Smart Contracts and Ethereum

Smart contractsSmart contracts are used in many areas, which include betting and gambling services, copyright management, cryptocurrencyCryptocurrencies trading/management, financial contract execution, gaming services, healthcare management, insurance, international and domestic trade, logistics administration, non-fungible tokenNon-Fungible Token (NFT) creation/purchasing/trading, real estate, rental services, supply chain management, etc. This chapter covers the details of smart contracts and how they are operated on blockchains. In the first section, the concept of a smart contract is introduced along with its characteristics as well as its pros and cons. In the second section, the first blockchain and cryptocurrency based smart contract Ethereum is introduced. Ethereum's ETH annual value changes are presented along with the use of Ethash and Gas. In addition, the base software program Solidity is introduced along with Ethereum’s account types and a smart contract execution example. In the third section, details of Ethash are introduced, which is a Proof-of-Work (PoW) algorithm that is designed to use memory-hard functions (MHFs). The fourth section focuses on Ethereum's new Proof-of-Stake (PoS), where Ethereum switched from PoW to PoS in September of 2022. The description on Ethereum PoS includes details of the Validator, Execution, and Consensus clients’ operational procedures as well as their transaction processing sequence. This is followed by a description of Ethereum PoS finalized block chaining process, including details on changing checkpoints. In addition, an overview of PoS attacks, security issues, inactivity leak defense, as well as validator requirements and violation penalties are provided. Further details of the correlation penalty and the Latest Message Driven Greediest Heaviest Observed SubTree (LMD-GHOST) fork selection algorithm are introduced.