, used by BitTorrent, may have provided a passable alternative for RLP, although its use of decimal encoding for lengths makes it slightly suboptimal compared to the binary RLP.

The wire protocol and the database both use a custom compression algorithm to store data.The algorithm can best be described as run-length-encoding zeroes and leaving other values as they are, with the exception of a few special cases for common values like sha3('').For example: Before the compression algorithm existed, many parts of the Ethereum protocol had a number of special cases; for example, sha3 was often overridden so that sha3('') = '', as that would save 64 bytes from not needing to store code or storage in accounts.However, a change was made recently where all of these special cases were removed, making Ethereum data structures much bulkier by default, instead adding the data saving functionality to a layer outside the blockchain protocol by putting it on the wire protocol and seamlessly inserting it into users' database implementations.This adds modularity, simplifying the consensus layer, and also allows continued upgrades to the compression algorithm to be deployed relatively easily (eg.

via network protocol versions).Warning: this section assumes knowledge of how bloom filters work./wiki/Bloom_filter Every block header in the Ethereum blockchain contains pointers to three tries: the state trie, representing the entire state after accessing the block, the transaction trie, representing all transactions in the block keyed by index (ie.key 0: the first transaction to execute, key 1: the second transaction, etc), and the receipt tree, representing the "receipts" corresponding to each transaction.A receipt for a transaction is an RLP-encoded data structure: There is also a bloom in the block header, which is the OR of all of the blooms for the transactions in the block.The purpose of this construction is to make the Ethereum protocol light-client friendly in as many ways as possible.For more details on Ethereum light clients and their use cases, see the light client page (principles section).The "Greedy Heaviest Observed Subtree" (GHOST) protocol is an innovation first introduced by Yonatan Sompolinsky and Aviv Zohar in December 2013, and is the first serious attempt at solving the issues preventing much faster block times.

The motivation behind GHOST is that blockchains with fast confirmation times currently suffer from reduced security due to a high stale rate - because blocks take a certain time to propagate through the network, if miner A mines a block and then miner B happens to mine another block before miner A's block propagates to B, miner B's block will end up wasted ("stale") and will not contribute to network security.Furthermore, there is a centralization issue: if miner A is a mining pool with 30% hashpower and B has 10% hashpower, A will have a risk of producing a stale block 70% of the time (since the other 30% of the time A produced the last block and so will get mining data immediately) whereas B will have a risk of producing a stale block 90% of the time.Thus, if the block interval is short enough for the stale rate to be high, A will be substantially more efficient simply by virtue of its size.With these two effects combined, blockchains which produce blocks quickly are very likely to lead to one mining pool having a large enough percentage of the network hashpower to have de facto control over the mining process.

As described by Sompolinsky and Zohar, GHOST solves the first issue of network security loss by including stale blocks in the calculation of which chain is the "longest"; that is to say, not just the parent and further ancestors of a block, but also the stale descendants of the block's ancestor (in Ethereum jargon, "uncles") are added to the calculation of which block has the largest total proof of work backing it.To solve the second issue of centralization bias, we adopt a different strategy: we provide block rewards to stales: a stale block receives 7/8 (87.5%) of its base reward, and the nephew that includes the stale block receives 1/32 (3.125%) of the base reward as an inclusion bounty.Transaction fees, however, are not awarded to uncles or nephews.In Ethereum, stale block can only be included as an uncle by up to the seventh-generation descendant of one of its direct siblings, and not any block with a more distant relation.This was done for several reasons.First, unlimited GHOST would include too many complications into the calculation of which uncles for a given block are valid.

Second, unlimited uncle incentivization as used in Ethereum removes the incentive for a miner to mine on the main chain and not the chain of a public attacker.Finally, calculations show that restricting to seven levels provides most of the desired effect without many of the negative consequences.Design decisions in our block time algorithm include: The difficulty in Ethereum is currently updated according to the following rule: The design goals behind the difficulty update rule are: We have already determined that our current algorithm is highly suboptimal on low volatility and non-exploitability, and at the very least we plan to switch the timestamps compares to be the parent and grandparent, so that miners only have the incentive to modify timestamps if they are mining two blocks in a row./ethereum/economic-modeling/blob/master/diffadjust/blkdiff.py (the simulator uses Bitcoin mining power, but uses the per-day average for the entire day; it at one point simulates a 95% crash in a single day).

Whereas all transactions in Bitcoin are roughly the same, and thus their cost to the network can be modeled to a single unit, transactions in Ethereum are more complex, and so a transaction fee system needs to take into account many ingredients, including cost of bandwidth, cost of storage and cost of computation.Of particular importance is the fact that the Ethereum programming language is Turing-complete, and so transactions may use bandwidth, storage and computation in arbitrary quantities, and the latter may end up being used in quantities that due to the halting problem cannot even be reliably predicted ahead of time.Preventing denial-of-service attacks via infinite loops is a key objective.The basic mechanism behind transaction fees is as follows: Each of the above components is necessary.For example: Note the following particular features in gas costs: The other important part of the gas mechanism is the economics of the gas price itself.The default approach, used in Bitcoin, is to have purely voluntary fees, relying on miners to act as the gatekeepers and set dynamic minimums; the equivalent in Ethereum would be allowing transaction senders to set arbitrary gas costs.

This approach has been received very favorably in the Bitcoin community particularly because it is "market-based", allowing supply and demand between miners and transaction senders to determine the price.The problem with this line of reasoning is, however, that transaction processing is not a market; although it is intuitively attractive to construe transaction processing as a service that the miner is offering to the sender, in reality every transaction that a miner includes will need to be processed by every node in the network, so the vast majority of the cost of transaction processing is borne by third parties and not the miner that is making the decision of whether or not to include it.Hence, tragedy-of-the-commons problems are very likely to occur.Currently, due to a lack of clear information about how miners will behave in reality, we are going with a fairly simple approach: a voting system.Miners have the right to set the gas limit for the current block to be within ~0.0975% (1/1024) of the gas limit of the last block, and so the resulting gas limit should be the median of miners' preferences.