A token system is the system in which a currency operates in Ethereum. It is a database with one operation which is to subtract X units from A and give X units to B, with the provision that A had at least X units before the transaction and that the transaction is approved by A. Token systems are a very literal implementation of the basic banking system's transaction functions on Ethereum. What separates Ethereum token systems from other blockchains is their ability to pay transaction fees directly in that currency. This is done by Ethereum constantly holding and refunding ether used to pay fees to the sender, refilling its balance by collecting the currency units that it takes in as fees and reselling them.

Token Systems

Ethereum uses an identity system in which anyone can register a name with some value, and that registration then sticks forever. A more sophisticated contract also has a function clause that allows other contracts to append it and make changes such as account ownership.

Identity and Reputation Systems

Ethereum offers cheap data storage by allowing users to earn small quantities of money by renting out their own hard drives and unused space to drive down costs of file storage. The contract for this works such that you split the desired data into blocks, encrypting each block for privacy. You then make a contract with the rule that, ever x blocks, the contract will pick a random index and give y ether to the first entity to supply a transaction. So long as a contract is still paying out money, you have cryptographic proof that someone is still storing that block of your file.

Decentralized File Storage

Decentralized Autonomous Organizations (DAOs) are decentralized online organizations whose members have the ability to collectively decide how the organization should allocate its funds. They use blockchain technology to enable members to vote on the organization's decisions rather than relying on a traditional hierarchical structure. 

Decentralized Autonomous Organizations (DAOs)

Saving wallets

- If worried about getting hacked, you can write a contract such that person A can withdraw a maximum of x% of funds in a day and person B can withdraw a maximum of x% of funds in a day but together, they can withdraw anything.

Crop insurance

- Farmers can hedge their crops by purchasing derivatives contracts that pay out inversely based on weather conditions.

Decentralized Data Feed

- This could work where N parties all put into the system the value of a given datum, say ETH/USD price. The values are sorted and everyone between the 25th and 75th percentile receive one token as a reward. This way, people are incentivized to provide the same answer as everyone else which will most likely be the correct answer.

Smart Multisignature Escrow

- Allowing x different keys to interact with a given fund (i.e. 3 out of 5 keys can spend up to 10% per day while 2 out of 5 can spend up to 1% per day).        


 Cloud Computing

- Ethereum technology can create a verifiable computing environment where users ask each other to carry out computations and then optionally ask for proofs that computations at certain, random checkpoints to see that things were done correctly.

Peer-To-Peer-Gambling

- Many gambling protocols like Frank Stajano and Richard Clayton's cyberdice can be implemented on the Ethereum blockchain.

Further Applications

ENS Domains(Ethereum Name Service Domains) are a way to simplify wallet addresses. Wallet addresses are 64 characters long and can inhibit the sending of crypto.  ENS uses domains to replace these wallet addresses. A good comparison is that of a nickname. Someone could have a very long name, so they are often referred to as a nickname for simplicity. This is how ENS works. It takes the long wallet address and consolidates it to a domain like alice.eth. These domains can be bought and sold. They require fees to be held. 


ENS Domains

Stable-value currencies, often referred to as stablecoins, are an application of Ethereum smart contracts designed to maintain a stable value relative to a specific external asset, such as a fiat currency. They provide a critical mechanism for users to hedge against the high price volatility typically associated with cryptocurrencies, enabling more reliable transactions and decentralized financial operations.

Stable-Value Currencies on Ethereum

Financial derivatives, which are contracts whose price is determined by the value of another asset, are a common application of Ethereum smart contracts. A primary challenge in their implementation is the necessity for an external price ticker, such as the ETH/USD exchange rate. This requires the smart contract to rely on a data feed maintained by a trusted third party, introducing a degree of centralization. However, utilizing a third-party data feed remains significantly more secure than relying on price points from issuers that are susceptible to fraud.

Financial Derivatives on Ethereum

- Token Systems
- Financial derivatives and Stable-Value Currencies
- Identity and Reputation Systems
- Decentralized File Storage
- Decentralized Autonomous Organizations
- Further Applications


University of Minnesota - Twin Cities

Ethereum is alternative protocol to Bitcoin for building decentralized applications.   

It is open-source, has smart-contract functionality, and allows users to create their own arbitrary rules for ownership, transaction formats and state transition functions.

Ethereum

Buterin, Vitalik. (2013). A Next-Generation Smart Contract and Decentralized  

Application Platform. https://ethereum.org/en/whitepaper/


Ethereum Whitepaper

- Ethereum Accounts
- Transactions
- Messages
- Ethereum State Transition Function
- Code Execution
- Blockchain and Mining
- Ethereum's Functionality
- Ethereum's Design

Key Ethereum Terms

Ethereum Applications

- Modified GHOST Implementation
- Fees
- Computation and Turing-Completeness
- Currency and Issuance
- Mining Centralization
- Scalability


Ethereum Concerns

- Ethereum Whitepaper
- Ethereum Name Service (ENS)
- Go-Ethereum for electronic voting system using clique as proof-of-authority

Ethereum References

The Ethereum governance refers to the way and process to make changes to the protocol, this protocol isn't controlled by someone. Therefore, decisions under the protocol are extremely important since so many people and project depends on it, that's why either decision making or core changes, this process considers social and technical criteria and it's also supported totally by the community.

Ethereum Governance

Is an updated version of the Ethereum network that aims to improve several features of the existing network
Some of the features of Ethereum 2.0 include:
- **Proof of Stake**: replaces *Proof of Work*
- **Sharding**.
- **Virtual Machine Update**.
- **Scalability**.
- **Security**.

Ethereum 2.0

Ether is the native cryptocurrency used fundamentally for payment transaction fees on the Ethereum network, then after the **Merge** it's also used for validate and propose blocks on Mainnet. The pricing mechanism for Ethereum's computing power is facilitated by the ether cryptocurrency. In order for transactions to be validated on the blockchain, users are required to pay ether, known as gas fees, which depends on computing power required for running a transaction


Ether (ETH)

Ethereum supports Proof of Stake and uses validators instead of miners, blocks are randomly selected by a validator to propagare this block to the network and consequently add it to the network through the assembly process. Unlike other blockchain, Blocks support of creation of smart contracts using a system of gas for the execution of them.

Ethereum Blocks

It's the runtime Environment for executing smart contracts and running transaction on the Ethereum Virtual Machine, designed to be Turing Complete, which means the EVM can run any program given enough resources. It allows developers to write and deploy smart contracts than are self-executing based on the agreement reached by the user.
The EVM exist as a single entity maintained by thousand of connected computers running an Ethereum Client software.

Ethereum Virtual Machine (EVM)

A Ethereum node is a device that is connected to the Ethereum network and helps maintain the network by validating transactions and blocks. A node can be any device, such as a personal computer, a server, or a mobile device, that runs **Ethereum client** software and connects to the Ethereum network.

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