2. Describe Ethereum blockchain and its properties

Blockchain Properties¶

Governance: Managed by a majority of nodes without a central authority.
Communication: Nodes communicate directly with each other.
Transaction Process: A user initiates a transaction, which is then broadcasted to the network. Nodes validate and relay the transaction until it's added to a block.
Block Validation: Governing nodes establish criteria for what constitutes a valid block. To ensure transaction security and prevent double-spending, a transaction is considered fully confirmed after it's included in multiple (usually 6-7) blocks.

Nature: A type of ledger, maintaining a list of transactions across all nodes.
Block Structure: Each block has transactions and links to its predecessor.

Modification Restrictions: Blocks can't be retroactively altered without affecting subsequent blocks.
Network Control: Rewriting blockchain history requires control over 51% of the network's hashing power (e.g., Bitcoin).

Launch and Background: Created in 2015, conceptualized by Vitalik Buterin in 2013.
Features: Supports Solidity, has its cryptocurrency (Ether), and allows Turing-complete code.

Function: Executes transactions, specifically for Ethereum.
Complexity: Enhanced complexity due to smart contracts, which are programs running on the blockchain, allowing for more than just transaction processing.
Structure: Stores accounts, balances, and a mutable machine state.
Smart Contracts: Code that runs automatically when conditions are met, not changeable unless agreed upon by the network.

Purpose: A series of words used to recover a cryptocurrency wallet.
- These words generate an initial seed.
Protocol: Ethereum mnemonics adhere to the BIP39 standard.
Security: Crucial to store safely as it's the key to wallet recovery.

Usage: For developers to test upgrades and contracts before live deployment.
Types of Proof: Proof-of-Work (e.g., Ropsten, similar to Ethereum Mainnet) and Proof-of-Authority (e.g., Kovan, Rinkeby).
ETH Acquisition: Facilitated through mechanisms like faucets in testnets.

Full Nodes: Store the entire blockchain history, validating all blocks and transactions. Require significant storage and processing power.
Fast Nodes: Only keep recent blockchain history, less resource-intensive than full nodes.
Light Nodes: Provide blockchain access on-demand without storing the complete history. Ideal for devices with limited capacity.

Blockchain networks use various 'proof' mechanisms to reach consensus and validate transactions. Here are the most common types:

Mechanism: Requires miners to solve complex mathematical puzzles.
Usage: Utilized in networks like Bitcoin and Ethereum (though Ethereum plans to switch to Proof of Stake).
Pros: Highly secure.
Cons: Energy-intensive, leading to environmental concerns.

Mechanism: Validators are chosen to create new blocks based on the number of coins they hold and are willing to 'stake' as collateral.
Usage: Many newer blockchains and Ethereum's upcoming upgrade.
Pros: More energy-efficient than PoW.
Cons: Potential for centralization if wealth is concentrated.

Mechanism: Transactions and blocks are validated by approved accounts, known as 'validators.'
Usage: Often used in private networks or testnets like Kovan and Rinkeby.
Pros: Efficient and less computationally intensive.
Cons: Centralization risk, as validators have significant control.

Mechanism: Miners 'burn' or permanently destroy a portion of their cryptocurrency to obtain the right to mine new blocks.
Pros: Discourages wasteful energy expenditure.
Cons: Still incurs a cost (burnt coins), less common.

Mechanism: A hybrid of PoW and PoS.
Pros: Aims to combine the security of PoW with the energy efficiency of PoS.
Cons: Still an emerging concept, not widely adopted.