Notes 2022-06-13

1inch Exchange is a decentralized exchange (DEX) aggregator. Rather than working as an exchange itself, it splits orders between other DEXs and private liquidity providers to find the best possible exchange rates.

1inch is an Ethereum-based project.

A blockchain is a type of distributed ledger technology.

Traditionally, a digital database is kept in a specialized computer called a server. This server would be accessed by people who are granted permission to do so; it could be made public, or private, or somewhere in between, but everyone is accessing that same database--it's centralized.

A blockchain--and in particular, a public blockchain--is, at its core, a different kind of database. The word ledger is used to describe it, and a blockchain is very good at keeping track of assets coming and going, but it can store lots of different kinds of information. However, rather than having this ledger all in one computer (centralized), it's synced across a number of different computers known as nodes: it's decentralized or, as it's often called, distributed.

All of those nodes are constantly syncing information between each other about transactions on the ledger: assets moving from one address, or account, on the network to another. These transactions are checked against the ledger's history to ensure that they're valid.

  • Once enough nodes have verified a new transaction, it gets confirmed and becomes final.
  • After a certain amount of time, or every certain number of transactions, the network will bundle up all those finalized transactions and seal them, using cryptographic software tools, into a block. This block is identified with a hash produced by those cryptographic tools.
  • The next block will use the previous block's hash as a starting point, and so the entire history of the ledger, and therefore of the network, is linked together in a chain of blocks containing transactions: the blockchain.

Ethereum is a public blockchain network. Ethereum is a global network that is capable of running programs on the Ethereum Virtual Machine (aka EVM). Programs are written for the EVM in a language called Solidity, and the network uses a cryptocurrency, called ether (or ETH, pronounced "eeth") to compensate the people that maintain the network--and also as a token of value for transactions carried out on the network.

An essential function of a blockchain network is coordinating the process of agreement between all the nodes in the network regarding whether a transaction is valid or not. The agreement is referred to as consensus, and the process by which it occurs is called a consensus mechanism, or consensus protocol. Two different consensus mechanisms are relevant for Ethereum, the first being Proof of Work (PoW) and the second Proof of Stake (PoS). In both mechanisms, computers are provided to do the work of verifying the validity of the transactions, and agreeing on them.

  • Under PoW consensus, actors known as "miners" carry the responsibility of verifying the transactions, creating the blocks, and maintaining the chain. In exchange, these miners are given a reward (in ETH) each time their node is the first to finalize, or mine, a new block; this also incentivizes miners having good-quality equipment and connection speeds, which in turn helps the network.
  • With PoS consensus, instead of miners, "validators" are the actors ensuring transaction validity and network integrity. In place of costly number-crunching as a security measure, each validator must have staked 32 ETH; that is, deposited it in a smart contract, a kind of computer program that lives on the Ethereum blockchain, with the promise that they will operate their validator according to the rules.

  1. 1inch
  2. Blockchain
  3. Ethereum