Snehendu Roy
Snehendu Roy

Snehendu Roy

How does Ethereum eliminate the need of a central authority?

How does Ethereum eliminate the need of a central authority?

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Snehendu Roy
·Jan 9, 2022·

3 min read

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Table of contents

  • Introduction
  • What is Ether?
  • What is Gas?
  • How does this Ethereum Network work?
  • What is Smart Contract?


Ethereum is one of the product of the bockchain technology just like Bitcoin. Bitcoin is used only for transactions and are actually non-programmable but Ethereum is actually programmable and applications can be built in top of that.

But... Ethereum is a blockchain based software platform and it doesnot have any central authority. Then How does it opereate and how are the applications which are built on top of the ethereum netwok so scalable. You will understand the answer to this question in parts

What is Ether?

Often people use Ether and Ethereum inchangably where both of these are 2 different things. Now let's talk about Ether. Ether is the currency which is like Bitcoin and acts as a store of value or a form of payment.

If BITCOIN corresponds to digital gold then ETHER is like digital oil.

Since Ethereum network is divided; the dapps need to pay for the computing power to host and manage data. The amount of ether or network fees required is determined as gas fee.

What is Gas?

GAS fees are determined according to the bandwidth, space and the computational difficulty.

GAS = Bandwidth + Space + Computational Difficulty

Ether gas prices are in GWEI. 1 Ether = 10^(18) GWEI.

The higher the gas fees the faster the transaction. So, Gas fees are the fees that the people need to pay for the computing charges of a transaction in the Ethereum Network.

How does this Ethereum Network work?

The base layer of this network consists of a vast network of computer called nodes. These computers have softwares installed on them and they are connected to each other to run the ETHEREUM BLOCKCHAIN.

In this base layer of nodes, the transacition data is processed, validated, broadcasted and stored. These nodes do the computational work and they are paid in ethers to process the data. These ethers are the gas fees which they recieve as a reward for handling the conmputaional charges. The transaction data contains value in form of ethers and informatin in form of code.

This code can transmit data and trigger action into the software layer. The software layer is the layer above the hadware or the base layer. This software layer supports programming lanuages like Solidity, Rust etc. Using these languages, developers can write Smart contracts.

What is Smart Contract?

Smart Contract are lines of code which dictate the terms of a contract and controls and executes the lines of the contract.

Between the hardware and the software layer lies the smart contract. It can authorise transactions and carry out terms of contract and create a trustworthy decentralised system which does not require a central authority.

The hardware layer and software layer of computers and the computers which are connected to each other over a vast network together forms a super computer named as EVM or the Ethereum Virtual Machine.

Make sure to comment down for doubts

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