An Introduction to Ethereum and Smart Contracts: A Programmable Blockchain, Part 2

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An Introduction to Ethereum and Smart Contracts: A Programmable Blockchain, Part 2

Welcome back! In this article, we'll discuss topics such as State, Ethereum's cyrptocurrency, Smart Contracts, and the language designed to program Ethereum, Solidity.

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Welcome to Part 2 of this extended article. If you missed Part 1, check it out here


Although Ethereum brings general computations to the blockchain, it still makes use of a "coin." Its coin is called "ether," and, as any coin, it is a number that can be stored into account addresses and can be spent or received as part of transactions or block generation. To run certain transactions, users must spend Ether. But why is this the case?

Turing-complete language is a language that, by definition, can perform any computation. In other words, if there is an algorithm for something, it can express it. Ethereum scripts, called smart contracts, can thus run any computation. Computations are run as part of a transaction. This means each node in the network must run computations. Any machine capable of running a Turing-complete language (i.e. a Turing machine) has one problem: the halting problem. The halting problem essentially states that no Turing machine can determine beforehand whether a program run in it will either terminate (halt) or run forever. In other words, the only way of finding out if a piece of code loops forever or not is by running that code. This poses a big problem for Ethereum: no single node can get caught up in an infinite loop running a program. Doing so would essentially stop the evolution of the blockchain and halt all transactions. But there is a way around that.

Since computation is costly, and it is in fact rewarded by giving nodes that produce blocks ether (like Bitcoin), what better way to limit computations than by requiring ether for running them? Thus, Ethereum solves the problem of denial of service attacks through malicious (or bugged) scripts that run forever. Every time a script is run, the user requesting the script to run must set a limit of ether to spend in it. Ether is consumed by the script as it runs. This is ensured by the virtual machine that runs the scripts. If the script cannot complete before running out of ether, it is halted at that point. In Ethereum, the ether assigned to a script as a limit is known as gas (as in gasoline).

As ether represents value, it can be converted to other coins. Exchanges exist to trade ether for other coins. This gives ether a real money valuation, much like coins from Bitcoin.

Smart Contracts

Smart contracts are the key element of Ethereum. In them, any algorithm can be encoded. Smart contracts can carry arbitrary state and can perform any arbitrary computations. They are even able to call other smart contracts. This gives the scripting facilities of Ethereum tremendous flexibility.

Smart contracts are run by each node as part of the block creation process. Just like Bitcoin, block creation is the moment where transactions actually take place, in the sense that once a transaction takes place inside a block, global blockchain state is changed. Ordering affects state changes, and just like in Bitcoin, each node is free to choose the order of transactions inside a block. After doing so (and executing the transactions), a certain amount of work must be performed to create a valid block. In contrast to Bitcoin, Ethereum follows a different pattern for selecting which blocks get added to the valid blockchain. While in Bitcoin the longest chain of valid blocks is always the rightful blockchain, Ethereum follows a protocol called GHOST (in fact a variation thereof). The GHOST protocol allows for stale blocks, blocks that were computed by other nodes but that would otherwise be discarded since others have computed newer blocks, to be integrated into the blockchain, reducing wasted computing power and increasing incentives for slower nodes. It also allows for faster confirmation of transactions: whereas in Bitcoin blocks are usually created every 10 minutes, in Ethereum blocks are created within seconds. Much discussion has gone into whether this protocol is an improvement over the much simpler "fastest longest chain" protocol in Bitcoin, however, this discussion is out of scope for this article. For now, this protocol appears to run with success in Ethereum.

An important aspect of how smart contracts work in Ethereum is that they have their own address in the blockchain. In other words, contract code is not carried inside each transaction that makes use of it. This would quickly become unwieldy. Instead, a node can create a special transaction that assigns an address to a contract. This transaction can also run code at the moment of creation. After this initial transaction, the contract becomes forever a part of the blockchain and its address never changes. Whenever a node wants to call any of the methods defined by the contract, it can send a message to the address for the contract, specifying data as input and the method that must be called. The contract will run as part of the creation of newer blocks up to the gas limit or completion. Contract methods can return a value or store data. This data is part of the state of the blockchain.


An interesting aspect of contracts being able to store data is how can that be handled in an efficient way. If state is mutated by contracts, and the nature of the blockchain ensures that state is always consistent across all nodes, then all nodes must have access to the whole state stored in the blockchain. Since the size of this storage in unlimited in principle, this raises questions with regards to how to handle this effectively as the network scales. In particular, how can smaller and less powerful nodes make use of the Ethereum network if they can't store the whole state? How can they perform computations? To solve this, Ethereum makes use of something called Merkle Patricia Trees.

A Merkle Patricia Tree is a special kind of data structure that can store cryptographically authenticated data in the form of keys and values. A Merkle Patricia Tree with a certain group of keys and values can only be constructed in a single way. In other words, given the same set of keys and values, two Merkle Patricia Trees constructed independently will result in the same structure bit-by-bit. A special property of Merkle Patricia Trees is that the hash of the root node (the first node in the tree) depends on the hashes of all sub-nodes. This means that any change to the tree results in a completely different root hash value. Changes to a leaf node cause all hashes leading to the root hash through that and sister branches to be recomputed. What we have described is, in fact, the "Merkle" part of the tree, the "Patricia" part comes from the way keys are located in the tree. Patricia trees are tries where any node that is an only child is merged with its parent. They are also known as "radix trees" or "compact prefix trees." A trie is a tree structure that uses prefixes of the keys to decide where to put each node.

The Merkle Patricia Trees implemented in Ethereum have other optimizations that overcome inefficiencies inherent to the simple description presented here.

Simplified Merkle Patricia Tree

For our purposes, the Merkle aspect of the trees is what matters in Ethereum. Rather than keeping the whole tree inside a block, the hash of its root node is embedded in the block. If some malicious node were to tamper with the state of the blockchain, it would become evident as soon as other nodes computed the hash of the root node using the tampered data. The resulting hash would simply not match with the one recorded in the block. At this point, we should find ourselves asking a big question: why not simply take the hash of the data? Merkle Patricia Trees are used in Ethereum for a different, but very important reason: most of the time, nodes do not need a full copy of the whole state of the system. Rather, they want to have a partial view of the state, complete enough to perform any necessary computations for newer blocks or to read the state from some specific address. Since no computations usually require access to the whole state stored in the blockchain, downloading all state would be superfluous. In fact, if nodes had to do this, scalability would be a serious concern as the network expanded. To verify a partial piece of the state at a given point, a node need only download the data necessary for a branch of the tree and the hashes of its siblings. Any change in the data stored at a leaf would require a malicious node to be able to carry a preimage attack against the hashing algorithm of the tree (to find the values for the siblings that combined with the modified data produce the same root hash as the one stored in the block).

A Partial Simplified Merkle Tree

All of this allows efficient operations on the state of the blockchain, while at the same time keeping its actual (potentially huge) data separate from the block, still the centerpiece of the security scheme of the blockchain.


Much like Bitcoin, the blockchain can be used to find the state of the system at any point in time. This can be done by replaying each transaction from the very first block up to the point in question. However, in contrast to Bitcoin, most nodes do not keep a full copy of the data for every point in time. Ethereum allows for old data to be pruned from the blockchain. The blockchain remains consistent as long as the blocks are valid, and data is stored outside of the blocks, so technically it is not required to verify the proof-of-work chain. In contrast to Bitcoin, where to find the balance of an account a node must replay all transactions leading up to that point, Ethereum stores state by keeping the root hash of the Merkle Patricia Tree in each block. As long as the data for the last block (or any past blocks) is available, future operations can be performed in the Ethereum network. In other words, it is not necessary for the network to replay old transactions, since their result is already available. This would be akin to storing the balance of each account in each block in the Bitcoin network.

Partial historical state in the blockchain

There are, however, nodes that store the whole copy of the historical state of the blockchain. This serves for historical and development purposes.

Solidity and a Sample Smart Contract

Smart contracts run on the Ethereum Virtual Machine, which in turn runs on each node. Though powerful, the Ethereum Virtual Machine works at a level too low to be convenient to directly program (like most VMs). For this reason, several languages for writing contracts have been developed. Of these, the most popular one is Solidity.

Solidity is a JavaScript-like language developed specifically for writing Ethereum Smart Contracts. The Solidity compiler turns this code into Ethereum Virtual Machine bytecode, which can then be sent to the Ethereum network as a transaction to be given its own address.

To better understand Solidity, let's take a look at one example:

pragma solidity ^0.4.2;

contract OwnerClaims {

    string constant public defaultKey = "default";

    mapping(address => mapping(string => string)) private owners;

    function setClaim(string key, string value) {
        owners[msg.sender][key] = value;

    function getClaim(address owner, string key) constant returns (string) {
        return owners[owner][key];

    function setDefaultClaim(string value) {
        setClaim(defaultKey, value);

    function getDefaultClaim(address owner) constant returns (string) {
        return getClaim(owner, defaultKey);


This is a simple owner claims contract. An owner claims contract is a contract that lets any address owner record arbitrary key-value data. The nature of the blockchain certifies that the owner of a certain address is the only one who can set claims in connection to that address. In other words, the owner claims contract allows anyone who wants to perform transactions with one of your addresses to know your claims. For instance, you can set a claim called "email," so that anyone that wants to perform a transaction with you can get your email address. This is useful since an Ethereum address is not bound to an identity (or email address), only to its private-key.

The contract is as simple as possible. First, there is the contract keyword that signals the beginning of a contract. Then comes OwnerClaims, the contract name. Inside the contract, there are two types of elements: variables and functions.

Among variables, there are two types as well: constants and writable variables. Constants are just that: they can never be changed. Writable variables, however, save state in the blockchain. It is these variables that encode the state saved in the blockchain, nothing more.

Functions are pieces of code that can either read or modify state. Read-only functions are also marked as constant in the code and do not require gas to run. On the other hand, functions that mutate state require gas, since state transitions must be encoded in new blocks of the blockchain (and these cost work to produce).

Values returned from functions are returned to the caller.

The owners variable in our contract is a map, also known as associative array or dictionary. It matches a key to a value. In our case, the key is an address. Addresses in Ethereum are the identifiers of either normal accounts (usually managed by users) or other contracts. When an owner of an address decides to set a claim, it is this mapping from address to a claim that we are interested in. In fact, we are not simply mapping an address to a claim, but to a group of key-values that constitute a group of claims (in the form of another map). This is convenient because an address owner might want to make several details about himself known to others. In other words, address owners might want to make their email address and their cell phone number available. To do so, they might create two claims: one under the "email" key, and the other under the "phone" key.

The contract leaves it to each owner to decide what entries to create, so the names of the keys are not known in advance. For this reason, a special "default" key is available, so any reader might know at least one claim if he doesn't know what keys are available. In truth, this key is also in place for a different reason: Solidity does not make it practical to return bulk data from functions. In other words, it is not easy to return all claims connected to an address in a single function call. In fact, the mapping type does not even have an iteration operation (although one can be coded if needed), so it is not possible to know what keys are inside a mapping. It is left as an exercise for the reader to find ways to improve this if needed.

Next Up

Thanks for reading! Tune in tomorrow when we'll discuss some current and potential uses for this technology.

blockchain, cryptocurrency, ethereum, security, smart contracts

Published at DZone with permission of Sebastián Peyrott , DZone MVB. See the original article here.

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