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Ethereum Node Incentive

How Does Ethereum Work,anyway?

How Does Ethereum Work,anyway?

Odds are youve heard about the Ethereum blockchain, whether or not you know what it is. Its been in the news a lot lately, including the cover of some major magazines, but reading those articles can be like gibberish if you dont have a foundation for what exactly Ethereum is. So what is it? In essence, a public database that keeps a permanent record of digital transactions. Importantly, this database doesnt require any central authority to maintain and secure it. Instead it operates as a trustless transactional system a framework in which individuals can make peer-to-peer transactions without needing to trust a third party OR one another. Still confused? Thats where this post comes in. My aim is to explain how Ethereum functions at a technical level, without complex math or scary-looking formulas. Even if youre not a programmer, I hope youll walk away with at least better grasp of the tech. If some parts are too technical and difficult to grok, thats totally fine! Theres really no need to understand every little detail. I recommend just focusing on understanding things at a broad level. Many of the topics covered in this post are a breakdown of the concepts discussed in the yellow paper. Ive added my own explanations and diagrams to make understanding Ethereum easier. Those brave enough to take on the technical challenge can also read the Ethereum yellow paper. A blockchain is a cryptographically secure transactional singleton machine with shared-state. [1] Thats a mouthful, isnt it? Lets break it down. Cryptographically secure means that the creation of digital currency is secured by complex mathematical algorithms that are obscenely hard to break. Think of a firewall of sorts. They make it nearly impossible to cheat the system (e.g. create fake transactions, erase tr Continue reading >>

Should Full Bitcoin Nodes Get Rewarded Like Miners?

Should Full Bitcoin Nodes Get Rewarded Like Miners?

Should Full Bitcoin Nodes Get Rewarded like Miners? The Bitcoin network is a large operation, and many people do not understand what makes the engine run under the hood. Mining is a concept that takes a little bit longer for some to learn how miners confirm transactions, find blocks and secure the network. Another important, intricate part of the system is nodes. Miners processing transactions and keeping the blockchain going needs to be relayed by a network of nodes. Also read: Bitcoin Classic Nodes Surge Following Beta 2 Release The permissionless distributed ledger used in Bitcoin is a chain of communication , which require nodes to validate actions within its protocol. They are essential to the ecosystem just as much as miners who are finding blocks and processing the data. There are currently 5,796 nodes acting as connectors and redistribution points that fully confirm transactions and blocks. Bittorrent is a protocol that is very similar to how the digital currency operates. The system is a giant collaboration of home computers, servers, and hosts acting as nodes to help lighten the weight of peer-to-peer file sharing. This helps the Bittorrent network become resilient from attack and speed up its processes. In the Bitcoin network, the actions of home computers and servers hosting full nodes also protects the currency from a single point of failure. Running a Bitcoin node comes with a few requirements and also some costs at times if runningit continuously. This includes the electricity to operate the host device the blockchain is kept on and the cost of a constant internet connection running the software. Any desktop can perform the function of hosting a node like Windows, Mac, and various Linux operating systems. It can also be held on smaller devices that are c Continue reading >>

An Introduction To Ethereum And Smart Contracts: A Programmable Blockchain

An Introduction To Ethereum And Smart Contracts: A Programmable Blockchain

An Introduction to Ethereum and Smart Contracts: a Programmable Blockchain Bitcoin took the world by surprise in the year 2009 and popularized the idea of decentralized secure monetary transactions. The concepts behind it, however, can be extended to much more than just digital currencies. Ethereum attempts to do that, marrying the power of decentralized transactions with a Turing-complete contract system. In this post we will take a closer look at how Ethereum works and what makes it different from Bitcoin and other blockchains. Read on! In our previous post , we took a closer look at what blockchains are and how they help in making distributed, verifiable transactions a possibility. Our main example was Bitcoin: the world's most popular cryptocurrency. Millions of dollars, in the form of bitcoins, are traded each day, making Bitcoin one of the most prominent examples of the viability of the blockchain concept. Have you ever found yourself asking this question: "what would happen if the provider of this service or application disappeared?" If you have, then learning about Ethereum can make a big difference for you. Ethereum is a platform to run decentralized applications: applications that do not rely on any central server. In this post we will explore how Ethereum works and build a simple PoC application related to authentication. A blockchain is a distributed, verifiable datastore. It works by marrying public-key cryptography with the nobel concept of the proof-of-work. Each transaction in the blockchain is signed by the rightful owner of the resource being traded in the transaction. When new coins (resources) are created they are assigned to an owner. This owner, in turn, can prepare new transactions that send those coins to others by simply embedding the new owner Continue reading >>

What Is Ethereum? Ethereum Homestead 0.1 Documentation

What Is Ethereum? Ethereum Homestead 0.1 Documentation

Ethereum is an open blockchain platform that lets anyone build and use decentralized applications that run on blockchain technology. Like Bitcoin, no one controls or owns Ethereum it is an open-source project built by many people around the world. But unlike the Bitcoin protocol, Ethereum was designed to be adaptable and flexible. It is easy to create new applications on the Ethereum platform, and with the Homestead release, it is now safe for anyone to use those applications. Blockchain technology is the technological basis of Bitcoin, first described by its mysterious author Satoshi Nakamoto in his white paper Bitcoin: A Peer-to-Peer Electronic Cash System, published in 2008. While the use of blockchains for more general uses was already discussed in the original paper, it was not until a few years later that blockchain technology emerged as a generic term. A blockchain is a distributed computing architecture where every network node executes and records the same transactions, which are grouped into blocks. Only one block can be added at a time, and every block contains a mathematical proof that verifies that it follows in sequence from the previous block. In this way, the blockchains distributed database is kept in consensus across the whole network. Individual user interactions with the ledger (transactions) are secured by strong cryptography. Nodes that maintain and verify the network are incentivized by mathematically enforced economic incentives coded into the protocol. In Bitcoins case the distributed database is conceived of as a table of account balances, a ledger, and transactions are transfers of the bitcoin token to facilitate trustless finance between individuals. But as bitcoin began attracting greater attention from developers and technologists, novel p Continue reading >>

Why Would Anyone Want To Run A Full Iota Node? Why Do The Founders Assume Growing Numbers Of People Will Install Enough Nodes To Support The Growth Of The Tangle? - Quora

Why Would Anyone Want To Run A Full Iota Node? Why Do The Founders Assume Growing Numbers Of People Will Install Enough Nodes To Support The Growth Of The Tangle? - Quora

Why would anyone want to run a full IOTA node? Why do the founders assume growing numbers of people will install enough nodes to support the growth of the tangle? Answered Dec 23, 2017 Author has 1.4k answers and 5m answer views This has actually been an intriguing offshoot of blockchains over the last few years. As most of you know, the main incentive for people to mine on any blockchain was to collect mining rewards and transaction fees. Running a full node, on the other hand wasnt incentivized at all. If you run a full node (that is, have a full copy of the blockchain among other things), you actually dont get any reward for that. (This, of course, has exceptions. Dash developed the concept of Masternodes after seeing how few full nodes existed on the Bitcoin blockchain). The reason for running a full node on Ethereum or Bitcoin is exactly the same reason why anyone would run an exit node on the Tor network: they believe in the network, what it stands for and want to support it in some small way. Tor is one of the largest decentralized networks in the world, and their nodes get paid exactly nothing to operate. So a few blockchain concepts have actually experimented with having no incentive to run validators. One such blockchain is Stellar Lumens, which has no mining reward or transaction fees paid to validators. Another example is IOTA. Because of the example of organizations like Tor, IOTA has faith that their users will take the time to run validators... and I think theyre right. A lack of validators may become a problem, but cloud computing and the big wallets of some of these foundations/HODLers make it so that they can create geographically diverse validators very quickly. I think the problem is different: having no reward mechanism will create centralization a Continue reading >>

On Public And Private Blockchains

On Public And Private Blockchains

Over the last year the concept of private blockchains has become very popular in the broader blockchain technology discussion. Essentially, instead of having a fully public and uncontrolled network and state machine secured by cryptoeconomics (eg. proof of work, proof of stake), it is also possible to create a system where access permissions are more tightly controlled, with rights to modify or even read the blockchain state restricted to a few users, while still maintaining many kinds of partial guarantees of authenticity and decentralization that blockchains provide. Such systems have been a primary focus of interest from financial institutions, and have in part led to a backlash from those who see such developments as either compromising the whole point of decentralization or being a desperate act of dinosaurish middlemen trying to stay relevant (or simply committing the crime of using a blockchain other than Bitcoin ). However, for those who are in this fight simply because they want to figure out how to best serve humanity, or even pursue the more modest goal of serving their customers, what are the practical differences between the two styles? First, what exactly are the options at hand? To summarize, there are generally three categories of blockchain-like database applications: Public blockchains: a public blockchain is a blockchain that anyone in the world can read, anyone in the world can send transactions to and expect to see them included if they are valid, and anyone in the world can participate in the consensus process the process for determining what blocks get added to the chain and what the current state is. As a substitute for centralized or quasi-centralized trust, public blockchains are secured by cryptoeconomics the combination of economic incentive Continue reading >>

How Will Ethereum Scale?

How Will Ethereum Scale?

Like other public blockchains, ethereumintends to support as many users as it can. The problem is that, today, we don't really know the limits of theplatform. Because of a hard-coded limit on computation per block, the ethereum blockchain currently supports roughly 15 transactions per second compared to, say, the 45,000 processed by Visa. This limitation of ethereum and other blockchain systems has long been the subject of discussion by developers and academics. While ethereum developers might like to highlight how the flexible smart contract platform differs from bitcoin, for example, it isn't unique in regards to scalability. As disappointing as that might sound, there's hope in proposed solutions that havent made it into the official software yet. Ethereum and bitcoin use a combination of technical tricks and incentives to ensure that they accurately record who owns what without a central authority. The problem is, its tricky to preserve this balance while also growing the number of users (especially to the point where average people can use the system to purchase coffee or run applications). That's because ethereum depends on a network of 'nodes', each of which stores the entire ethereum transaction history and the current 'state'of account balances, contracts and storage. This is obviously a cumbersome task, especially since the total number of transactions is increasing approximately every 1012 seconds with each new block. The worry is that, if developers raise the size of each block to fit more transactions, the data that a node will need to store will grow larger effectively kicking people off the network. If each node grows large enough, only a few large companies will have the resources to run them. Despite the inconvenience, running a full node is the best w Continue reading >>

You Really Should Run A Bitcoin Full Node: Here's Why

You Really Should Run A Bitcoin Full Node: Here's Why

You Really Should Run a Bitcoin Full Node: Here's Why On day one of the 2017 MIT Bitcoin Expo , Sia Co-Founder David Vorick , who has contributed to Bitcoin Core , gave a presentation on the important role played by full nodes in digital currency networks. In his view, economically relevant full nodes are the ones that have voting power (for lack of a better term) in attempted hard-forking changes to the rules of Bitcoin. Early in his talk, Vorick focused on the general role played by full nodes on the network. Full nodes validate transactions on the Bitcoin network, he stated. Bitcoin has this longest-chain rule where the chain with the most work in it is the one that everybody follows, except this chain also has to follow all of the rules that the network has. The full nodes are the ones [that] check that the chain follows the rules, and if a chain doesnt follow the rules, it doesnt matter how much hashrate is behind it, that chain is ignored. According to Vorick, of all the different types of Bitcoin users, full nodes are the only ones that check that the rules are followed. Those who run an SPV node or use some sort of web wallet are putting their trust in others to verify that certain rules are being followed correctly on the most-work chain. Theyre faster, Vorick said in terms of SPV nodes. They download all the headers. They make sure that they are on the chain with the most work, but they dont actually check that the chain with the most work is legal or is valid. Vorick went on to state that SPV nodes are essentially betting that the rest of the network will sufficiently handle the validation process for them. SPV nodes just blindly have faith in the broader network to do this process that makes sure that the longest chain is always valid, Vorick continued. The Continue reading >>

Kudos Token Incentives To Skedaddle Through Ethereums Public Blockchain

Kudos Token Incentives To Skedaddle Through Ethereums Public Blockchain

Thank you sire, Ill give you a top token rating, rest assured. Might be something you say after a pleasant journey in a few years time if Kudos manages to execute on its new vision of automatic monetary rewards, based not on voluntary tipping, but on star ratings. Theres a big problem in some parts of the customer facing service economy, the company says. Discrimination. Both ways. Customers tend to be a bit prejudicial, but so do the service providers, who tend to be far nicer to individuals they believe are wealthy, and thus may leave bigger tips, according to the start-up. They want to change that by, in a way, taking away direct monetary incentives from the experience, replacing them with more indirect ratings in a complex triangular system. As the service economy has boomed, the majority of the resulting wealth has remained centralized in the hands of a select few: platform owners, developers and their investors. Contractors and workers still struggle to make ends meet, the start-up charges in their prospectus whitepaper . Their idea is to replace those monopolies with potentially a new monopoly of their own. With the start-up stating: Long gone are the days when startup companies kept their data servers in storage closets and built their websites from scratch. As WordPress, Squarespace and others did for building websites, the Kudos protocol will make building rewards simple and affordable using one unified token. The idea is simple and intriguing with potential uses in many cases, encapsulated in a fairly short section of the paper which basically distills it all: We presume, because the whitepaper doesnt detail it, that businesses initially buy an x amount of tokens through the Kudos platform where they set certain they call them incentives, but a more familiar Continue reading >>

Rolling Your Own Proof-of-authority Ethereum Consortium

Rolling Your Own Proof-of-authority Ethereum Consortium

Rolling your own Proof-of-Authority Ethereum consortium How do you set up a private Ethereum chain and what considerations are there when doing so?A private chain can potentially have huge advantages over public ones, transactions are cheaper, latencies are lower and the level of control you have is higher.Why would you pick Proof-of-Authority over the other consensus methods out there? One of the largest flaws in the Ethereum protocol (and other Proof-of-Work based cryptocurrencies) is that any attacker with 51% or more of the mining resources (mining hashrate) will be in control of the network.While the blockchain is immutable and recorded blocks cannot be changed this attacker could potentially do other things such as making sure no legitimate traffic comes through (a denial of service attack).Considering anyone with the same genesis block could join your network this type of attack is very feasible and likely to hit you sooner or later. There is also the issue of power usage (Bitcoin now uses the same amount of electricity as a small country ).Ethereum has been working on alternatives to Proof-of-Work such as Proof-of-Stake which also solves the power issue but its more aimed at public networks. For a private network Proof-of-Work simply does not make sense. Ethereum will soon transition to a Proof-of-Stake consensus algorithm which resolves some of the issues with Proof-of-Work for public networks.Someone who wants to be a validator (miner) will deposit a number of ether into a smart contract and if a validator is deemed to be malicious the network simply locks this ether away. Because there is no race to solve hard mathematical problems there is less incentive to issue new coins all the time, a validator will instead get their ether from transaction fees.It does Continue reading >>

Can Incentive Be Provided For Non-mining Ethereum Nodes?

Can Incentive Be Provided For Non-mining Ethereum Nodes?

Can incentive be provided for non-mining Ethereum nodes? Setting up a full-time mining rig is a tremendous resource commitment - and you either have to be all-in or go home if you want to ever actually see any return (yeah, I know - I'm ignoring syndicate/collective mining). On the other hand, running a full node that doesn't mine is really not that expensive a thing to do - and provides all of the transaction validation, consensus voting, and block propagation that a mining node does. For developers (and perhaps for users who just, well, use Ethereum a lot) there is a direct benefit to running such a node, but I wonder if there could be some way to provide incentive for other people to run these sorts of nodes. When I think about it I'm not seeing anything obvious and/or elegant. I guess a corollary is whether or not it would even be a good idea. Seems to me the more nodes the better, though. Currently there is indeed no monetary incentive to run a full node. It's done by enthusiasts that just do it for the fun of it, or by projects who are building on top of Ethereum and need access to network data (also wallets run it at the moment because light clients aren't done yet, they will certainly switch away s soon as they can). The inherent problem with light nodes is that they leach the network: why run a full node when you can get away with a light node? To address this we're considering a model where light nodes actually pay for data they request from full nodes. If we can work out a meaningful model for this, then this would be the incentive for people to run full nodes: they can serve light nodes, and be compensated for it. Also we're working on Swarm, which would allow anyone to rent out their disk capacity for others to use as a distributed file system, which could Continue reading >>

Full Node - Bitcoin Wiki

Full Node - Bitcoin Wiki

Any computer that connects to the Bitcoin network is called a node. Nodes that fully enforce all of the rules of Bitcoin are called full nodes. Most nodes on the network are lightweight nodes instead of full nodes, but full nodes form the backbone of the network. The latest version of bitcoin full node software can be found on the bitcoin.org site . Full nodes download every block and transaction and check them against Bitcoin's core consensus rules. Here are examples of consensus rules, though there are many more: Blocks may only create a certain number of bitcoins. (Currently 12.5 BTC per block.) Transactions must have correct signatures for the bitcoins being spent. Transactions/blocks must be in the correct data format. Within a single block chain , a transaction output cannot be double-spent. If a transaction or block violates the consensus rules, then it is absolutely rejected, even if every other node on the network thinks that it is valid. This is one of the most important characteristics of full nodes: they do what's right no matter what. For full nodes, miners actually have fairly limited power: they can only reorder or remove transactions, and only by expending a lot of computing power. A powerful miner is able to execute some serious attacks , but because full nodes rely on miners only for a few things, miners could not completely change or destroy Bitcoin. Nodes that have different consensus rules are actually using two different networks/currencies. Changing any of the consensus rules requires a hard fork , which can be thought of as creating a new currency and having everyone move to it. Consensus rules are different from policy rules, which specify how a node or miner prioritizes or discourages certain things. Policy rules can be changed freely, and dif Continue reading >>

Blockchains Dont Scale. Not Today, At Least. But Thereshope.

Blockchains Dont Scale. Not Today, At Least. But Thereshope.

Blockchain Engineer. I have a passion for understanding things at a fundamental level and sharing it as clearly as possible. Blockchains dont scale. Not today, at least. But thereshope. The first Bitcoin paper was first released in 2008. My excitement about the potential of blockchain technology has been building ever since. Decentralized digital currency, once just a far-fetched goal, is finally making inroads into the mainstream. While thats exciting on its own merit, Im personally most excited about the potential for decentralized applications. Financial exchanges, prediction markets, and asset management platforms all carry enormous potential. The trustless systems supporting them are no less intriguing; identity verification systems, smart property, censorship resistant social platforms, and autonomous structures and governance models like DAOs . The most disruptive use cases probably havent even been dreamt up yet. But this dream still remains a dream for the foreseeable future while a few early enthusiasts and entrepreneurs are experimenting with building such applications, theres still a big missing piece that prevents us from seeing these applications come to fruition: scalability. Blockchains, as it stands today, are limited in their ability to scale. Thats not to say that this will be the case forever, but its definitely true today. In fact, Id argue its one of the biggest technological barriers we face with blockchain technology today. Its quickly become a very active area of research among researchers in the community and cryptocurrency in general. Currently, all blockchain consensus protocols (eg. Bitcoin, Ethereum, Ripple, Tendermint) have a challenging limitation: every fully participating node in the network must process every transaction. Recall that Continue reading >>

Proof Of Stake Faq Ethereum/wiki Wiki Github

Proof Of Stake Faq Ethereum/wiki Wiki Github

See A Proof of Stake Design Philosophy for a more long-form argument. No need to consume large quantities of electricity in order to secure a blockchain (eg. it's estimated that both Bitcoin and Ethereum burn over $1 million worth of electricity and hardware costs per day as part of their consensus mechanism). Because of the lack of high electricity consumption, there is not as much need to issue as many new coins in order to motivate participants to keep participating in the network. It may theoretically even be possible to have negative net issuance, where a portion of transaction fees is "burned" and so the supply goes down over time. Proof of stake opens the door to a wider array of techniques that use game-theoretic mechanism design in order to better discourage centralized cartels from forming and, if they do form, from acting in ways that are harmful to the network (eg. like selfish mining in proof of work). Reduced centralization risks, as economies of scale are much less of an issue. $10 million of coins will get you exactly 10 times higher returns than $1 million of coins, without any additional disproportionate gains because at the higher level you can afford better mass-production equipment. Ability to use economic penalties to make various forms of 51% attacks vastly more expensive to carry out than proof of work - to paraphrase Vlad Zamfir, "it's as though your ASIC farm burned down if you participated in a 51% attack". How does proof of stake fit into traditional Byzantine fault tolerance research? There are several fundamental results from Byzantine fault tolerance research that apply to all consensus algorithms, including traditional consensus algorithms like PBFT but also any proof of stake algorithm and, with the appropriate mathematical modeling, pr Continue reading >>

Incentives For Running Full Ethereum Nodes

Incentives For Running Full Ethereum Nodes

Incentives for running full Ethereum nodes Maybe we could use a payment channel for buying state reads from full nodes, just like we need to pay gas for writing in ethereum state, full nodes could earn gas for providing the response to nodeless clients. We could have some judge system, like iExec is doing for offchain computation, so if one node sends invalid (signed) response, other could protest and information could be checked inchain (or through judges), if it was indeed a bad response than signer of bad response is penalized somehow (maybe a stake is required for participating). In the scheme proposed though it seems that a block proposer will have less incentive to include fake-self-made-easy-to-validate transaction because she will not get paid transaction fees. It seems to be a tradeoff - if you include a fake transaction, than it is easy to validate but you will not get paid transaction fees, only the block reward, because you are essentially paying transaction fees to yourself. True, but the block reward is still a significant incentive as of the moment3 ETH is not a petty amount. I dont know what miners receive on average for transaction fees at the moment. Micah I made an EIP here with your proposal as a potential option. I suggest that we have discussion specifically about rewarding clients and full nodes for validating transactions over there, and other incentive ideas such as state channel payments to light client serves can continue to be had here. I suggested payment channels but could be done without it, but I think would be smart to use them, because the answer of the call will also not be safe, so both things relay on a judging mechanism, where for payments we use timelocks as security and the answer we use a verifier contract (that could be able to Continue reading >>

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