Part 3

Introduction to Blockchain Course

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Relish on blockchain among other things with its ontology.
ETHEREUM BLOCKCHAIN
 2009

ETHEREUM BLOCKCHAIN
BITCOIN BLOCKCHAIN

PURPOSE PURPOSE

Be a global decentralised payment system Be a decentralised supercomputer to power Dapps globally

Bitcoin Blockchain Algorithm uses Proof-of-Work (POW) 2015 Ethereum Blockchain Algorithm uses Proof-of-Stake (POS)
What Gave Rise to Ethereum Blockchain?
Ethereum is a programmable blockchain. Like a blank canvas it is up to entrepreneurs or
developers to design anything using their own laws and protocols. Freedom to create their
own operations.
MISSION
3
Block transaction speed. Bitcoin’s average algorithm block time is 10
minutes whereas Ethereum have been successful with 12
seconds. Ethereum give users greater opportunity to complete
more blocks.
MISSION
2

Not just a global blockchain platform that

is exclusively used for
payments
MISSION ETHEREUM MISSIONS
1
Ethereum was created by Vitalik Buterin. Unlike the allusive Satoshi of
Bitcoin, Vitalik is very real and known. He continues to develop Ethereum
blockchain with the global open source community. Its peer-to-peer
networks is made up of participant computers collectively called the
Ethereum Virtual Machine or EVM and verifies transactions through network
validation - proof-of-stake (POS). And, it features smart contracts.
Ethereum Blockchain - Characteristics

(1)
P r o o f o f Wo r k v s . P r o o f o f S
Algorithm take

Publi (2)
sh D e c e n t r App Store
a l i se d (3) E xe c u t i o n o f S m
A p p l i ca t i o Contract logic art
ns ( D a p p ) Contracts
Proof of Work (POW)

 In Proof of Work, miners work competitively to solve complex math problems in

order to secure transactions on the network. It is this system that ensures there
will never be double-spend attack.

 Threat however happens when hackers are able to attack over the 51% of the
network/nodes. Has this happened before?

 Yes, but not an everyday scam. This is because it means taking over 51% of all
processing power and that takes massive amounts of energy and grossly
expensive. It remains a key concern for many blockchain(s) to this day that
uses Bitcoin Blockchain Technology.

How Proof of Stake (POS) is Different?

• Instead of miners, POS has validators. They do not use processing power to
secure blocks, instead they literally stake their funds/coins on the blocks. A coin
could be Bitcoin.

• Validators will receive a cut of the fees included in the block, proportional to the
amount they had previously staked. For example validators who owns 5% of
the Bitcoin can theoretically validate only 5% of the Ethereum blocks.

• This is why there is so much liberty for entrepreneurs. Every cryptocurrency or

new Blockchain developers using POS algorithm can set their own rules and
methods combined for they think is the best possible combinations.

• Access the link below. Read to find out top POS coins for 2020.

https://medium.com/@karloabart/top-list-of-proof-of-stake-coins-for-2020-534816e9a715
 Ethereum
Decentralised App (dapps)
How is it Different?

 Dapps has its backend code running on a decentralised peer-to-peer network. Contrast
this to a typical app we all know the backend code is running on centralised servers. Hence,
dapps!

 Dapps built on Ethereum blockchain can do things regular centralised applications cannot.
For example:

- Create new kinds of cryptocurrency and digital assets.

- Web applications that are unstoppable which means they cannot be deleted or
censored.
- Build decentralised organisations or virtual worlds that are governed collectively
(peer-to-peer)

 Dapps on Ethereum are backed by smart contracts (next characteristic).

Top 2020 Dapps - Video Examples
MetaMask is a browser extensions that lets you run
dapps without being part of the Ethereum network
as a Ethereum Node. Instead, it lets you connect to
another Ethereum Node called INFURA and run
smart contracts on that Node.

MetaMask manages your Ethereum wallet, which

contains your Ethers and allows you to send and
receive Ethers. It also allows you to explore
blockchain dapps in the most secure way so that
you are always in control when interacting on the
new decentralised web.

Internet of the Future

Ethereum Smart
Contracts
How it Works in Ethereum Blockchain?

1) An option contract or specifically called a pre-programmed smart contract is

written as code in the Ethereum Blockchain. The terms, rules and conditions of
the agreement are established by all counter-parties and translated into code.
Individuals from buyers and sellers can remain anonymous but the contact is in
the ledger.

2) A triggering event like an expiration date and strike price is hit, the smart
contract
executes itself according to the coded terms. The code automatically executes.

3) Once executed, the terms of the contract will automatically transfer the value to
the relevant parties.

4) The transfer of value to counterparties will be recorded on the Ethereum

blockchain. Validators can use the blockchain to understand the activity in the
market while maintaining the privacy of individual actor’s positions.
 What language is used for Smart Contracts?

S o lid ity is an o b je c t- o r ie n te d p r o g r a m m in g la n g u a g e f o r w r itin g

s m a r t c o n tr acts. I t is u s e d f o r im p le m e n tin g s m a r t c o n tr a c ts o n
v a r io u s b lo ck ch ain p la tf o r m s , m o s t n o ta b ly, E th e r e u m . I t is e x e c u te d
in E th e r eu m ’ s p e e r to p e e r n e tw o r k p a r tic ip a n ts n a m e ly c a lle d
E th er e u m Vir tu al Ma c h in e ( E V M) w h ic h lik e th e b itc o in b lo c k c h a in
is in stalled .

h ttp s ://c r y p to z o m b ie s . io /

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Smart Contracts Simplified!

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 What language is used for Smart Contracts?

S o lid ity is an o b je c t- o r ie n te d p r o g r a m m in g la n g u a g e f o r w r itin g

s m a r t c o n tr acts. I t is u s e d f o r im p le m e n tin g s m a r t c o n tr a c ts o n
v a r io u s b lo ck ch ain p la tf o r m s , m o s t n o ta b ly, E th e r e u m . I t is e x e c u te d
in E th e r eu m ’ s p e e r to p e e r n e tw o r k p a r tic ip a n ts n a m e ly c a lle d
E th er e u m Vir tu al Ma c h in e ( E V M) w h ic h lik e th e b itc o in b lo c k c h a in
is in stalled .

h ttp s ://c r y p to z o m b ie s . io /

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 What Happens after a Transaction Completes in a Blockchain?

 In traditional and centralised structures,

the value of the transactions will be
stored or validated in a centralised
intermediary for example: bank accounts,
law firms, trust organisations or
insurance.

 In blockchain and decentralised

structures, the value of the transactions
will be stored in what is called a
B l o c k c h a i n Wa l l e t .

 The blockchain wallet is a software

installed in your device can be a mobile
or PC which stores addresses, keys
(public & private) for transactions.
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Blockchain Digital Wallets and Addresses
What is so unique about Digital Wallets?

 Think of it as your safe deposit box in the blockchain.

 It contains crypto (Bitcoin or Ether) addresses, a public key and

its corresponding private key. It does not physically store any
money/cryptocurrencies.

 If you loose your keys however, it is as good as loosing all your

transactions in the blockchain and hence your crypto addresses
too.

 The crypto address is derived from the public key through hash
algorithm (hash function).

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 Blockchain Addresses
Did you know that in the early days of Blockchain, it was possible to send payments to an
IP address like: 104.25.248.32? Why do you think this change?

 Cryptography is essential to counteract with hackers.

 Therefore, what is important to know is that whenever you now want to

send a payment to a recipient via a blockchain. You ask for an address.

 When you paste the address into the Blockchain wallet, the software checks
the address prefixes and calculates the checksum. If it does not match, it
rejects the address. This makes it impossible to send crypto to a wrong
address due to typing error.

 Therefore, if you have the private key for an address, only you can sign a
transaction token assigned to this address. The public key is used to verify
the digital signatures. This to and fro process is all but significant, that let
you transfer through the Blockchain wallet.

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Typical Example of Bitcoin Address

Bitcoin addresses have around 26-35 alphanumeric characters, which usually

begin with a number “1” or “3” and contains random digits and uppercase or
lowercase letters. An example of a Bitcoin address:

1BvBMSEYstWetqTFn5Au4m4GFg7xJaNVN2 (https://en.bitcoin.it/wiki/Address)

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 Activity
Download metamask | Try Sending and Receiving Ether

https://metamask.io/

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 Three Levels of Security

Level 1
 Security is designed to prevent users from losing account access. It allows
users to verify their email address, create a 12-word backup recovery phrase
that can be used if a password is forgotten, and set up a password hint
(Blockchain does not store the password).

Level 2
 Security is designed to prevent others from gaining unauthorized access to

Wallet Security the wallet and includes linking a phone number to the account to receive a
one-time password when the account is logged into, and creating two-step
authorization.

Level 3
 Security allows users to block TOR requests. TOR is a global network of
servers that allows users to route their web traffic through multiple
computers with the goal of preventing anyone from tracing the origins back
to the user.

 TOR is an open source software for enabling anonymous communications

in the Internet traffic.

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Bitcoin and Ethereum Blockchain Visualisation

Click on the Tutorial!

https://txstreet.com/v/eth-btc

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INDUSTRY USE CASE: LEADERS IN SINGAPORE
https://fintechnews.sg/30718/blockchain/blockchain-project-startup-top-singapore/

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Private blockchain and NFT

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 Are there Risks with Blockchain Technology?
LENS OF SPECULATION
There are risks for just about everyone
participating in the blockchain. Key question
is always does it work? Solidity
developers building smart contracts for the
Ethereum platform, or the millions of
cryptocurrency investors in bitcoin, ether,
and coins poses the fundamental threat of
unsettlement in the blockchain space.
LENS OF BUSINESS DISRUPTIONS
Particularly for the Financial Services and
eCommerce industries, blockchains are
disrupting business models and perhaps
reducing revenues. There is also a huge risk
of the conglomerate economic drivers are not
exploring Blockchain and not playing the role
as the first mover advantage. Small
businesses will thrive but another
fundamental question is always will their
blockchain be scalable and adopted?
LENS OF HACKERS
There have been several successful attempts by
hackers to command a miner’s computing power to
make the blockchain believe the winning miner is the
hacker. Hackers will use your computing power
using malware and launch a variety of attacks against
blockchain. With so many new cryptocurrencies that
promise the new Internet of Future for blockchain, it
will be difficult to recognise legitimate services
versus scams, Ponzi schemes. For example Japan
bitcoin exchange Mt.Gox Hack!
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