Ethereum Blockchain Protocol: Key Characteristics and Insights

This article is a guide to Ethereum blockchain protocol, exploring various protocol-level characteristics. It’s the first article in the Guide to Blockchain Protocols: Comparison of Major Protocol Coins series.

Launched in 2015, Ethereum is an open-source, decentralized software platform. It enables the revolutionary functionality of Smart Contracts and Distributed Applications (ĐApps). They run without downtime, fraud, or outside interference. Ethereum has its own native programming language, which helps developers build and publish distributed applications. The potential uses of Ethereum are extensive. Ethereum is the second biggest cryptocurrency in the market. Unlike Bitcoin, it allows other dApps to build on top of its blockchain. (Read more: Bitcoin vs Alt Coins Returns: Comparison of Gains Between Bitcoin & Altcoins Investing)

Here is a detailed look at the key characteristics of Ethereum:

Consensus Mechanism & Transaction Speed

Consensus Mechanism

Ethereum blockchain protocol currently uses a Proof-of-Work (POW) consensus algorithm but plans to transition to Proof-of-Stake (POS). POS is a different method for validating transactions within a distributed system. The POS algorithm first appeared in Peercoin (2012). In a POW system, miners solve complex math problems. Under POS, “miners” are selected based on how many coins they stake. Because stakers must own native tokens, they are called forgers. POS has no block rewards; instead, forgers rely on:

Transaction Fees: Fees paid by users who send transactions or run smart contracts
Interest: Forgers earn interest on the coins they stake

Why Ethereum Wants to Use PoS?
The Ethereum community, led by Vitalik Buterin, planned this transition from the start. POW consumes vast energy. One Bitcoin transaction can match powering 1.57 American households for a day. Some estimates claim Bitcoin could reach Denmark-level electricity use by 2020.

Transaction Speed

In ideal conditions, the Ethereum blockchain protocol can handle about 15 transactions per second. The average block time is roughly 15–20 seconds, far faster than Bitcoin’s 10-minute blocks. Sometimes, transactions take longer due to congestion. Always check the Ethereum network’s status before setting gas fees (Gwei). Ethereum is steadily improving scalability, with Sharding proposed as a solution.

(See more: Guide to Ethereum: What is Gas, Gas Limit and Gas Price?)

Programming Language & Traction

Programming Language

Solidity is a custom language for writing smart contracts on the Ethereum Virtual Machine (EVM). It is contract-oriented, high-level, and its syntax is similar to JavaScript. Solidity targets the EVM and allows advanced features for the Ethereum blockchain protocol. The motivation behind Solidity arose from testing two parameters during Bitcoin’s creation:

First Parameter: A trustless, decentralized database secured by cryptography
Second Parameter: A robust transaction system that sends value globally without intermediaries

Developers needed a Turing-complete scripting language to expand blockchain functionality. Until recently, complex features like user-issued currencies or domain registration often required specialized blockchains. Solidity eases that process by providing a stronger base for advanced protocols. Ethereum is modular, stateful, and Turing-complete, aiming for simplicity and generalization. Its goal is to host decentralized apps, akin to an android of the crypto world.

(Read also: Coins, Tokens & Altcoins: What’s the Difference?)

Traction

Currently, about 1419 projects are built on the Ethereum blockchain protocol. This outstrips all other platforms. Waves, for instance, hosts around 25 projects. Ethereum’s popularity is due to unifying standards that simplify integration. Here is a chart of Ethereum’s share of the market:

Ethereum Transactions Process

Whenever a user sends Ether (ETH), the transaction propagates across devices running the Ethereum blockchain protocol. After verification, it rests in the Memory Pool (Mempool) until miners include it in a block. Transactions not included stay “pending” or “unconfirmed.” Here’s the process if you’re trying to send using MEW wallet:

Network congestion can delay inclusion if blocks are full. You might wait until your transaction is picked by miners. Once included, your transaction receives its first confirmation. Each new block adds another confirmation layer, making it harder to alter. Always monitor and verify your transactions for security.

(You should also see: Guide to Ethereum Hard Forks: Ethereum Classic, Etherzero & Metropolis)