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Ethereum (Blockchain Network)
- 1. Blockchain 2 From Simple Financial Transactions to Smart Contracts
- 2. Agenda • Blockchain Reminder • What is Blockchain 2 • Ethereum • Ethereum Components • SmartContracts • How SmartContracts Work • Ethereum Advantages • Ethereum Disadvantages • Smart Contract DEMO
- 4. Blockchain • Bitcoin built on blockchain • Financial transactions • Limited tasks • Main Objectives to eliminate intermediaries and unnecessary fees by making decentralized transactions on a distributed ledger
- 5. Blockchain 2
- 6. Blockchain 2 • Still capable of doing the financial transactions • Plus making complex operations on top of that • Complex Operations can be built as needed and distributed on the blockchain network • These Complex Operations are programs . Yes a developer can code a program and upload it to the blockchain network • Mainly these programs called SmartContracts
- 7. What is a Smart Contract • Computer program code • Capable of facilitating, executing and enforcing the performance of an agreement
- 8. Legal Contract • Contains Legal Language (written by Lawyers) • Heavily rely on third parties for enforcement • Enforcement is very time consuming • Very Ambiguous • Lengthy and Expensive • If no fulfillment by any of the parties - going to court
- 9. Smart Contract Definition • Program Created by Computer Programmers • Written in a digital code (programing language) • States the Rules • States the Obligations • Automatically Executed
- 10. Smart Contract Characteristics • Deterministic Whoever runs it gives the same value • Immutable Once deployed can’t be changed • Verifiable Gets unique address and can be verified by the interested parties before using it
- 11. Smart Contract Features • Speed (Near Real Time) • Accurate • Low Risk • Fewer Intermediaries (No need for escrow) • Lower Cost . Which leads to New Business Models
- 12. Smart Contract Components • Code Where you code the logic of having inputs, fulfilling rules and taking actions • Distributed Ledger Similar to a transaction the smart contract is encrypted and distributed to contributors with a machine (decentralized) • Execution Once the contract is executed it is distributed on a ledger and monitor the compliance to take action
- 13. Ethereum
- 14. What is Ethereum At its simplest, Ethereum is an open software platform based on blockchain technology that enables developers to build and deploy decentralized applications the Ethereum blockchain focuses on running the programming code of any decentralized application “Ethereum is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third party interference. These
- 16. Ethereum Components • Ethereum Virtual Machine (EVM) • Swarm - similar to BitTorrent app split the files into chunks but incentivized by ether • Whisper - secure messaging protocol between nodes • Solidity - javascript like programing language to write smart contacts • Bitcoin blockchain has addresses • Ethereum has accounts • Account that only store ETH (Externally Owned Accounts - EOA) • Account stores ETH and Program (SC) - once the SC uploaded to the network waits to be activated. The SC got activated when sending ETH into it • Once the Smart Contract is activated, it keeps monitoring for events, milestones or conditions to occur
- 17. Bitcoin VS Ethereum Bitcoin Global network of computers used mainly for processing transactions No Programming Language Update chain every ~10 min BTC 21 M Supply Original Crypto Currency (Financial by Design) Ethereum Platform with programing language to create programs (SC) to create DApps DAO (150M ETH Held) $50M stolen Reset the Chain before the 50M were stolen Update the chain every ~30 sec ETH No Limit Designed for computer power payments Ethereum Classic Continued without reset the chain Code is LAW without intermediary Smaller Community Smaller Computing Power ETH Classic
- 18. DApps • Decentralized Apps • No Central Server Centralized App Installed and Run on Central Server Hacked - all data Failure - entire app is down Sensorship - can be blocked Computer Power (more users - slower) DApps On Multiple Computers Has to Hack Majority Failure - connect to another computer To block - needs to be blocked from the majority Computer power distributed Blockchain DApps Operate Similar to DApps Open Source Run on Blockchain allows Additional Functionality It has a token to cover the cost of computer power Changes to the app decided by the majority - controlled by the Majority
- 19. What is a smart contract Smart contract is just a phrase used to describe computer code that can facilitate the exchange of money, content, property, shares, or anything of value When running on the blockchain a smart contract becomes like a self-operating computer program that automatically executes when specific conditions are met Written in Solidity Programming Language and runs on the Ethereum virtual Machine EVM on ETH
- 21. How Smart Contracts Work
- 22. How Smart Contracts Work
- 23. How Smart Contracts Work • Connected to ETH Crypto Currency • Terms of the contract contains • Payment Amount • Compensation in case of failure to complete the terms • Payment would sent to the smart contract not the seller • Once the terms are fulfilled the money sent to the seller and the ownership sent to the buyer • If the terms failed to be fulfilled / expired the smart contract rejects the transaction and sends the money back to the buyer and the ownership to the seller
- 24. Uber VS Ether DApp Uber Save Credit Card info within Uber Uber Authorizes the credit card for a payment When you take a car to start a contract to pay a certain amount of money based on your distance you travel When you finish the trip the contract executes and your credit card is automatically charged CC takes fees for the transaction Ethereum DApp You have an account on ethereum network which can send and receive ETH (or Wallet) Smart Contract has the driver and rider parties and has clear terms on the payment. Once the ride starts, the money sent to the smart contract Once the ride is done and if the terms are fulfilled, smart contract sends the money to the driver and maybe some If the ride terms fails, then the smart contract returns the money to the rider The execution of the SC is being compensated
- 25. New Methods for Funding • Ethereum gave companies and developers to fund while their growth • Initial Coin Offering - possible before Ethereum • Allows companies to develop applications and sells tokens or coins that can be used in the application • ICO before ethereum linked to the popularity of the crypto currency • ICO with ethereal linked to the popularity of the application . If the application becomes popular and widely used , then theoretically the tokens should increase in value • Companies can have funds without requiring Loans or Venture Capitals Funding
- 26. Benefits of Ethereum • Smart Contracts Because smart contracts run on the blockchain, they run exactly as programmed without any possibility of censorship, downtime, fraud or third party interference • Greater ease and lower costs • Ease of development and create applications • Immutability – A third party cannot make any changes to data. • Corruption & tamper proof – Apps are based on a network formed around the principle of consensus, making censorship impossible. • Secure – With no central point of failure and secured using cryptography, applications are well protected against hacking attacks and fraudulent activities. • Zero downtime – Apps never go down and can never be switched off.
- 28. Disadvantages and Risks of Ethereum • Not designed for real world payments • New Technology - Still needs more time to be proven • Badly written smart contract (written by humans) may lead to exploits and steeling money - cant be argued! obtaining a network consensus and rewriting the underlying code
- 29. Disadvantages and Risks of Ethereum • No free Applications While social networks pays for hosting / computing and users don’t however the personal data is the product. DApps controlled by the users and it will be difficult to convince users to pay for making any action on a decentralized social network like / uploading images … etc • ETH may not increase in value even if the application gains popularity (speculators). Speculators normally they don’t intend using the coins in the app. The value of the token / point mainly depends on the demand and supply of the token. High Supply depreciate the value , hight demand appreciate the value
- 30. Disadvantages and Risks of Ethereum • Not designed for real world payments • ETH may not increase in value even if the application gains popularity (speculators) • Speculators normally they don’t intend using the coins in the app • The value of the token / point mainly depends on the demand and supply of the token. High Supply depreciate the value , hight demand appreciate the value
- 31. Skyline especially if connected to military and government systems
- 32. GAS • Internal pricing for running a smart contract • Decouple from unit of ETH for computing and from market value • Originator of the transaction sets the price of the GAS upfront
- 33. Wallet Types Online Wallet/Web Wallet These are wallets accessible over the internet with a web browser. These wallets are simple to set up and use for cryptocurrency beginners, yet vulnerable to attacks. Mobile Wallet These are mobile software applications designed to hold cryptocurrencies. It’s usually developed to work with devices that run Android and iOS operating systems. These wallets make cryptocurrency transactions easy, most especially “on the go”. Desktop Wallets Also software applications for personal computers. This is to some extent considered more secure than the other two types mentioned above (web & mobile wallets). Though these wallets create private keys offline, it’s necessary to connect to the internet to have the software updated to display your actual fund (if any). Hardware Wallets These are special digital devices (called wallets), great for storing large cryptocurrencies you don’t need for everyday use. Of course, you can also use it for daily use, it all depends on you. These wallets offer more security on cryptocurrencies stored in them than all other types of wallets.
- 34. MultiSig Wallets • Your multi-sig wallet is a smart contract living on the blockchain! • Once the multi-sig wallet has been deployed, Ether can be sent to it just like to any other Ethereum address. • The weird bit is that they each have to use a normal wallet to talk to the multi-sig wallet. • Before creating a multisig wallet - you need to • A list of people who are allowed to do things (Tom, John and Harry) • Rules on how many of those people have to agree before it happens • Once Tom has submitted - submitTransaction(0x31EFd75bc0….fDab6a3F22,1000000000 ,) he will get a message back from his wallet with a number or hash code which is the transactionID. Tom has to communicate this transactionID to Dick or Harry to get them to confirm it. • Harry or John will confirm the transaction - function confirmTransaction(uint transactionId)
- 35. DAO • Decentralized Autonomous Organization The government who votes for the contracts Public and Transparent When a transaction is placed, the DAO checks if A has balance , withdraw and then set your new balance
- 36. DAO Attack !! Multiple Transactions happened at the same time Checks on the balance, it is valid! make a withdraw then update the balance Deposit the new amount and repeat More $50M were withdrawn from the Ethereum platform
- 37. Ethereum is moving to Proof Of Stake
- 38. Ethereum is moving to Proof Of Stake • Lowers the overall energy and monetary cost • No ASIC advantage • Makes 51% attack harder: 51% attack happens when a group of miners gain more than 50% of the world’s hashing power. Using proof of stake negates this attack. • Malicious-free validators: Any validator who has their funds locked up in the blockchain would make sure that they are not adding any wrong or malicious blocks to the chain, because that would mean their entire stake invested would be taken away from them. • Block creation: Makes the creation of newer blocks and the entire process faster. • Scalability: Makes the blockchain scalable by introducing the concept of “sharding”
- 39. Writing a smart contract DEMO
- 42. Thank You ! Qais Ammari qais.ammari@triphop.com