Sharon Jebitok
Sharon Jebitok


Sharon Jebitok

Introduction to Ethereum Blockchain

Introduction to Ethereum Blockchain

Sharon Jebitok's photo
Sharon Jebitok
·Jan 12, 2022·

8 min read

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I'm currently learning blockchain development through the EatTheBlock course and thought I would document it through my learning processing. In this first article, it covers the basic introduction to blockchain on Ethereum Blockchain

Introduction to Blockchain

Blockchain is a special kind of database made up of blocks of data that are linked to each other by cryptography. Each block is made up of two bars:-

  • metadata i.e timestamp reference block cryptographic signature of all transactions.
  • transactions i.e how there are changes that transfer from account to account or interact with smart contract.

Blockchain is immutable i.e cannot modify data that is already on the blockchain. Blockchain network is decentralized and runs on a network of computers i.e nodes that form a blockchain network. The blockchain runs on a public network i.e made up of distributed databases that run on a private network.

In the mining process, miners add a new block to the blockchain by computing mathematical equations to add transactions to the block and earn a nonce in return.

Ethereum blockchain is a Proof-of-work algorithm that doesn't rely on a third party.

Pros: Ethereum includes immutability, decentralized, censorship resistance, secure through the proof-of-work algorithm.

Cons: It's slower than traditional databases, less scalable, can't use external API, expensive(gas fees), centralized transactions these are things blockchain technology is still trying to solve, a public network(no privacy).



Blockchain is used to build cryptocurrencies e.g bitcoin for the transfer of virtual currencies between different bitcoin addresses. Through transactions on can transfer bitcoin then block is created that links relevant transactions that managed by external addresses called wallets that has no limit of addresses. Bitcoin miners are rewarded and bitcoin was created to reduce inflation by limiting it to up to 21M bitcoins.


  • Bitcoin was the first blockchain use case, Vitalik Buterin created Ethereum in 2013 to fix some limitations that Bitcoin had. Ethereum is a second-generation blockchain capable of processing transactions and any arbitrary computations.
  • Ethereum blockchain technology is based on blocks i.e transactions, miners, proof-of-work, and addresses for transfer of ETH.
  • Development of smart contracts & decentralized applications on Ethereum blockchain
  • EVM(Ethereum Virtual Machine) runs programs i.e smart contracts
  • Ether: code multi-signature wallet several people without spending ETH.

Cryptographic Hashes

A cryptographic hash is used a lot in blockchain to identify a transaction. It is a fingerprint that uniquely identifies a piece of data it is informed of a gibberish string of data.

A cryptographic hash function is used to generate cryptographic hash for example SHA-2, SHA-3. A cryptographic hash function is a way function interesting for privacy.

Ethereum uses Keccak256 hashing function. As developers, we build on top of blockchain networks and we don't care about cryptographic functions we know that they generate cryptographic hashes by data.

You can read more about the difference between Keccak256 vs SHA-255

Ethereum Addresses

Addresses send and receive Ether. When Eth address is created a private key i.e a long number randomly and must be kept secret like a password.

Through Elliptic Curve Cryptography - ECC a secret private key generates a public key. Private key to public key is 128 characters. Private key to public key(128 char) to hash(64 char) to address(42) out of the hash take the last 40 key char then prefix 0x.


Give out an address to someone else to send Eth. They'll use a private key to send Ether to another address i.e sending transactions. Addresses are created by external software called wallets.


Wallets are software that manages addresses of different blockchain software. Wallets are installed and managed by users. There are different kinds of wallets i.e desktop apps, mobile apps, browser extensions like Metamask, Phantom, and physical wallets like Nano Ledger.

Functions of Wallets

  • generate addresses by randomly generating private keys then compute a public key then derive an ETH address (for most people one address therefore wallet can generate millions of addresses with a single private key through Hierarchical Deterministic (HD) Wallet i.e BIP32 and BIP39).

A single private key equals multiple ETH addresses. Two ETH addresses can't be bonded to a single private key. The possibility of having address coliation i.e operating same address is rear.

  • software wallet Metamask loses access to a wallet and private key. Copy private key/ mnemonic phrase to a wallet to piece of paper.


Transactions are signed packages of data that describe an action you want to take on the blockchain. There are some kinds of transactions:-

  • sending Eth to another address
  • execute smart contracts
  • create a new smart contract

Fields of transactions

from: your address or that of the smart contract(sender)
to: recipient address
gas: how much you're willing to pay miners to include your transaction on the blockchain
gas price: how much you're willing to pay miners to include your transaction on the blockchain
value: the amount of ETH to transfer from sender to recipient (in WEI, a denomination of ETH)
data: optional field to include arbitrary data

Lifecycle of Transaction

  • setup wallet to undertake the transaction
  • build transaction
  • sign transaction using private associated with the address
  • send the transaction to Ethereum blockchain
  • mine transaction: miners pick transactions and add them to the next block. the lifecycle of the transaction takes 15 seconds, once the miner adds to the block you'll see side effects of the transaction i.e an update on a blockchain explorer like EtherScan.

Smart Contracts

A smart contract is a small program that runs on the Ethereum blockchain. Smart contracts have some properties that make them different from other programs.

Pros of Smart Contracts

  • code is immutable i.e impossible to update and the same as when they're deployed
  • they're censorship resistant i.e no organization can control them not even the creators of the blockchain
  • no need for servers i.e can deploy on blockchain and forget about them.
  • very safe i.e if they have no bug it will be hard to be hacked
  • easy to transfer money for example Eth on Ethereum blockchain

    Cons of Smart Contract

  • expensive to run smart contracts i.e gas fees
  • very slow to interact with smart contract
  • limited capabilities i.e can store too much but no complicated computations hence the need for oracles.
  • no future scheduling
  • can't call API outside the blockchain

    How smart contracts work

    smart contracts have ETH addresses, some code, and data on the blockchain. Writing code of smart contracts using programming language i.e solidity on Ethereum blockchain.
pragma solidity 0.6.0;

contract simple storage {
     string public data;

   function set(string memory _data) public {
      data  = _data;

   function get() view public returnS(string memory) {
      return data;

the code is compiled into EVM(Ethereum Virtual Machine) i.e bytecode. EVM is part of ETH that runs smart contracts. It doesn't know how to run solidity but how to run elementary instructions i.e Bytecode Elementary Instructions - EVM. Once the smart contract is compiled and have bytecode create a smart contract on blockchain by creating a transaction with EVM, bytecode, and sending it to the blockchain the miner will pick transaction, and a smart contract will be created.

Interaction with smart contract by creating other transactions by specifying functions of smart contract to call functions to send ETH to other addresses through computation of functions which can call functions other smart contracts which can execute other smart contracts on the blockchain this is so powerful.


To send transactions on the Ethereum blockchain you need to pay fees i.e to reward miners' efforts.

  • the sender of the transaction pays for the gas fees i.e owner of the addresses that signed the transaction
  • the miner receives the transaction fee
  • the gas is the amount of the fees When you run a smart contract you run an elementary operation on the EVM at operation is computationally intensive which is quantifiable into gas e.g 20000 Gwei. Scores of all of these operations and have total gas cost that's converted into ETH.
    total cost(ETH) = gas cost * gas price
    how much you're willing for each unit of gas: if it's low miners might ignore your transaction if you need it to be transacted faster you could raise the price. You can check the average cost of gas on ETH Gas Station. The wallet determines the maximum gas/gas price you're willing to pay for a transaction.

Ethereum Accounts vs Contracts

There are two kinds of Ethereum accounts:-

  • Externally owned Accounts (EOA)
  • Contract Accounts


    Externally owned accounts are controlled by humans or by code outside the blockchain. They have a private key that allows signing transactions.

    Contract Accounts

    These are smart contract accounts. They don't have private keys. It is controlled by code and can't initiate transactions unlike EOA first sends transactions and put in motion a contract account. Contract accounts react to transactions according to the code of the smart contract

    Account Fields

    EOA and contract account have the same fields:-
  • Balance: balance if ETH associated with address both as ETH
  • Data: contract accounts its data of smart contract and for EOA it's empty
  • Code: for contract accounts, it's code of smart contract whereas for EOA it's empty
  • nonce: for EOA it's the number of transactions that were sent by address. A replay attack is prevented i.e sending the same transaction multiple times until funds run out of the address. For contract accounts, a nonce is the number of smart contracts that were created by this address.

Ethereum Network: local, public testnets and mainnets

There are several networks that are completely isolated from each other and have an impact on the others. The same address can be revised by several networks. The balance of ETH on one network is independent of the balance of ETH on another network i.e you can't transfer ETH between this different network. Each network has a different purpose.

Thanks for reading through my article this was an overall basis of the Ethereum Blockchain. The next article will cover decentralized applications, some use-cases, and their architecture. You can leave a comment or follow me on Twitter for more chat on blockchain and software development.

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