The Basics of Ethereum Blockchain Smart Contracts

Introduction to Ethereum

Blockchain is a decentralized, distributed database. Ethereum leverages blockchain's fairness and transparency to develop smart contracts on the blockchain system, expanding its use beyond simple digital currency transactions. This enables companies, organizations, or individual developers to create diversified services on a traceable, tamper-proof, and highly trustworthy system.

Ethereum is a blockchain platform where users can write and publish programs (smart contracts) to develop diverse applications. Many international teams have already utilized smart contracts to build services (e.g., Slock.it, SkinCoin). In Ethereum, smart contracts are processed by a decentralized virtual machine called the Ethereum Virtual Machine (EVM). The concept was first proposed by programmer Vitalik Buterin in 2013–2014, and the Ethereum Public Chain launched in 2015.

Key Features of Ethereum

Ethereum Virtual Machine (EVM)

• Ethereum is a blockchain platform where users can write/publish programs (smart contracts).
• Smart contract programs and their execution inputs/outputs are stored on the blockchain, accessible to anyone.

• Smart contracts run on the EVM, analogous to Java programs running on the JVM.

  • Smart contracts are compiled into EVM bytecode, executed by the EVM.
  • EVM is Turing complete.

Why Use EVM?

1. Universality: Ethereum has thousands of nodes with varying hardware/software environments. EVM ensures a consistent execution environment across all nodes.
2. Security: Malicious programs or vulnerabilities could harm nodes. EVM acts as a sandbox, isolating smart contracts from the main system (e.g., OS). Smart contracts can only interact with other contracts, not filesystems or networks.

Gas Mechanism

To prevent infinite loops or attacks, EVM uses a gas mechanism:

• Users prepay gas before execution.
• Each instruction consumes a fixed amount of gas.
• Excess gas is refunded if execution completes.
• If gas runs out mid-execution, the transaction is reverted, and gas is paid to validators.

Smart Contracts Explained

Smart contracts are programs stored on the blockchain. As noted by The Economist, they enable low-cost interactions between organizational databases and allow users to create sophisticated agreements. A key application is forming decentralized autonomous organizations (DAOs), reducing repetitive manual tasks.

Industry Applications

• IoT: Slock.It’s smart locks auto-open upon payment (e.g., EV charging, rental access).
• Energy Grids: TransActive Grid enables peer-to-peer energy trading.
• Securities: Streamlines trading steps and enables fast settlements.
• Copyright: Ujo Music lets artists publish music via smart contracts, with direct payments.
• Crowdfunding: The Rudimental supports blockchain-based fundraising for artists.
• Leasing: DocuSign & Visa are prototyping smart contract payments.

👉 Explore decentralized finance (DeFi) applications

Smart Contracts and Ethereum Nodes

Developers use Ethereum’s console or APIs (e.g., web3.js, JSON-RPC) to build DApps (Decentralized Applications), integrating smart contracts into mobile/web interfaces.

Solidity: Ethereum’s Smart Contract Language

Solidity is a primary language for Ethereum smart contracts. After coding, contracts are compiled into bytecode and deployed on-chain.

Development Steps

1. Write Code
   Example contract with a uint variable and set/get functions:

   contract SimpleStorage {
     uint storedData;
     function set(uint x) { storedData = x; }
     function get() constant returns (uint) { return storedData; }
   }

2. Compile

   • Use online tools like Ethereum’s Solidity compiler or local tools (solc).
   • Optimize with flags like --abi, --bin, and --optimize.

3. Deploy

   • Via geth console or Node.js scripts.

   • Requires:

     • Contract ABI (interface).
     • Contract address (assigned post-deployment).

4. Execute

   • Call functions using web3.js or direct node interactions.

Key Concepts

• Smart contracts are accounts (like users) controlled by code.
• They require external calls to execute and can hold balances or send transactions.
• Immutable: Once deployed, code cannot be altered.

FAQ

1. What makes Ethereum smart contracts unique?

They run on EVM, ensuring security and universality across nodes while enabling complex decentralized logic.

2. How does gas prevent abuse?

Gas limits computation, halting infinite loops and ensuring validators are compensated.

3. Can smart contracts interact with external systems?

No—EVM restricts access to filesystems/networks for security. Contracts interact only with other contracts.

👉 Learn advanced Ethereum development

This primer covers Ethereum smart contract fundamentals. Future topics include deeper dives into Solidity and node setup.