This article continues our exploration of the foundational layers of the Ethereum blockchain, building upon our previous exploration of EVM Opcodes, the "DNA of Ethereum Smart Contracts." If you haven't yet, you can revisit the world of opcodes here.
The internet is shifting from centralized platforms to decentralized ownership, powered by open protocols and user control. To truly understand this transformation, it’s crucial to grasp how Ethereum works under the hood.
In this article, we’ll dig into the key building blocks of the Ethereum network: transactions, Ethereum upgrades, nodes, validators, gas, and more, that are essential for anyone looking to build within or meaningfully engage with Web3.
Transactions: The Backbone of On-Chain Activity 🔗
At its heart, a transaction is an action initiated by a user or smart contract on the Ethereum blockchain. Whether you're sending ETH, calling a function in a smart contract, or deploying a new contract, you're creating a transaction. Think of it like writing a digital check, where every action is recorded and verifiable.
Each transaction contains crucial information:
- Nonce: Ensures uniqueness and prevents replay attacks.
- Gas Limit: Defines the maximum computational work a user is willing to pay for.
- Gas Fee: Sets the price per unit of gas.
- Recipient Address: The destination of the transaction.
- Value: The amount of Ether being transferred (denominated in wei, where 1 ETH = 10^18 wei).
- Optional Data: Information for smart contract interactions.
- Digital Signature: Verifies the sender's identity.
Transaction Types
Ethereum supports various transaction types, with newer ones designed for improved gas fee predictability and efficiency:
- Legacy Transactions
- Access List Transactions (EIP-2930)
- Dynamic Fee Transactions (EIP-1559)
Only Externally Owned Accounts (EOAs), controlled by humans with private keys, can initiate transactions. Contract Accounts, controlled by smart contract code, can only react to transactions.
Ethereum Upgrades and EIPs: Driving Innovation 💡
Ethereum is a constantly evolving network, with changes and upgrades proposed through Ethereum Improvement Proposals (EIPs). These community-driven proposals ensure the network remains adaptable, secure, and innovative.
Key EIPs that have shaped Ethereum include:
- EIP-1559: Introduced a dynamic fee structure with a base fee (burned, making ETH potentially deflationary) and an optional priority fee (a tip to validators). This replaced the manual gas pricing model, improving predictability.
- EIP-3675: Marked "The Merge," the monumental transition from Proof of Work (PoW) to Proof of Stake (PoS), drastically reducing Ethereum’s energy consumption by over 99%.
- EIP-2930: Introduced access lists to transactions, allowing users to specify which addresses and storage slots their transaction will access, which can reduce gas costs.
- EIP-4844 (Proto-Danksharding): A crucial step towards full sharding, it introduces temporary "data blobs" to help Layer 2 rollups scale more efficiently.
- EIP-4337: Enables account abstraction, allowing for smart contract-based wallets with advanced features like social recovery and gasless transactions, enhancing user experience.
Blocks, Nodes, and Validators: The Ethereum Ecosystem's Foundation 🏗️
Blocks
A block is a collection of validated transactions bundled together, akin to a digital receipt listing many transactions. Blocks are the fundamental units that form the blockchain, ensuring continuity and security.
Each block contains:
- A list of validated transactions.
- The hash of the previous block, linking them to form the chain.
- Metadata such as timestamps and gas usage.
When a block is created, it's added to the blockchain, and every node updates its copy of Ethereum. If a block were to change, the chain would break, which helps ensure Ethereum's security and trustworthiness.
Nodes
A node is any computer running Ethereum software, acting as a team member in the decentralized network. Nodes perform critical roles:
- They validate transactions and blocks.
- They relay information across the network.
- They store a copy of the entire blockchain's history.
- They run the EVM to process code.
Different types of nodes exist, including Full Nodes, Light Nodes, Archive Nodes, and Validator Nodes. Nodes are the backbone of the decentralized Ethereum ecosystem.
Clients: Execution and Consensus
Following the transition to Proof of Stake, Ethereum now utilizes two types of clients that run on nodes:
- Execution Clients (e.g., Geth, Nethermind): Handle transaction execution and maintain the network state.
- Consensus Clients (e.g., Lighthouse, Prysm): Coordinate validator actions and maintain consensus across the network.
This separation enhances performance, decentralization, and security.
Validators
Validators replaced miners in Ethereum's Proof of Stake system. They are essential for the health and security of the network. Their responsibilities include:
- Staking 32 ETH to participate in the network.
- Proposing and attesting to new blocks.
- Earning rewards for honest behavior or being penalized for dishonest actions.
Gas: The Fuel of Ethereum 🔥
Gas is the unit of measurement for the computational work required to process a transaction or run a smart contract on Ethereum. Think of gas as the "fuel" needed for any action on the network. Every operation, from transferring ETH to calling a function within a dApp, requires gas.
Why Pay Gas Fees?
Gas fees serve three crucial purposes:
- Reward Validators: They compensate validators for their work in securing the network.
- Prevent Spam and Misuse: By attaching a cost to operations, gas fees deter malicious actors from spamming the network with trivial or resource-intensive transactions.
- Prioritize Transactions: During periods of high network demand, transactions with higher priority fees are more likely to be processed faster.
How Are Gas Fees Calculated?
Since the EIP-1559 upgrade, Ethereum uses a more dynamic fee structure:
- Base Fee: A network-set fee that is burned (removed from circulation), contributing to ETH's deflationary mechanism.
- Priority Fee: An optional "tip" given to validators to incentivize faster transaction inclusion.
- Max Fee: The maximum total amount a user is willing to pay per unit of gas.
The formula for calculating the total transaction fee in Ethereum is:
Total Fee = Gas Used × (Base Fee + Priority Fee) Example
If a transaction uses 21,000 gas, the base fee is 50 gwei, and the priority fee is 5 gwei, then:
Total Fee = 21,000 × (50 gwei + 5 gwei) = 21,000 × 55 gwei = 1,155,000 gwei = 0.001155 ETH This system improves gas predictability and supports Ethereum’s economic sustainability. Gas isn't just a technical detail; it's central to how Ethereum operates and evolves.
Conclusion
Getting comfortable with concepts like transactions, EIPs, nodes, validators, and gas isn’t just technical homework — it’s how you start thinking like a Web3 builder. Alongside our look at opcodes, these fou ndations reveal how Ethereum really works under the hood. Understanding them isn’t optional if you want to build things that matter in this space.
Stay tuned as we continue our journey deeper into the world of Ethereum.
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