Merge pull request #57 from jjmstark/patch-5

Update what-is-ethereum.rst

source/introduction/what-is-ethereum.rst

@@ -3,44 +3,48 @@ A next generation blockchain
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 A blockchain is a distributed computing architecture where every network node executes and records the same transactions, grouped in blocks. Each block contains a mathematical calculation which verifies that it contains all of the transactions and is based on the previous block. If all nodes in the blockchain network have consensus on each block in the chain, then this enables a sort of distributed ledger or replicated database of the transactions that occurred.
 
-Blockchain technology is the technological basis of Bitcoin, first described by its mysterious author Satoshi Nakamoto in his white paper "Bitcoin: A Peer-to-Peer Electronic Cash System", published in 2008. While the use of blockchains for more general uses was already discussed in the original paper, it was not until a few years later that blockchain technology emerged as a generic term to designate the cryptoeconomic system composed of a transparent open ledger or database representing a state of a complex system, manipulated via transactions propagated across a peer to peer network. In Bitcoin's case the open ledger is conceived of as a table of account balances, and transactions are transfers of the bitcoin token. Due to the decentralised nature of this peer to peer system, secured by cryptography and driven by algorithmically enforced economic incentives coupled with scarcity and controlled issuence (predictable inflation) coded in the protocol, bitcoin is suitable to serve as digital money without a central bank or other centralized authority behind it. This allows trustless finance between individuals.
+Blockchain technology is the technological basis of Bitcoin, first described by its mysterious author Satoshi Nakamoto in his white paper "Bitcoin: A Peer-to-Peer Electronic Cash System", published in 2008. While the use of blockchains for more general uses was already discussed in the original paper, it was not until a few years later that blockchain technology emerged as a generic term to designate the cryptoeconomic system composed of a transparent open ledger or database representing a state of a complex system, manipulated via transactions propagated across a peer to peer network. In Bitcoin's case the open ledger is conceived of as a table of account balances, and transactions are transfers of the bitcoin token. Due to the decentralised nature of this peer to peer system, secured by cryptography and driven by algorithmically enforced economic incentives coupled with scarcity and controlled issuance (predictable inflation) coded in the protocol, bitcoin is suitable to serve as digital money without a central bank or other centralized authority behind it. This allows trustless finance between individuals.
 
 As bitcoin began attracting greater attention from developers and technologists, novel projects began to use the bitcoin network for purposes other than transfers of value tokens. Many of these took the form of "alt coins" - separate blockchains with cryptocurrencies of their own which improved on the original bitcoin protocol to add new features or capabilities. In late 2013, Ethereum's inventor Vitalik Buterin proposed that a single blockchain with the capability to be reprogrammed to perform any arbitrarily complex computation could subsume these many other projects. 
 
-In 2014, Ethereum founders Vitalik Buterin, Gavin Wood and Jeffrey Wilcke began work on a next-generation blockchain that had the ambitions to implement a fully general trustless smart contract platform.
+In 2014, Ethereum founders Vitalik Buterin, Gavin Wood and Jeffrey Wilcke began work on a next-generation blockchain that had the ambitions to implement a general fully trustless smart contract platform.
 
 
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 What is Ethereum?
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-Ethereum is a programmable blockchain. Rather than give users a set of pre-defined operations (e.g. bitcoin transactions), Ethereum allows users to create their own operations. In this way, it serves as a platform for many different types of decentralized blockchain applications, including cryptocurrencies.
+Ethereum is a programmable blockchain. Rather than give users a set of pre-defined operations (e.g. bitcoin transactions), Ethereum allows users to create their own operations. In this way, it serves as a platform for many different types of decentralized blockchain applications, including but not limited to cryptocurrencies.
 
 Ethereum in the narrow sense refers to a suite of protocols that define a platform for decentralised applications. At the heart of it is the Ethereum Virtual Machine ("EVM"), which can execute code of arbitrary algorithmic complexity. In computer science terms, Ethereum is "turing complete". Developers can create applications that run on the EVM using friendly programming languages modelled on existing languages like javascript and python.
 
-Like any blockchain, Ethereum also includes a peer to peer network protocol. The ethereum blockchain database is maintained and updated by many nodes connected to the network. Each and every node of the network runs the EVM and executes the same instructions. For this reason, Ethereum is sometimes described evocatively as a "world computer". 
+Like any blockchain, Ethereum also includes a peer-to-peer network protocol. The ethereum blockchain database is maintained and updated by many nodes connected to the network. Each and every node of the network runs the EVM and executes the same instructions. For this reason, Ethereum is sometimes described evocatively as a "world computer". 
 
 This massive parallelisation of computing across the entire Ethereum network is not done to make computation more efficient. In fact, this process makes computation on Ethereum far slower and more expensive than on a traditional "computer". Rather, every Ethereum node runs the EVM in order to maintain consensus across the blockchain. Decentralized consensus gives Ethereum extreme levels of fault tolerance, ensures zero downtime, and makes data stored on the blockchain forever unchangeable and censorship-resistant.
 
-The ethereum platform is featureless or value-agnostic in the same sense as a programming language is. Similar to programming language enviroments, it is up to entrepreneurs and developers to decide what they are using it for.
+Many applications are now being built on Ethereum. The Ethereum platform itself is featureless or value-agnostic. Similar to programming language enviroments, it is up to entrepreneurs and developers to decide what it should be used for. However, it is clear that certain application types benefit more than others from Ethereum's capabilities. Specifically, ethereum is **suited for applications that automated direct interaction between peers or facilitate coordinated group action across a network**. For instance, applications for coordinating peer-to-peer marketplaces, or the automation of complex financial contracts. Ethereum's open architecture - the fact that anyone, anywhere, can build on it - gives it the potential to compete with existing services. 
 
-That said it is clear that the applications which benefit most from Ethereum are those that automate direct interaction or facilitate coordinated group action across a network. For instance, applications for coordinating complex peer-to-peer marketplaces, or the automation of complex financial contracts. Ethereum's open architecture - the fact that anyone, anywhere, can build on it - gives it the potential to compete with existing services and drive down prices.
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+How does Ethereum work?
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+
+Ethereum incorporates many features and technologies that will be familiar to users of bitcoin, while also introducing many modifications and innovations of its own.
 
-Since nodes need to (be able to) agree on the outcome of computations, the Ethereum Virtual Machine runs in a closed box so that strictly deterministic execution is guaranteed. If you understand this, you will understand why it is not possible to have native random number generation or external calls (like access to current date/time or api calls etc).
+Whereas the bitcoin blockchain was purely a list of transactions, **Ethereum's basic unit is the account**. The Ethereum blockchain tracks the state of every account, and all state transitions on the Ethereum blockchain are transfers of value and information beween accounts. There are two types of account:
 
-The Ethereum blockchain is an open database. In this database sit the accounts which are smart contracts. Smart contracts are pieces of code which executes when a transaction is sent addressing the account in question. Users can create new contracts by deploying the EVM contract code to the blockchain or trigger the execution of existing contracts. Both are done by sending a transaction to the network.
+- Externally Owned Accounts (EOAs), which are controlled by private keys
+- Contract Accounts, which are controlled by their contract code and can only be "activated" by an EOA
 
-The nodes of the network receieve, verify, and execute all incoming transactions which they then package into blocks. The peer to peer network protocol describes how transactions are relayed and how blocks are announced.
+For most users, the basic difference between these is that human users control EOAs - because they can control the private keys which give control over an EOA. Contract accounts, on the other hand, are governed by their internal code. If they are "controlled" by a human user, it is because they are *programmed* to be controlled by an EOA with a certain address, which is in turn controlled by whoever holds the private keys that control that EOA. The popular term "smart contracts" refers to cod in a Contract Account - programs that execute when a transaction is sent to that account. Users can create new contracts by deploying code to the blockchain. 
 
-We can think of these smart contracts as functions which are called with input parameters specified in the transaction. Peers are motivated to produce blocks (which presupposes the execution of all transactions in previous blocks) by economic incentives.
+Contract accounts only perform any operation when instructed to do so by an EOA. So it is not possible for a Contract Account to be performing native operations like random number generation or API calls - it can do these things only if prompted by an EOA. This is because Ethereum requires nodes to be able to agree on the outcome of computation, which requires a guarantee of strictly deterministic execution.
 
-Just like in the case of bitcoin, the blocks need to be sealed by a proof of work. Any computational problem that requires orders of magnitude more resources to solve algorithmically than it takes to verify the solution is a good candidate for proof of work. In order to discourage centralisation due to the use of specialised hardware (e.g. ASICs), Ethereum chose a memory-hard computational problem. If the problem requires memory as well as CPU, specialised hardware is in fact the general computer hence Ethereum is ASIC resistant, allowing a more democratised provision of security than blockchains whose mining is dominated by specialized hardware, like Bitcoin.
+Like in bitcoin, users must pay small transaction fees to the network. This protects the Ethereum blockchain from frivolous or malicious computational tasks, like DDOS attacks or infinite loops. The sender of a transaction must pay for each step of the "program" they activated, including computation and memory storage.  These fees are paid in amounts of Ethereum's native value-token, Ether. 
 
-The nodes are incentivised to validate blocks and perform the proof of work calculations by competing for a reward. The first node to submit a valid block with the strongest proof is rewarded.
+These transaction fees are collected by the nodes that validate the network. These "miners" are nodes in the Ethereum network that receive, propogate, verify, and execute transactions. The miners then group the transactions - which include many updates to the "state" of accounts in the Ethereum blockchain - into what are called "blocks", and miners then compete with one another for *their* block to be the next one to be added to the blockchain. Miners are rewarded for each succesful block they mine with ether. This provides the economic incentive for people to dedicate hardware and electriciy to Ethereum network. 
 
-The system is protected against users sending frivolous computational tasks (DDOS peers with transactions or running infinite loops etc) because transaction senders are charged for each execution step. Even in the absence of transactions, nodes are producing blocks and get a standard one-off fee for their contribution called a mining reward.
+Just as in the bitcoin network, miners are tasked with solving a complex mathematical problem in order to succesfully "mine" a block. This is known as a Proof of Work. Any computational problem that requires orders of magnitude more resources to solve algorithmically than it takes to verify the solution is a good candidate for proof of work. In order to discourage centralisation due to the use of specialised hardware (e.g. ASICs), as has occurred in the Bitcoin network, Ethereum chose a memory-hard computational problem. If the problem requires memory as well as CPU, the ideal hardware is in fact the general computer. This makes Ethereum's Proof of Work ASIC-resistant, allowing a more decentralized distribution of of security than blockchains whose mining is dominated by specialized hardware, like Bitcoin.
 
-Transaction charges and mining rewards necessitate having a token of value, a currency at the heart of the system. The mining reward is newly minted coins as if you found gold (which is why the whole process of validation is called mining). This currency is Ether.
 
 Ethereum is perhaps best described as an ecosystem: the core protocol is supported by various pieces of infrastructure, code, and community that together make up the Ethereum project.