Introductory Concepts

Overview

Blockchain technology operates as a decentralized and secure system where transactions, smart contracts, and computational processes run without a central authority. This ensures privacy, security, and transparency across the network. Understanding the core components of blockchain—including transactions, blocks, the Ethereum Virtual Machine (EVM), and gas fees—is essential for developers, users, and potential investors looking to leverage blockchain technology effectively.

1. Decentralized Applications (dApps)

Decentralized Applications (dApps) are software applications that run on blockchain networks rather than centralized servers. They utilize smart contracts to execute logic without relying on intermediaries.

Key Characteristics of dApps:

• Decentralization: Data and records are stored on a blockchain rather than a centralized server.

• Transparency: Transactions and smart contract executions are publicly verifiable.

• Censorship Resistance: No single entity can control or shut down a dApp.

• Trustless Execution: Smart contracts ensure automated and reliable execution of logic.

Examples of dApps include decentralized finance (DeFi) platforms, NFT marketplaces, and blockchain-based games.

2. Accounts

Blockchain accounts are used to store and manage assets, execute transactions, and interact with smart contracts. The two main types of blockchain account models are:

EVM Account (Ethereum Virtual Machine Account)

EVM accounts are used in Ethereum and EVM-compatible blockchains. They are categorized into:

• Externally Owned Accounts (EOAs): Controlled by private keys; used by individuals to send transactions and interact with smart contracts.

• Contract Accounts: Smart contract addresses that execute code when triggered by an EOA or another contract.

EVM accounts are identified by a unique 20-byte address, and transactions require gas fees to execute operations on the network.

UTXO Account (Unspent Transaction Output Model)

The UTXO model is used in blockchains like Bitcoin. Instead of tracking balances, transactions consume previous outputs (UTXOs) and generate new outputs.

Key properties of UTXO accounts:

• Each transaction references previous unspent outputs.

• Transactions fully consume inputs and create new outputs.

• Wallets calculate balances based on unspent UTXOs.

This model enhances security and privacy by ensuring transactions do not rely on a centralized ledger of balances.

3. Transactions

Transactions are the fundamental operations on a blockchain. They represent value transfers, smart contract interactions, or other blockchain-related activities.

Transaction Structure:

A typical blockchain transaction consists of:

• Sender Address: The account initiating the transaction.

• Receiver Address: The destination account or contract.

• Amount: The value transferred (e.g., ETH, tokens).

• Gas Fees: Computational fees required to execute the transaction.

Transactions are verified by miners before being included in a block.

4. Blocks

A block is a collection of transactions that is cryptographically linked to previous blocks, forming the blockchain.

Components of a Block:

• Block Header: Includes metadata such as the previous block’s hash, timestamp, and nonce.

• Transactions: A list of validated transactions.

• Merkle Root: A cryptographic summary of all transactions in the block.

Blocks are added to the blockchain through consensus mechanisms like Proof of Work (PoW) ensuring security and immutability.

5. Ethereum Virtual Machine (EVM)

The Ethereum Virtual Machine (EVM) is a decentralized computation engine that executes smart contracts. It operates on nodes running Ethereum or EVM-compatible blockchains.

Key Features of the EVM:

• Smart Contract Execution: Runs code in a deterministic and trustless manner.

• Turing Complete: Can execute any computational logic.

• State Transition System: Modifies blockchain state based on transactions.

Opcodes

Opcodes (operation codes) are low-level machine instructions that the EVM understands. Some key opcodes include:

• PUSH, POP: Stack operations.

• CALL, DELEGATECALL: Smart contract interactions.

• SSTORE, SLOAD: Read/write storage operations.

EVM opcodes enable complex smart contract logic and decentralized computation.

6. Gas Fees

Gas fees are transaction costs required to execute operations on blockchains like Ethereum.

How Gas Fees Work:

• Gas Price: Measured in Gwei (a fraction of ETH), set by the user.

• Gas Limit: The maximum amount of gas a transaction can consume.

• Total Fee = Gas Used × Gas Price.

Gas fees help prioritize transactions and compensate network validators for computational resources. They fluctuate based on network congestion and demand.

Conclusion

This section provides an introductory overview of key blockchain concepts. Understanding these fundamentals is essential for developers, users, and businesses building on blockchain technology. Jump to next page to know each section in detail.