7. Describe the process that changes state of Ethereum blockchain (transactions, mining)

The State-Changing Process in Ethereum

Transactions

Definition

Transactions are the actions initiated by users or contracts to transfer Ether, interact with a contract, or deploy a new contract. They are the fundamental units of action in the Ethereum network.

Process

1. Initiation: A user or contract creates a transaction, which includes details like the recipient's address, amount of Ether to transfer, gas limit, and gas price.
2. Signing: The transaction is digitally signed using the sender's private key. This ensures authenticity and non-repudiation.
3. Broadcast: The signed transaction is broadcast to the Ethereum network.
4. Verification by Nodes: Ethereum nodes receive the transaction and verify its validity (e.g., correct signature, sufficient balance).
5. Transaction Pool: Valid transactions await in the transaction pool (mempool) to be picked up by miners.

Mining

Definition

Mining is the process where miners compete to add new blocks of transactions to the Ethereum blockchain. It involves solving a complex cryptographic puzzle, known as Proof of Work (PoW).

Process

1. Selection of Transactions: Miners select transactions from the pool, prioritizing those with higher gas fees.
2. Block Formation: Miners compile these transactions into a candidate block.
3. Solving the Proof of Work: Miners attempt to solve a cryptographic puzzle. The first to solve it gets the right to add their block to the blockchain.
4. Broadcast the Solution: The miner who solves the puzzle broadcasts this new block to the network.
5. Verification by Nodes: Other nodes verify the block (checking the PoW solution and the validity of transactions).
6. Adding to the Blockchain: Once verified, the block is added to the blockchain, updating the state of the Ethereum network.

The State-Changing Process in Ethereum 2.0

Transactions

Definition

Transactions in Ethereum 2.0 remain the primary means for users and contracts to interact with the Ethereum network, including transferring Ether, interacting with smart contracts, or deploying new contracts.

Process

1. Initiation: Transactions are created and include essential details like the recipient's address, amount of Ether, gas limit, and gas price.
2. Signing: The transaction is digitally signed with the sender's private key, ensuring security and authenticity.
3. Broadcast: The signed transaction is broadcast to the Ethereum network.
4. Verification by Nodes: Ethereum nodes verify the transaction's validity, including signature authenticity and the sender's account balance.
5. Transaction Pool: Valid transactions are placed in the transaction pool, waiting to be processed by validators.

Consensus Mechanism in Ethereum 2.0: Proof of Stake (PoS)

Definition:

With Ethereum 2.0, the network has shifted from PoW to a PoS consensus mechanism. In PoS, validators, rather than miners, are responsible for processing transactions and creating new blocks.

Process

1. Becoming a Validator: Users stake 32 ETH to become validators. This stake acts as collateral against dishonest behavior.
2. Selection of Transactions: Validators choose transactions from the pool. The inclusion of transactions is often influenced by the gas fees offered.
3. Block Proposal: A randomly chosen validator proposes a new block containing selected transactions.
4. Validation by Committee: Other validators act as a committee to verify the proposed block.
5. Adding to the Blockchain: Once a block is validated, it's added to the blockchain, updating the state of the network.
6. Rewards and Penalties: Validators receive rewards for proposing and validating blocks. Penalties (or slashing) are imposed for dishonest or lazy validation efforts.